Who are the benefactors of the defaulter stimulus package? Many defaulters just stay in their homes because they have made a conscious decision not to pay the banks any more money on their underwater homes, or in anticipation of a loan modification approval. Some are unemployed, staying put for as long as they can in an effort to get their personal finances together and on with their lives. There are a despicable hybrid of defaulters sharing their misfortune with others by moving out of their home and renting it to some unsuspecting soul. The landlords collect and pocket the rent for as long as the scam runs and lender/servicers evict the occupants at the end of their lease term, if they were lucky enough to get a bona fide lease agreement.
Local municipalities also suffer because of an eroded tax base. Providing basic services to a community that may not have realized an actual reduction in population, only in revenue, is daunting. Defaulters do not pay property taxes, limiting the pool of funds available, straining the already burdened local economies.
Most people on Main Street have little sympathy for the banks and the investors even though there is definitely a loss associated with defaulting loans. It could have been a very different story if modification and principal reduction were more of the norm than the exception. Defaulters creating their own stimulus packages could not have been something any of us would have predicted, but when in dire straits and with no viable alternatives, many have adopted this behavior.
Wednesday, November 10, 2010
Exemption Laws
In bankruptcy, property can be divided into two piles: exempt and non-exempt. Exempt property is protected from creditors and the bankruptcy trustee. Non-exempt property is subject to sale or attachment. How to determine if your property is exempt? Consult a bankruptcy attorney, the laws vary by state.
NEW CREDIT CARD FEES ON THE WAY
Less than a year after the passage of new laws limiting banks' ability to impose certain fees on credit and debit cards, Bank of America Corp., Discover Financial Services, JPMorgan Chase & Co. and other lenders are using different tactics to boost their fee income, the Wall Street Journal reported today. Some are raising minimum payments on certain customers' accounts in order to increase late penalties. Others are ramping up credit-protection insurance programs and charging customers for coverage without permission. Still others are pushing aggressively into high-fee prepaid cards, which are exempt from most of the new rules. Banks already have rolled out a slew of new fees since the passage of the Credit Card Accountability Responsibility and Disclosure Act of 2009. Among other things, they have revived annual fees; shortened billing cycles; levied new charges on cards with low credit limits; increased balance-transfer, cash-advance and foreign-exchange fees; and begun aggressively marketing "professional cards" not subject to the restrictions of the Card Act. The Federal Reserve responded on Oct. 19 by announcing proposals that would ban hefty activation fees and prevent issuers from raising interest rates on promotional card offers until a borrower is more than 60 days late.
http://online.wsj.com/article/SB10001424052748703778304575590823786685984.html?mod=WSJ_hps_sections_personalfinance
http://online.wsj.com/article/SB10001424052748703778304575590823786685984.html?mod=WSJ_hps_sections_personalfinance
HAMP FALLING SHORT OF HELPING TO SLOW FORECLOSURE CRISIS
The foreclosure-paperwork furor is deepening criticism of the U.S. government's high-profile mortgage-restructuring effort, which has fallen short of its goal of helping three million homeowners, the Wall Street Journal reported on Saturday. More than half of the 1.4 million borrowers approved for temporary modifications have fallen out of HAMP because they did not qualify. The program "has undoubtedly put people into foreclosure," says Neil Barofsky, the special inspector general overseeing the Troubled Asset Relief Program, which funds HAMP. "It's a parade of documentation horrors." In a report to Congress on Oct. 26, Barofsky concluded that some borrowers seeking loan modifications through HAMP might wind up "worse off than before they participated." Back payments, penalties and late fees triggered when homeowners are rejected for a permanent fix can push some borrowers over the edge, he said. As part of HAMP, mortgage servicers and investors get financial incentives to modify a borrower's loan payment to 31 percent of monthly gross income. Servicers typically hit that number by lowering interest rates or extending a loan's life. Borrowers must make at least three "trial payments" to be considered for a permanent fix. Borrowers who miss a payment or otherwise fail to win a permanent modification essentially are stuck with the original terms of their mortgage. The Treasury Department doesn't record how frequently errors occur with documentation on home loans submitted to more than 2,500 financial institutions and servicers empowered by the U.S. government to grant and reject HAMP requests. An outside review of borrowers denied permanent modifications disagreed with the servicer's decision in 4.8 percent of the loans during the fiscal quarter ended in August.
