Banks Reportedly Make Money Helping Crooks

The government says banks big and small may be ignoring warning signs of fraud perpetrated against their customers.

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Some banks may be turning a blind eye to fraud because it makes them money.

Court documents and interviews with officials at the Justice Department, Federal Trade Commission and the Consumer Financial Protection Bureau show banks turning a profit after ignoring potential fraud warnings and sometimes playing a more direct role in “enabling dubious merchants to prey on consumers,” The New York Times says.

“Banks across the country, from some of the largest to smaller regional players, help facilitate billions of dollars of fraud each year, according to interviews with consumer lawyers and state and federal prosecutors,” the Times says.

In one example, a bank allowed about $39 million to be withdrawn from hundreds of thousands of accounts between 2007 and 2009 by telemarketing companies, the Times says.

Executives at the bank at least suspected what was happening, email conversations in court records indicate. Despite an unusual number of consumer disputes with certain merchants, the bank kept allowing the transactions, the Times wrote.

The banks can make money through intermediaries working with the telemarketers, through overdrafts on consumer accounts, and through fees charged to merchants when consumers dispute charges, the Times says.

But that may change soon.

A U.S. attorney in Philadelphia sued another bank late last year, claiming it was “willfully blind” and enabled fraudsters, the Times says. The Justice Department is considering civil and criminal actions against several other banks, it adds. The industry may be in for a rude awakening.

But don’t rely on your bank to watch your back. Check your accounts regularly for fraud, and learn how to avoid top consumer complaints.

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