Fraudsters are smart, so much so that they know how to outwit the banks security, clearing system and best of all innocent account holders. So how do fraudsters use identity theft to steal your overdraft facility? Read on to find out more. Here is a good example of how an ‘overdraft fraud’ works.
When a genuine cheque has been stolen it can be used for opening a bank account in someone else’s name. Identity thieves will have the address and personal data to fool the banks security, so setting the bank account up would be relatively straightforward. In most cases the clearing process should identify fraudulent activities i.e. signature, altered name etc. Under these circumstances the cheque would be returned to the bank.
Here is how this fraud works – the bank account set up by the fraudster in someone else name may well have an overdraft facility setup. Fraudsters will look to do this for example in the event a fraudulent cheque bounces. A fraudster would ‘mail intercept’ the card and pin before it reached the real person (victim). On receipt of the card and pin, the fraudster can make several cash withdrawals up to the overdraft limit. In this instance, it is very difficult to prove that the account was opened by a fraudster and that the withdrawals were fraudulent. In this event, the bank will ask a debt recovery company to recover the overdraft debt.
In the event this might happen, you should contact your banks fraud department and ask them to investigate. In addition if you live in the US, you should contact all three credit reference agencies for a ‘credit freeze’ (also known as a credit lock down); and if you live in the UK, you should register for CIFAS Protective Registration, which will place a ‘fraud alert’ on your credit files. Worth noting, when these facilities are used, it takes much longer for you or any fraudster to apply for credit in your good name.
Safe surfing folks!