wsj.com/article/SB10001424052748704805204575594453938527666.html?mod=WSJ_RealEstate_LeftTopNews
wsj.com/article/SB10001424052748704805204575594453938527666.html?mod=WSJ_RealEstate_LeftTopNews
FDIC PROPOSES TO BOOST FAILURE ASSESSMENTS ON LARGE BANKS
http://www.bloomberg.com/news/2010-11-09/fdic-proposes-higher-assessments-for-big-banks-to-protect-against-failures.html
The Federal Deposit Insurance Corp. (FDIC) today proposed shifting the burden for protecting depositors against bank failures toward larger lenders whose reliance on riskier funding sources may pose a greater threat to the financial system, Bloomberg News reported today. The FDIC board today approved two proposals for overhauling assessments for its deposit insurance fund, including one that would base the fees on banks’ liabilities rather than their domestic deposits. The fee proposal, a response to the Dodd-Frank financial-regulation law, would increase assessments on banks with more than $10 billion in assets. “This proposal achieves the goals of the Dodd-Frank Act to change the assessment base to better reflect risks to the deposit insurance fund,” said FDIC Chairman Sheila Bair. The measure is subject to a 45-day comment period.
In related news, the FDIC said that the number of bank failures in 2010 eclipsed the total bank failures seen last year as regulators announced the closure of four banks Friday amid continued weakness in the U.S. economy, Dow Jones Daily Bankruptcy Review reported today. The FDIC yesterday announced the failures of banks in Maryland, California and Washington for a total of 143 bank failures so far this year. In 2009, 140 banks failed. Specifically, regulators closed the K Bank of Randallstown, Md., Western Commercial Bank of Woodland Hills, Calif., First Vietnamese American Bank of Westminster, Calif. and Pierce Commercial Bank of Tacoma, Wash. All of the banks are being purchased by other banks. The FDIC estimates that the cost of the four bank failures to the Deposit Insurance Fund will be about $255 million.
The Federal Deposit Insurance Corp. (FDIC) today proposed shifting the burden for protecting depositors against bank failures toward larger lenders whose reliance on riskier funding sources may pose a greater threat to the financial system, Bloomberg News reported today. The FDIC board today approved two proposals for overhauling assessments for its deposit insurance fund, including one that would base the fees on banks’ liabilities rather than their domestic deposits. The fee proposal, a response to the Dodd-Frank financial-regulation law, would increase assessments on banks with more than $10 billion in assets. “This proposal achieves the goals of the Dodd-Frank Act to change the assessment base to better reflect risks to the deposit insurance fund,” said FDIC Chairman Sheila Bair. The measure is subject to a 45-day comment period.
In related news, the FDIC said that the number of bank failures in 2010 eclipsed the total bank failures seen last year as regulators announced the closure of four banks Friday amid continued weakness in the U.S. economy, Dow Jones Daily Bankruptcy Review reported today. The FDIC yesterday announced the failures of banks in Maryland, California and Washington for a total of 143 bank failures so far this year. In 2009, 140 banks failed. Specifically, regulators closed the K Bank of Randallstown, Md., Western Commercial Bank of Woodland Hills, Calif., First Vietnamese American Bank of Westminster, Calif. and Pierce Commercial Bank of Tacoma, Wash. All of the banks are being purchased by other banks. The FDIC estimates that the cost of the four bank failures to the Deposit Insurance Fund will be about $255 million.
