
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, April 16, 1991                   TAG: 9104160149
SECTION: BUSINESS                    PAGE: A-7   EDITION: METRO 
SOURCE: Associated Press
DATELINE: RICHMOND                                LENGTH: Short

BANKS WARNED ABOUT TELEMARKETING PRACTICE

The Federal Reserve Bank of Richmond has warned banks that some telemarketers are debiting checking accounts directly instead of charging credit card accounts. That presents "opportunities for fraud that are hard to detect," according to the regional branch of the nation's central bank.

"This change . . . may expose financial institutions to large losses," Robert Black, president of the Fifth Federal Reserve District, said in an April 11 letter to banks.

Black said banks in the Fifth District and other parts of the country have reported the problem recently. The Fifth District has jurisdiction over financial institutions in Virginia, Maryland, North Carolina, South Carolina, parts of West Virginia and the District of Columbia.

"In opening business accounts unscrupulous operators may not tell banks that they are telemarketers . . .," Black wrote. "Under a variety of pretexts, some extract checking account information from consumers and print unauthorized drafts. They deposit these drafts, often a large number of them just before closing time, and wire the funds out as soon as they are allowed to do so."

Black said the drafts are encoded in magnetic ink and banks may not realize they have no authorization to file for the unsigned drafts until customers have received their account statements.

by CNB