ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, March 24, 1996 TAG: 9603260016
SECTION: BUSINESS PAGE: G-2 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: DARLENE SUPERVILLE ASSOCIATED PRESS
Consumers should guard their checking accounts as closely as they do credit cards to avoid becoming victims of a new kind of fraud in the popular automated payment industry, officials say.
``I couldn't believe how shrewd they were,'' said Geraldine O'Donnell of Philadelphia, referring to a company that contacted her last fall to tell her she supposedly had won $1,000 in groceries and a diamond watch.
Suspecting nothing, she complied with the request for her checking account number for verification purposes, only to find out later that she had been charged almost $150 for unwanted magazine subscriptions.
Officials say the fraud isn't new, but targeting checking accounts is.
``People have not traditionally suspected that there's a way to abuse your [checking] account,'' Jodie Bernstein, director of consumer protection for the Federal Trade Commission said last week.
A new FTC rule makes it illegal for telemarketers to debit personal checking accounts without a consumer's ``express authorization.''
But unscrupulous callers often tell consumers they need an account number to confirm their identity or deposit monetary prizes into the accounts, then make unauthorized withdrawals, Bernstein said.
``They lie,'' said Elaine Harrington, associate director for marketing practices at the FTC. ``Once they get you, they are able ... to get into the account.''
Millions of consumers pay mortgages, health club memberships and other bills without ever writing a check, said David Weiss, executive director of the National Automated Payment Association of Seminole, Fla.
The automated payments involve about $1 billion a year and are expected to grow to about $5 billion annually by 2000, Weiss said.
Some companies send confirmation notices to consumers naming the merchant and listing the withdrawals. Some are also including antifraud tips on the monthly notices.
``People need to understand this payment system and what they can do to protect themselves,'' Bernstein said.
O'Donnell said she has learned a valuable lesson.
``I will be very cautious of what information I give out and how I give it out,'' she said. ``Something like that is so confidential I should not have given it out.''
Meanwhile, the FTC has charged two companies with illegally deducting up to $800, in some instances, from checking accounts. They also were accused of misrepresenting the cost of the subscriptions, the reason they needed an account number and the amount to be withdrawn, the FTC said.
Named were Diversified Marketing Service Corp. of Oklahoma City, and its president, H.G. Kuykendall Jr. No one from the company was available to comment.
Also charged was a web of companies operating under the names Wholesale Magazine, Premium Magazine, Magazine Express, Magazines Unlimited, Magazines of America, Magazines Limited and Magazine Distributor of America in Atlanta and Somerville, N.J., the FTC said.
HOW TO AVOID GETTING RIPPED OFF
Consumer tips from the Federal Trade Commission to protect against fraudulent telemarketers and automatic debit scams:
Hang up if you are asked to pay for a prize. Free means free.
Don't give out checking account information over the phone unless you know the company and understand why the information is necessary.
Know the law. Telemarketers must obtain your verifiable authorization and your express permission to get payment from your bank account.
Don't be afraid to ask questions.
Contact your state attorney general immediately if you believe you may have been a victim of telemarketing fraud.
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