Debt Reduction in America
According to the New York Fed’s report, about 457,000 individuals received home foreclosure notices on their credit reports between July 1 and September 30, 2010. Officials say this represents a 5.5 percent decrease from the second quarter and a 6.4 percent drop from a year earlier.
The Fed says consumers are continuing to trim their debt. It’s a trend that has been evident for the previous seven quarters, though the pace of decline has slowed recently. Since peaking in the third quarter of 2008, nearly $1 trillion has been shaved from outstanding consumer debts, the federal bank reports.
Excluding the effects of defaults and charge-offs, available data show that non-mortgage debt fell for the first time since at least 2000. Also, net mortgage debt paydowns, which began in 2008, reached nearly $140 billion by year-end 2009.
The Fed says “these unique findings suggest that consumers have been actively reducing their debts, and not just by defaulting.”
The Fed says consumers are continuing to trim their debt. It’s a trend that has been evident for the previous seven quarters, though the pace of decline has slowed recently. Since peaking in the third quarter of 2008, nearly $1 trillion has been shaved from outstanding consumer debts, the federal bank reports.
Excluding the effects of defaults and charge-offs, available data show that non-mortgage debt fell for the first time since at least 2000. Also, net mortgage debt paydowns, which began in 2008, reached nearly $140 billion by year-end 2009.
The Fed says “these unique findings suggest that consumers have been actively reducing their debts, and not just by defaulting.”
Tuesday, November 9, 2010
Bankruptcy
Our country's well-established system for handling problems related to consumer debt is bankruptcy court. The availability of this remedy is so crucial for both creditors and debtors that the framers established it in the Constitution, and the first bankruptcy legislation passed in 1800. Today, bankruptcy judges restructure debt for corporations and individuals alike.
http://www.mortgageorb.com/e107_plugins/content/content.php?content.7069
http://www.mortgageorb.com/e107_plugins/content/content.php?content.7069
Chapter 7 on the Rise
The Bankruptcy Abuse Prevention and Consumer Protection Act of five years ago made it harder for individuals to receive Chapter 7 bankruptcy protection, in part by increasing the costs associated with filing. Chapter 7 is designed to give individual debtors a "fresh financial start" by liquidating assets and discharging debts.
In fiscal 2010, Chapter 7 filings spiked nearly 15% to over 1.1 million, from 989,227 in fiscal 2009. Chapter 13 filings, in which debtors are typically required to repay debts according to a budget plan that the court sets up, rose 9.2% in the year. Chapter 11 filings fell 3.8%.
Meanwhile, business filings decreased slightly in fiscal 2010, according to the Courts. Bankruptcies filed by a corporation or partnership totaled 58,322, down 0.7% from the 58,721 business filings in 2009.
In fiscal 2010, Chapter 7 filings spiked nearly 15% to over 1.1 million, from 989,227 in fiscal 2009. Chapter 13 filings, in which debtors are typically required to repay debts according to a budget plan that the court sets up, rose 9.2% in the year. Chapter 11 filings fell 3.8%.
Meanwhile, business filings decreased slightly in fiscal 2010, according to the Courts. Bankruptcies filed by a corporation or partnership totaled 58,322, down 0.7% from the 58,721 business filings in 2009.
Jumbo-Mortgage Lending Thaws
When the credit crisis hit more than two years ago, many banks cut back or stopped making jumbo home loans, but now smaller and regional lenders, along with some bigger players, are issuing more new jumbo loans and doing more refinancings, the Wall Street Journal reported today. In the second quarter of 2010, jumbo-mortgage lenders originated $18 billion in loans - a 20 percent increase from the first quarter. Jumbo lending still remains far below 2007 levels, according to Inside Mortgage Finance Publications Inc. JPMorgan Chase & Co.'s Chase Home Lending unit increased its jumbo-mortgage volume by 146.2 percent in the first six months of this year over the same period a year earlier, and Wells Fargo & Co. by 47.5 percent, according to Inside Mortgage Finance. PHH Corp. of Mount Laurel, N.J., a mortgage originator and servicer, issued 64.6 percent more jumbos in that period.
