Newest Trend in Bank Fraud

For those of you out there with home equity lines of credit (HELOCs), review your statements carefully.  The newest thing to hit my bank’s fraud department involves HELOCs and reloadable stored value gift cards.

Here’s how it works: the thief gets their potential victim’s HELOC loan number, typically by going through the target’s mail or trash.  The thief calls or visits the target’s bank and requests 90% of the available loan balance wire transferred to a checking account at another financial institution.  The proceeds are then loaded onto a Visa or MasterCard stored value gift card the same day.   

Reloadable stored value cards were created to be given as gifts or for payroll (for the unbanked) - once transferred (given) from one person to another, the cardholder’s identity is unknown - making them an excellent tool for fraud.  In this case - by the time the theft is detected, reported, and the card blocked, the loan proceeds have already been spent.  

The thieves targeting customers of my bank have primarily preyed on clients with more than $100,000 in available credit, so the losses have been considerable. 

How to avoid being a victim:

  1. Sign up for e-statements if your financial institution has the option available.  This goes for regular deposit account statements, credit card statements, etc., as well.  Monitor your account balances online and immediately report any suspicious activity.
  2. Add a security phrase to your bank account - particularly for phone transactions (online transactions have built-in security, thanks to federal dual authentication requirements). Choose something that isn’t a matter of public record - stay away from mother’s maiden name or city where you were born, go with the name of your favorite pet or the model of your first car instead (I have a customer who uses the name of his table saw as his security phrase!).
  3. Don’t take out more of a line than you need.  If you have good credit, you can easily get your bank to finance up to 90% of your home’s value, even in today’s market.  If you don’t have a defined need for access to $120,000 any time in the near future, why have a line of credit of that amount?
  4. Shred.  If you’re not already shredding your bank statements or anything else with personal information (especially social security number and date of birth), start doing it now.  This protects you from identity theft as well.
Stumble it!

6 Responses to “Newest Trend in Bank Fraud”

  1. Mrs. Micah Says:

    I hadn’t heard of that, thanks for spreading the word!

  2. Ricardo Bueno Says:

    Now this is certainly something to look out for!

    Just goes to show that you can’t undermine the importance of shredding important financial information. Hey, you can pick up an “ok” shredder for $25.

  3. RacerX Says:

    Great tip..thanks. I guess it shouldn’t shock me how low some will go!

  4. Rob Says:

    Bankergirl - I went looking for news on this, any chance you have a link? I work for a bank in the south, in a related area and would appreciate a real world example.

  5. Becky Says:

    Very good to know. I don’t ever plan on having a HELOC, but I still like to be kept up-to-date on any scams going around. You can never be too knowledgeable about stuff like that.

  6. Friday Finance Findings For January 18th : Generation X Finance Says:

    […] The Newest Trend in Bank Fraud -  This is just plain scary. Do you have a HELOC? If so, you better read this so you can stay ahead of the thieves. […]

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