Office of the Comptroller of the Currency

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Check Fraud: A Guide to Avoiding Losses

Telemarketing Fraud

Telemarketing frauds are based on the creation of "demand drafts," rather than checks. A demand draft resembles a personal check but carries no signature. In place of a signature, it has a notice that the account holder has given permission to have money withdrawn from his or her checking account to pay bills for goods and services.

Example 1: The criminal calls a consumer and announces that the consumer has won a cash prize. The criminal explains that, to deposit the prize into the "winner's" account, he or she needs the account information. Once the consumer provides the account information, the criminal prepares demand drafts and withdraws funds from the account. (A common variant is for the criminal to offer the consumer something for sale, such as a magazine subscription, in order to get the necessary account information.)

Example 2: A representative of a criminal organization contacts potential credit card users and promises to arrange for them to get VISA or MasterCard credit cards. The representative asks for checking account information to issue the card and, when the information is provided, prepares demand drafts against the consumers' accounts.

Telemarketing frauds can be successful when customers reveal confidential account information.

To protect against such frauds, banks should:

• warn customers about them, either through direct mail or advertising in the bank,
• check a customer's file when a demand draft is presented to see if he or she has provided written authorization for the bank to pay those drafts.

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