N.Y. Foreclosure Case Alarms Nation's Biggest Lenders
A year ago, Long Island Judge Jeffrey Spinner concluded that a mortgage company's paperwork in a foreclosure case was so flawed and its behavior in negotiations with the borrower so "repugnant" that he erased the family's $292,500 debt and gave the house back for free, the Washington Post reported today. The judgment in favor of the homeowner, Diane Yano-Horoski, which is being appealed, has alarmed the nation's biggest lenders, who say that it could establish a dramatic new legal precedent and roil the nation's foreclosure system. Judge Spinner and some of colleagues in the New York City area estimate they are dismissing 20 to 50 percent of foreclosure cases on the basis of sloppy or fraudulent paperwork filed by lenders.
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/08/AR2010110806583.html
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/08/AR2010110806583.html
NY Robo Signer Cases- Price
#1 TP1_US BANK v. Ronnie Fishbein
The purported affidavit of Tamara Price, “Vice President of CITI RESIDENTIAL LENDING MORTGAGE, a servicing agent who has power of attorney for the plaintiff,” does not contain a jurat, and there is no language of oath or affirmation. The absence of a jurat renders the “affidavit” inadmissible as there is no evidence that an oath or affirmation was taken (Pagano v Kingsbury, 182 AD2d 268[ 2d Dept 19921; see also, People v Lieberman, 57 Misc 2d 1070 [Sup. Ct 19681). Moreover, the purported power of attorney pursuant to which 1 he affidavit was assertedly prepared is not annexed to the motion papers, and the submissions do not otherwise establish the authority of an officer of plaintiffs servicer to execute the affidavit on behalf of plaintiff.
#2 TP2_ARGENT v. Olivera
The Affidavit of Merit and Amount Due was executed and notarized in San Bernadino, California by Tamara Price and it is unaccompanied by a certificate of conformity and, therefore, cannot provide evidence on this application. (see Daimler Chrysler Services North America LLC v,Tammaro 14 Misc 34128 [A]; 2006 NY Slip OP 52506[U]* [App Term, 2Deptl; Bath Meaka1 Suppw, Inc. v. Allstate Indemnity Co., 13 Misc 3d142[A] 2006 NY Slip OP52273[U] *1-*2 [AppTerm 2d Dept]).
#3 TP 3 DBNT v. Halverson
Moreover, the submissions do not reflect the authority of Tamara Price, a self-described “authorized agent” of AMC Mortgage Services, hc., a non-party to this mortgage foreclosure action, to represent plaintiff in this action, nor do the submissions contain evidence that AMC Mortgage Services, Inc. is the attorney in fact for the plaintiff in this action, as alleged in the affidavit of Ms. Price. Similarly, the assignment whereby the mortgage was purportedly assigned to plaintiff was executed by Tamara Smith on behalf of AMC Mortgage Services, Inc. as “authorized agent” for the assignor, without any evidence of such agency. Accordingly, the motion is denied, with leave to renew upon proper submissions that address the deficiencies identified herein.
