At the time of writing, the government has issued up to three economic impact payments (EIP) to millions of Americans, and scam artists have rushed in to take advantage of this situation. Financial institutions need to ensure they are poised to deal with stimulus check fraud and other issues related to these payments, and to protect yourself, you should consider the following.
Educating Customers About Stimulus Check Fraud
Fraudsters are reaching out to consumers and using stimulus checks as an excuse to steal their information. When consumers fall victim to identity theft and bank fraud, they are typically responsible for the losses they incur, but if their accounts go negative, financial institutions often bear the brunt of those losses.
To protect your financial institution, you may want to educate your customers about the following red flags of stimulus check fraud:
- Phishing calls — To obtain consumer’s details, many scam artists call and ask for personal details such as bank account numbers and Social Security Numbers. They often tell consumers that they are calling from the government and need to verify information before sending them a check. Let your customers know that the government never calls consumers with these types of questions, and remind them to never give away personal details over the phone to unsolicited callers.
- Scam texts and emails — Scam artists are also sending out fake links over text and email. Typically, the links direct the victim to a site where they are requested to verify their personal details before they can receive a check. Reach out to your customers and let them know that there is no screening process to receive stimulus checks. The IRS sends these checks out automatically based on the information in consumer’s tax returns or because they are receiving Social Security payments.
- High pressure tactics — To motivate consumers to give away their information, scam artists tend to use high-pressure tactics. Consumers need to be aware of this risk so they can avoid falling for these types of ruses.
- Fees — Thieves are also reaching out to consumers and offering to give them stimulus payments in advance in exchange for a fee. In other cases, they are sending consumers fake checks for more than the amount of their stimulus payment and requesting to have the consumer repay part of the funds. Be proactive about educating your customers about these types of scams.
Detecting Counterfeit Stimulus Checks
Your financial institution is likely processing hundreds or thousands of stimulus checks on top of its regular payment processing, and you need to ensure that fake checks don’t slip through the cracks. Fraudsters are leveraging this situation to their advantage by altering and depositing actual stimulus checks, and they are also stealing checks and other documents out of the mail to commit identity theft.
To deal with the influx of payments and the increase in fraudulent activity, you need high quality software that can automatically process presented checks, look for minute alterations, or detect changes to stock information that may indicate fraud. Then, the software should present suspicious items to your team for manual verification.
Preventing Inappropriate Seizures
The government has strict rules against the automatic seizure of stimulus payments. Creditors are not allowed to garnish these checks for any reason, and if an entity seizes a payment from one of your customers, you may be caught in the middle of a mess. Take steps to ensure that you verify all garnishments and seizures to ensure they are legally allowable.
Dealing With Temporary Credits
In that same vein, the government has also banned financial institutions from assessing overdraft or insufficient funds fees to stimulus checks, and as a result, your financial institution may have been forced to credit fees that were removed from accounts in the days before the stimulus checks were deposited. Unfortunately, in most situations, there is nothing your financial institution can do to recoup those funds.
However, your financial institution may have also issued temporary credits to customers whose accounts were in the red when the stimulus checks were deposited. You do have a legal right to recoup those funds, and most financial institutions have plans to reverse the temporary credits within 90 days or so.
Customers may not be prepared to deal with these reversals, and if the reversal catches them unexpectedly, you may deal with a flurry of negative balances, insufficient funds, and bank fees. This domino effect may also strain your customer service reps as they have to deal with an influx of calls from confused and angry customers.
To minimize the potential damage from this situation, be proactive about notifying customers about the temporary reversals and when you are likely to recoup the funds. Then, alert them again just before you actually take the funds. Even if your financial institution is in the right, an expected reversal of a temporary credit can cause consumer panic and hurt your financial institution’s reputation.
Investing in Anti-Fraud Tools and Solutions
Financial institutions suffer fraud at incredibly high rates, and to protect your bottom line, your customers, and your reputation, you need the right anti-fraud tools and solutions in place. At SQN Banking Systems, we offer check image analysis tools as well as other hosted fraud solutions — to learn more, contact us today.