Educational Consumer Tips

Automatic Debit Scams

Author: Better Business Bureau

The following is Better Business Bureau (BBB) general information and is not intended as a report on any specific company.

When authorized, automatic debiting of your checking account can be a legitimate form of payment. When unauthorized, it is ILLEGAL. If you do not know the person or business soliciting you, do not give your checking account information over the phone and never agree to pay for items or services. If you give your information to a stranger, they may withdraw money from your account. Once a solicitor has your account number, it is put on "demand draft". The draft has your name, account number, and an amount. Unlike a standard check, however, the draft does NOT require your signature. Your bank will receive the draft and take the money from your account believing it is a legitimate transaction. You may not know your account has been drafted until you receive your next statement. 

Protecting Yourself 

To protect yourself from automatic debit scams: 

*Do NOT give your checking account number over the phone unless you initiated the call to the company and know why the information is necessary. 

*Do NOT be afraid to ask questions. For example, if a solicitor says the call is being recorded, ask why.

*Remember, most companies do not ask for your bank information unless you have expressly agreed to this form of payment. Since December 1995, the law requires solicitors to acquire your verifiable authorization for payment from your bank account. Anyone taking money from your account must have express permission to do so, must tell you the funds will be debited from your account, and must verify your permission through tape recorded or written authorization. 

Tape Recorded Authorization 

If solicitors record your authorization, they must disclose they are taping the conversation, and you must receive the following information: 

*The date of the demand draft
*The amount of the draft(s)
* The payer's (company's) name
*The number of draft payments if more than one
*A telephone number you may call during normal business hours
*The date you are giving your oral authorization. 

Written Authorization 

If a seller or telemarketer uses written confirmation to verify authorization, they must give you the same information required for tape-recorded authorization and tell you in the confirmation notice the refund procedure you may use to dispute the accuracy of the confirmation or to receive a refund. In both written and tape-recorded authorization, sellers and telemarketers must send you written notice prior to debiting your account. It is AGAINST THE LAW for anyone to withdraw money from your account without your prior knowledge or consent. If you follow the refund procedure given on the written confirmation and do not receive a refund, that too is against the law. 

If you have been a victim of an automatic debit scam, the BBB suggests the following: 

*Contact your bank immediately and explain you did not authorize the transaction and want to prevent it from happening again. 
*Contact your Attorney General and file a complaint against the company; depending on how much time has passed, you may be able to recover some or all of your lost funds. 

For more information, contact: 

Better Business Bureau Serving Upstate NY 
(800) 828-5000 

New York State Attorney General 
(877) 771-7755 

This report is general in nature and is not intended as a Business Review on any company, service or product.