#4 FROM JUDGE SCHACK
TP 4 JUDGE SCHACK_ DEUTSCHE v. Ezagui
According to plaintiffs application, defendant Ezaguis’ default began with thenonpayment of principal and interest due on September 1,2006. Yet, more than five months later, plaintiff DEUTSCHE BANK was idling to take an assignment of a nonperforming loan from AMERIQUEST. Further, both assignor AMC, as Attorney in Fact for AMERIQUEST, and assignee, DEUTSCHE BANK, have the same address, 505 City Parkway West, Orange, CA 92868. Plaintiffs “affidavit of amount due,” submitted in support of the instant application for a default order of reference was executed by Tamara Price, on February 16, 2007. Ms. Price states that “I am the Vice President for DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE OF AMERIQUEST MORTGAGE SECURITIES, INC., ASSET-BACKED PASS THROUGH CERTIFICATES, SERIES 2004-R1( 1, UNDER THE POLING AND SERVICING AGREEMENT DATED AS OF OCTOBER 1,2004, WITHOUT RECOURSE (DEUTSCHE BANK.” However, i he February 7,2007 assignment from AMERIQUEST, by AMC, its Attorney in Fact, is executed by Tamara Price, Vice President of AMC. The Tamara Price signatures on both the February 7,2007 affidavit and the February 16,2007 assignment are identical. Did Ms. Price change employers from February 7,2007 to February 16,2007? The Court is concerned that there may be fraud on the part of AMERIQUEST, or at least malfeasance. Before granting an application for an order of reference, the Court requires an affidavit from Ms. Price, describing her employment history for the past three years. Further, irrespective of her employment history, Ms. Price must explain why DEUTSCHE BANK would purchase a nonperforming loan from AMERIQUEST, and why DEUTSCHE BANK shares office
#5 JUDGE SCHACK_DBNT v. CLOUDEN
In the instant action, Argent’s defective assignment to Deutsche Bank affects the standing of Deutsche Bank to bring this action. The recorded assignment from Argent to Deutsche Bank, made by “Tamara Price, as Authorized Agent” on behalf of “AMC Mortgage Services Inc. as authorized agent,” lacks any power of attorney granted by Argent to AMC Mortgage Services, Inc. and/or Tamara Price to act on its behalf. The first mortgage assignment, from Grand Pacific Mortgage to Argent, was proper. It was executed by the President of Grand Pacific Mortgage.
The purported affidavit of Tamara Price, “Vice President of CITI RESIDENTIAL LENDING MORTGAGE, a servicing agent who has power of attorney for the plaintiff,” does not contain a jurat, and there is no language of oath or affirmation. The absence of a jurat renders the “affidavit” inadmissible as there is no evidence that an oath or affirmation was taken (Pagano v Kingsbury, 182 AD2d 268[ 2d Dept 19921; see also, People v Lieberman, 57 Misc 2d 1070 [Sup. Ct 19681). Moreover, the purported power of attorney pursuant to which 1 he affidavit was assertedly prepared is not annexed to the motion papers, and the submissions do not otherwise establish the authority of an officer of plaintiffs servicer to execute the affidavit on behalf of plaintiff.
#2 TP2_ARGENT v. Olivera
The Affidavit of Merit and Amount Due was executed and notarized in San Bernadino, California by Tamara Price and it is unaccompanied by a certificate of conformity and, therefore, cannot provide evidence on this application. (see Daimler Chrysler Services North America LLC v,Tammaro 14 Misc 34128 [A]; 2006 NY Slip OP 52506[U]* [App Term, 2Deptl; Bath Meaka1 Suppw, Inc. v. Allstate Indemnity Co., 13 Misc 3d142[A] 2006 NY Slip OP52273[U] *1-*2 [AppTerm 2d Dept]).
#3 TP 3 DBNT v. Halverson
Moreover, the submissions do not reflect the authority of Tamara Price, a self-described “authorized agent” of AMC Mortgage Services, hc., a non-party to this mortgage foreclosure action, to represent plaintiff in this action, nor do the submissions contain evidence that AMC Mortgage Services, Inc. is the attorney in fact for the plaintiff in this action, as alleged in the affidavit of Ms. Price. Similarly, the assignment whereby the mortgage was purportedly assigned to plaintiff was executed by Tamara Smith on behalf of AMC Mortgage Services, Inc. as “authorized agent” for the assignor, without any evidence of such agency. Accordingly, the motion is denied, with leave to renew upon proper submissions that address the deficiencies identified herein.
