Your Bank May Not Refund a Scam: Learn What Rights You Have

Unfortunately, just because you fall victim to a scam doesn’t mean your bank will refund your money. Banks have a legal obligation to refund unauthorized purchases, but everything else falls under your bank’s terms and conditions.

The best chance you have of getting your money back if you have been scammed is by using an identity theft protection service. But you can also take steps to avoid becoming a victim in the first place.

Let’s take a look at the most common types of scams, what consumer protections you have, and how to spot scammers.

Do banks refund scammed money?

Whether banks refund scammed money depends on the scenario. Let’s say someone steals your debit card information and spends $5,000 from your account. This would be an unauthorized transaction, and federal law says the bank is legally responsible for repaying you.

However, if you call a fake tech support number and they convince you to send them $5,000 to fix your computer, you authorized that payment so the bank isn’t obligated to refund you at all.

In the case of a transaction you authorized, banks refund scammed money based on their individual policies. Your bank may have refund rules based on how long it took to report the scam, what type of scam it was, how much money you lost, and the individual policies in your plan. Fortunately, there are some protections you have outside of your bank.

What protections exist for consumers who have been scammed?

The Bureau of Consumer Protection under the Federal Trade Commission (FTC) does have some action items to help customers who have been scammed. It’s recommended you reach out to your state Consumer Protection office. Unfortunately, the help may not be as far-reaching as you’d like.

The FTC will sue a company for defrauding customers. The more consumers report the fraudulent activity, the more likely the FTC is to investigate the business and its practices. Once a company is deemed fraudulent, the agency goes to work.

This is great if the company sticks around for a while to receive all this attention. But, if it’s a quick scam or an overseas cybercriminal, there’s little the FTC can do to track and prosecute the offenders.

There are some other protections available to you, depending on the type of scam you encountered.

Unauthorized charges

As we mentioned above, banks are legally required to reimburse you for an unauthorized money transfer. If someone steals your bank information and uses it to remove money from your account, your bank will reimburse all those funds.

Payment apps

PayPal, Venmo, CashApp, and many other payment apps factor heavily into scams. Be wary of anyone wanting you to transfer money via a payment app, especially if it seems out of character. If you receive a payment request, like the one we got from a random stranger for $10,000, you should report it and block the user.

Normal payment app activity includes purchasing goods or services from such things as a reputable farmer’s or night market vendor. It could also be from a verified website or eCommerce site.

Uncharacteristic payment app activity could include a text message from your company’s CEO asking you to send them money. Unsolicited payment requests of unusually high charges, or a random, unverified QR code could signify a payment app scam.

Credit cards

Credit cards are one of the safest ways to pay for goods and services because of the robust refund policies they have for scams and theft. You can even attach credit cards to payment apps like PayPal for extra protection when you’re using either payment method.

If you find yourself the victim of a scam and paid with your credit card, contact the card issuer and report the fraudulent transactions. Credit card issuers have a lot of power to reverse charges and help you get your money back.

Debit cards

If you were the victim of a scam and used your debit card to pay, there’s a lower chance of retrieving those lost funds. It’ll depend on your bank’s policies as to whether or not they will help. You should still call to see if you can stop payment and reverse the charges.

However, if you get involved in a practice dubbed “card cracking,” you may be in trouble. Card cracking is when a cybercriminal promises easy money in return for a debit card holder’s cooperation. The criminal obtains the debit card holder’s information to deposit fake checks in their account and then removes the money via ATM. The cardholder disputes the checks, and the criminal cuts the cardholder in on some of the profit.

Law enforcement is on to this scam, and anyone willingly participating in it may face fines, penalties, and even jail time. If someone reaches out to you, usually via social media, and asks if you want to get some “quick cash,” you should block and report that account.

Wire transfer payments

Wire transfers have some built-in cushioning as far as timelines are concerned. If you realize that you’ve been scammed after you’ve transferred money, you should call and try to get the transfer reversed ASAP.

Hacked bank accounts

You should report unusual bank activity as soon as possible. Most banks give you a 48-hour window to report, and you’ll likely have no financial responsibility for covering any fraudulent charges or have a very low threshold (almost like a deductible). You should then file a police report, change your login name and password, and put up monitoring on your social security number and credit reports.

What to do if you’ve been scammed

Once you know you’ve been the victim of fraud, there are several steps you need to take to ensure you don’t get hit a second time. Follow our recommendations below to protect yourself and begin the remediation process.

