Topic: Fraud
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If we obtain cell phone numbers from our customers, can our core processor send them fraud alerts via text message? Do we need any disclosures referencing text messages and fees the customer’s provider may charge to receive texts from our core processor?
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We do not recommend sending text messages to your customers without their prior written permission, which generally is required by the Telephone Consumer Protection Act (TCPA). The TCPA requires “prior express written consent” before texting a consumer’s cellular phone, with limited exceptions. The Federal Communications Commission (FCC) has carved out a narrow exception for texts…
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If a bank advertises in Spanish, does it have to provide loan documents in Spanish?
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No, we do not believe that advertising in Spanish obligates a bank to provide loan documents in Spanish. However, you should be aware of two statutory notice requirements in Illinois relating to residential mortgage foreclosures. One requirement applies to all foreclosure filings, and one requirement applies to foreclosures of residential rental properties located in the…
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Can we charge off an overdrawn account immediately if we suspect fraud? A new customer opened an account by depositing a $400 check. The check was drawn on a closed account, so we returned the check. However, he had already withdrawn the full amount of the check from an ATM, causing his account to be overdrawn by $400, plus a small overdraft fee. Typically, we wait 60 days to charge off an overdrawn account, but we suspect that the customer was engaging in deposit fraud. Can we charge off his account right away?
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Yes, we believe that you may charge off the account right away. The Joint Agency Guidance on Overdraft Protection Programs states that “overdraft balances should generally be charged off when considered uncollectible, but no later than 60 days from the date first overdrawn.” In other words, the longest you can wait to charge off an…
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One of our customers signed an affidavit of forgery relating to four checks that were drawn on her account (we believe this is related to elder abuse by her son). We paid two of the checks and returned two NSF. We are going to refund the two checks that were paid. Can we return these checks? The midnight deadline already has passed. Does Rule 9 apply?
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No, we do not believe that you may return the checks after the midnight deadline. Generally, your bank must return a check, including a forged check, by midnight on the next banking day after receiving the check, as required by the Uniform Commercial Code (UCC) (with certain limited extensions permitted under Regulation CC). In this…
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We have a consumer loan with a co-signer who did not receive any proceeds of the loan. Our agreement states that if the debt is ever in default, that fact may become a part of the co-signer’s credit record. Does the Consumer Fraud and Deceptive Business Practices Act require us to provide a co-signer on a consumer loan with fifteen days’ notice before reporting a delinquent loan to credit reporting agencies? What negative information can we report with respect to the co-signer? Can we report the borrower’s late payments on the co-signer’s file with the credit bureaus?
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Yes, your bank must notify a co-signer of the primary borrower’s delinquency at least fifteen days before reporting adverse information about the co-signer to a credit reporting agency. The Illinois Consumer Fraud and Deceptive Business Practices Act (“Consumer Fraud Act”) requires lenders to notify co-signers before reporting adverse information to a consumer reporting agency. While…
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We have a customer who recently was the victim of check forgery. A fraudster forged the customers’ signature to write two different $6,000 checks drawn on that customer’s account. We plan to file a Suspicious Activity Report (SAR), and we also want the customer to fill out an affidavit of forgery to verify the fraud. The sample affidavit of forgery form that we found online includes a space to identify a state and county. In that space, should we list the county where the forged checks were presented, or the county where our main office is located? Also, should we contact local law enforcement? We believe we may have surveillance footage of the fraudster.
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Yes, we recommend contacting your local law enforcement regarding the forgeries, particularly if you may have information that could assist police in identifying the fraudster. In addition, we are not aware of any form requirements regarding affidavits of forgery for checks, although you should check for any clearinghouse rules that might require an affidavit or…
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On the advice of our internal auditor, we recently updated our BSA policy to provide our response to a discovery of an ACH transaction that is connected to unlawful internet gambling. How can we detect these ACH transactions? Does NACHA provide any guidance?
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We are not aware of any specific guidance from NACHA on identifying ACH transactions involving illegal gambling. Regulation GG itself includes examples of policies and procedures to identify illegal gambling transactions, which include due diligence on commercial customers to determine the risk that the customer will engage in internet gambling and notification that your bank…
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A fraudster sent one of our customers a cashier’s check and told the customer to return excess funds by wire (that cashier’s check subsequently was returned and charged back to the customer’s account). Our customer instead purchased a cashier’s check and sent it to the fraudster. The fraudster is using this check, including the signature of our teller, to create fake cashier’s checks, which are being sent all over the country. We have received dozens of calls from the recipients, and one recipient took the story to a local news channel (we declined to comment on the story). We also are returning several of these checks daily. So far, our bank has not suffered a loss, but is there anything else that we should be doing? Should we contact our local law enforcement?
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This is serious fraudulent activity, and we recommend consulting with your bank counsel immediately to discuss a strategy for safeguarding against potential monetary, regulatory and reputational risks. Meanwhile, we would recommend that you contact local law enforcement, as well as the FBI. In addition, you should contact your primary federal regulator (the FDIC) to report…
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One of our customers just notified us that several counterfeit checks have been drawn on her checking account, starting over six months ago, with the most recent check paid about a month ago. We have copies of the checks, which state “signature not required” and that “customer authorization was obtained using Quick Pay Office Pro.” Are we liable for paying these checks? Our account agreement requires customers to report unauthorized checks within 60 days.
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Based on the facts provided, we believe these checks are remotely created checks (defined in Regulation CC as a check “that does not bear a signature applied, or purported to be applied, by the person on whose account the check is drawn”). We do not believe that your bank should be liable for the unauthorized…
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One of our customers is claiming that her daughter stole several checks from her checkbook and forged her signature on checks totaling $800. The customer lives with her daughter and told us that her daughter is a felon and a drug addict. Do we have to reimburse our customer? She notified us about the forgeries within the 30-day deadline established in our account agreement, but we believe that she failed to properly guard her checkbook. This is her second claim of fraud, with the first claim involving her grandson’s unauthorized use of her debit card. Also, can we contact the individual (a local businessman) who cashed the forged checks?
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You need to reimburse a customer for forged checks if the customer alerts you to the forgery with “reasonable promptness.” In this case, your customer fulfilled her notice obligation by alerting you about the forged checks within the 30-day notice period established in your account agreement. However, your bank is not obligated to reimburse the…