#4 FROM JUDGE SCHACK
TP 4 JUDGE SCHACK_ DEUTSCHE v. Ezagui
According to plaintiffs application, defendant Ezaguis’ default began with thenonpayment of principal and interest due on September 1,2006. Yet, more than five months later, plaintiff DEUTSCHE BANK was idling to take an assignment of a nonperforming loan from AMERIQUEST. Further, both assignor AMC, as Attorney in Fact for AMERIQUEST, and assignee, DEUTSCHE BANK, have the same address, 505 City Parkway West, Orange, CA 92868. Plaintiffs “affidavit of amount due,” submitted in support of the instant application for a default order of reference was executed by Tamara Price, on February 16, 2007. Ms. Price states that “I am the Vice President for DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE OF AMERIQUEST MORTGAGE SECURITIES, INC., ASSET-BACKED PASS THROUGH CERTIFICATES, SERIES 2004-R1( 1, UNDER THE POLING AND SERVICING AGREEMENT DATED AS OF OCTOBER 1,2004, WITHOUT RECOURSE (DEUTSCHE BANK.” However, i he February 7,2007 assignment from AMERIQUEST, by AMC, its Attorney in Fact, is executed by Tamara Price, Vice President of AMC. The Tamara Price signatures on both the February 7,2007 affidavit and the February 16,2007 assignment are identical. Did Ms. Price change employers from February 7,2007 to February 16,2007? The Court is concerned that there may be fraud on the part of AMERIQUEST, or at least malfeasance. Before granting an application for an order of reference, the Court requires an affidavit from Ms. Price, describing her employment history for the past three years. Further, irrespective of her employment history, Ms. Price must explain why DEUTSCHE BANK would purchase a nonperforming loan from AMERIQUEST, and why DEUTSCHE BANK shares office
#5 JUDGE SCHACK_DBNT v. CLOUDEN
In the instant action, Argent’s defective assignment to Deutsche Bank affects the standing of Deutsche Bank to bring this action. The recorded assignment from Argent to Deutsche Bank, made by “Tamara Price, as Authorized Agent” on behalf of “AMC Mortgage Services Inc. as authorized agent,” lacks any power of attorney granted by Argent to AMC Mortgage Services, Inc. and/or Tamara Price to act on its behalf. The first mortgage assignment, from Grand Pacific Mortgage to Argent, was proper. It was executed by the President of Grand Pacific Mortgage.
Monday, November 8, 2010
Bankruptcy Filings Up Nearly 14 Percent over Last Fiscal Year
Bankruptcy cases filed in federal courts for fiscal year 2010, the 12-month period ending September 30, totaled 1,596,355, up 13.8 percent over total FY 2009 bankruptcy filings of 1,402,816, according to statistics released today by the Administrative Office of the U.S. Courts. While non-business bankruptcy filings continued to rise in FY 2010, business filings dropped slightly for the first time since 2006. The bankruptcies reported today are for October 1, 2009 through September 30, 2010.
http://www.uscourts.gov/News/NewsView/10-11-08/Bankruptcy_Filings_Up_Nearly_14_Percent_over_Last_Fiscal_Year.aspx
http://www.uscourts.gov/News/NewsView/10-11-08/Bankruptcy_Filings_Up_Nearly_14_Percent_over_Last_Fiscal_Year.aspx
FHA Fiscal Year
The Federal Housing Administration (FHA) insured 1.74 million single-family mortgages during fiscal year 2010, which for the federal agency ended in September. The collective value of the loans endorsed was $318.8 billion.