1. Document details — Record as much of a paper trail as possible and save all communication.
2. Stop contact with the scammer — Do not respond to the scammer and remove their access to you via social media, email, or messaging apps.
3. Report fraud — The Internet Crime Complaint Center (IC3) website is a government reporting site for internet crimes. You should also contact your local law enforcement.
4. Research your bank’s procedures and insurance coverage — Look at the terms of service and contracts regarding your accounts to see what options are available.
5. Freeze your credit — Use your identity protection software to freeze your credit. If you don’t have identity theft protection, try freezing your credit via the Social Security Administration website.
6. Monitor your account — Check accounts at least once a day. Data leaks and poor password hygiene make it easier for hackers to access multiple accounts once they gain entry to one.
7. Change your login name and passwords and enable 2FA — Make your usernames long and your passwords complicated. Enable 2FA or any biometric logins, like FaceID or a fingerprint scanner.
8. Scan your device — Use antivirus software to scan your phones, computers, tablets, and anything else that connects to the internet. You could have unknowingly picked up a hacker or data-stealing malware.
9. File a report with the FTC — Always file a report with the FTC. The more people reporting, the more information the FTC has against the aggressor.
10. Seek legal action — Contact law enforcement and seek legal action. Identity theft protection can provide support from remediation specialists to help you contact who you need to find the perpetrators and restore your good name.

What is a fraud alert?

Fraud alerts let you know if something suspicious is happening with monitored accounts. You can set up fraud alerts on your Social Security number (SSN), credit reports, bank accounts, and even social media accounts.

If you receive a fraud alert, do not click links or open attachments. Instead, go directly to the company’s website and log in. You should investigate the alert ASAP just in case you need to immediately contact your bank.

How long does fraud resolution take?

Resolving fraud through your bank or credit card issuer is faster than if you’re involved in a full-scale identity theft restoration. However, it’s important to note that a refund and resolution will likely depend on your individual circumstances.

• Credit card disputes — The time frame spans from less than a week to approximately 90 days, depending on the situation.
• Debit card disputes — The time frame here is slower than credit card scam resolution due to the necessary investigations but usually still within 90 days.

What if your scam claim is denied?

There is a definite possibility that your claim may be denied. Taking too long to report the fraud, the bank rejecting your claims, and many more reasons could all factor in having a claim denied.

You can attempt some extra remediation options if the bank rejects your claim. Make sure to collect as much documentation as possible, and then try the following avenues.

• File a dispute with the bank
• Submit a complaint to the Consumer Financial Protection Bureau
• Contact law enforcement
• Contact the remediation specialists at your identity theft protection provider
• File a complaint with the FTC and the IC3
• Contact your state’s Attorney General

How to protect yourself from scams

Remediation is a hassle, so you should learn to protect yourself from scams. Remember to be skeptical of anything that seems too good to be true or is trying to lure you in easily. The suggestions below are some of the best practices you should follow to stay safe.

• Use strong passwords and change any leaked passwords immediately
• Enable two-factor authentication
• Understand the signs of scams
• Use a VPN
• Use an antivirus
• Use a password manager
• Sign up for fraud alerts
• Exercise caution in making payments and double-check a site’s credentials if you’re online shopping
• Properly dispose of financial records
• Monitor your finances
• Sign up for identity fraud protection
• Check the caller ID of the person calling (If they claim to be from a government agency but the number doesn’t match, you’re likely dealing with an imposter scam.)
• Learn to identify phishing scams in emails, texts, online posts, and direct messages

The best services for identity fraud protection

If you aren’t using identity theft protection, you should consider it. Identity theft protection often comes with identity theft insurance, which covers lost funds and legal services, offers remediation specialists that help you contact all the right agencies, and prevention alerts and monitoring that can help you avoid identity fraud altogether.

What are the signs of scams?

Remember, if something feels off, it likely is a scam or, at the very least, not completely above board. You should be on alert for some signs which can help you avoid the scam. Here are some things to watch out for.

• Requests for personal or financial information
• Pressure to act quickly
• Strange payment methods (ie: gift cards, Western Union, a payment app name that doesn’t match the requester’s name, access to your bank account, etc.)
• Sites that feel overly spammy
• Suspicious links in text messages
• Suspicious links or attachments in emails
• Someone asking for more money in increasing amounts after you send some
• Any pop-up appearing on your screen with a warning, usually telling you that your device has been infected and that you should call the number provided
• Fake support numbers

Most common scams online

• Tech support scams — Tech support won’t contact you. If you’re getting a tech support email or message, it’s almost always a scam.
• Charity or political scams — Some scammers pose as legitimate political donation collectors. Also, there are fake charities or people who set up accounts on places like GoFundMe that pretend to be actual people who need help.
• Debt relief scams — If someone is reaching out to you to help with debt relief, it’s likely a scam. Do not give these scammers any information. You can research legitimate debt relief assistance on trusted websites.

FAQs

Bottom line

Unfortunately, your bank may not refund the money you lost in a scam. While consumer protections do exist, there’s still a good chance that you’ll be the one taking the loss. Identity theft protection subscriptions are great because they tend to pay out for scams and money lost in connection with identity theft (check the terms and conditions). Otherwise, most of the action you’ll take is reporting and working with law enforcement.

Remember, you can protect yourself if you stay educated on scams, use good security practices, and take your time evaluating the real motivation behind any request for money. Remember not to rush into anything and always say “no” if you’re uncomfortable.