FHA’s loan volume for the year was down 10.3 percent from 2009, and came in below the 1.87 million mortgages it had previously projected would be endorsed in the 2010 fiscal year.
http://search.hud.gov/search?q=cache:7tAUFg75DPAJ:www.hud.gov/offices/hsg/rmra/oe/rpts/ooe/olcurr.xls+FHA+Outlook+Single-Family+Operations%2C+September&output=xml_no_dtd&ie=UTF-8&client=hud2009_frontend&proxystylesheet=hud2009_frontend&site=default_collection&access=p&oe=ISO-8859-1
FHA’s loan volume for the year was down 10.3 percent from 2009, and came in below the 1.87 million mortgages it had previously projected would be endorsed in the 2010 fiscal year.
http://search.hud.gov/search?q=cache:7tAUFg75DPAJ:www.hud.gov/offices/hsg/rmra/oe/rpts/ooe/olcurr.xls+FHA+Outlook+Single-Family+Operations%2C+September&output=xml_no_dtd&ie=UTF-8&client=hud2009_frontend&proxystylesheet=hud2009_frontend&site=default_collection&access=p&oe=ISO-8859-1
Telemarket Scams
Automatic Debit Scams
Fraudulent telemarketers have found yet another way to steal your money, this time from your checking account. Consumers across the country are complaining about unauthorized debits (withdrawals) from their checking accounts.
Automatic debiting of your checking account can be a legitimate payment method; many people pay mortgages or make car payments this way. But the system is being abused by fraudulent telemarketers. Therefore, if a caller asks for your checking account number or other information printed on your check, you should follow the same warning that applies to your credit card number - do not give out checking account information over the phone unless you are familiar with the company and agree to pay for something. Remember, if you give your checking account number over the phone to a stranger for "verification" or "computer purposes," that person could use it to improperly take money from your checking account.
How The Scam Works
You either get a postcard or a telephone call saying you have won a free prize or can qualify for a major credit card, regardless of past credit problems. If you respond to the offer, the telemarketer often asks you right away, "Do you have a checking account?" If you say "yes," the telemarketer then goes on to explain the offer. Often it sounds too good to pass up.
Near the end of the sales pitch, the telemarketer may ask you to get one of your checks and to read off all of the numbers at the bottom. Some deceptive telemarketers may not tell you why this information is needed. Other deceptive telemarketers may tell you the account information will help ensure that you qualify for the offer. And, in some cases, the legitimate telemarketer will honestly explain that this information will allow them to debit your checking account.
Once a telemarketer has your checking account information, it is put on a "demand draft," which is processed much like a check. The draft has your name, account number, and states an amount. Unlike a check, however, the draft does not require your signature. When your bank receives the draft, it takes the amount on the draft from your checking account and pays the telemarketer's bank. You may not know that your bank has paid the draft until you receive your bank statement.
What You Can Do To Protect Yourself
It can be difficult to detect an automatic debit scam before you suffer financial losses. If you do not know who you're talking to, follow these suggestions to help you avoid becoming a victim:
Don't give out your checking account number over the phone unless you know the company and understand why the information is necessary.
If someone says they are taping your call, ask why. Don't be afraid to ask questions.
Companies do not ask for your bank account information unless you have expressly agreed to this payment method.
IT'S THE LAW: Since December 31, 1995, a seller or telemarketer is required by law to obtain your verifiable authorization to obtain payment from your bank account. That means whoever takes your bank account information over the phone must have your express permission to debit your account, and must use one of three ways to get it. The person must tell you that money will be taken from your bank account. If you authorize payment of money from your bank account, they must then get your written authorization, tape record your authorization, or send you a written confirmation before debiting your bank account. If they tape record your authorization, they must disclose, and you must receive, the following information:
The date of the demand draft;
The amount of the draft(s);
The payor's (who will receive your money) name;
The number of draft payments (if more than one);
A telephone number that you can call during normal business hours; and
The date that you are giving your oral authorization.
If a seller or telemarketer uses written confirmation to verify your authorization, they must give you all the information required for a tape recorded authorization and tell you in the confirmation notice the refund procedure you can use to dispute the accuracy of the confirmation and receive a refund.
What To Do If You Are A Victim
If telemarketers cause money to be taken from your bank account without your knowledge or authorization, they have violated the law. If you receive a written confirmation notice that does not accurately represent your understanding of the sale, follow the refund procedures that should have been provided and request a refund of your money. If you do not receive a refund, it's against the law. If you believe you have been a victim of fraud, contact your bank immediately. Tell the bank that you did not okay the debit and that you want to prevent further debiting. You also should contact your state Attorney General. Depending on the timing and the circumstances, you may be able to get your money back.
For More Information
The FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a new video, How to File a Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
Thank you FDIC
Fraudulent telemarketers have found yet another way to steal your money, this time from your checking account. Consumers across the country are complaining about unauthorized debits (withdrawals) from their checking accounts.
Automatic debiting of your checking account can be a legitimate payment method; many people pay mortgages or make car payments this way. But the system is being abused by fraudulent telemarketers. Therefore, if a caller asks for your checking account number or other information printed on your check, you should follow the same warning that applies to your credit card number - do not give out checking account information over the phone unless you are familiar with the company and agree to pay for something. Remember, if you give your checking account number over the phone to a stranger for "verification" or "computer purposes," that person could use it to improperly take money from your checking account.
How The Scam Works
You either get a postcard or a telephone call saying you have won a free prize or can qualify for a major credit card, regardless of past credit problems. If you respond to the offer, the telemarketer often asks you right away, "Do you have a checking account?" If you say "yes," the telemarketer then goes on to explain the offer. Often it sounds too good to pass up.
Near the end of the sales pitch, the telemarketer may ask you to get one of your checks and to read off all of the numbers at the bottom. Some deceptive telemarketers may not tell you why this information is needed. Other deceptive telemarketers may tell you the account information will help ensure that you qualify for the offer. And, in some cases, the legitimate telemarketer will honestly explain that this information will allow them to debit your checking account.
Once a telemarketer has your checking account information, it is put on a "demand draft," which is processed much like a check. The draft has your name, account number, and states an amount. Unlike a check, however, the draft does not require your signature. When your bank receives the draft, it takes the amount on the draft from your checking account and pays the telemarketer's bank. You may not know that your bank has paid the draft until you receive your bank statement.
What You Can Do To Protect Yourself
It can be difficult to detect an automatic debit scam before you suffer financial losses. If you do not know who you're talking to, follow these suggestions to help you avoid becoming a victim:
Don't give out your checking account number over the phone unless you know the company and understand why the information is necessary.
If someone says they are taping your call, ask why. Don't be afraid to ask questions.
Companies do not ask for your bank account information unless you have expressly agreed to this payment method.
IT'S THE LAW: Since December 31, 1995, a seller or telemarketer is required by law to obtain your verifiable authorization to obtain payment from your bank account. That means whoever takes your bank account information over the phone must have your express permission to debit your account, and must use one of three ways to get it. The person must tell you that money will be taken from your bank account. If you authorize payment of money from your bank account, they must then get your written authorization, tape record your authorization, or send you a written confirmation before debiting your bank account. If they tape record your authorization, they must disclose, and you must receive, the following information:
The date of the demand draft;
The amount of the draft(s);
The payor's (who will receive your money) name;
The number of draft payments (if more than one);
A telephone number that you can call during normal business hours; and
The date that you are giving your oral authorization.
If a seller or telemarketer uses written confirmation to verify your authorization, they must give you all the information required for a tape recorded authorization and tell you in the confirmation notice the refund procedure you can use to dispute the accuracy of the confirmation and receive a refund.
What To Do If You Are A Victim
If telemarketers cause money to be taken from your bank account without your knowledge or authorization, they have violated the law. If you receive a written confirmation notice that does not accurately represent your understanding of the sale, follow the refund procedures that should have been provided and request a refund of your money. If you do not receive a refund, it's against the law. If you believe you have been a victim of fraud, contact your bank immediately. Tell the bank that you did not okay the debit and that you want to prevent further debiting. You also should contact your state Attorney General. Depending on the timing and the circumstances, you may be able to get your money back.
For More Information
The FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a new video, How to File a Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
Thank you FDIC
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