What To Do When Your Bank Doesn't Believe You've Been Scammed  

IMPOSTER SCAMS: A PRIMER FOR WHEN YOUR BANK DOESN’T BELIEVE YOU’RE A VICTIM OF IDENTITY THEFT.

By Mark E. Brenner, Esq.

According to Experian, in 2021 and 2022, identity theft complaints were the most common type of fraud reported to the Federal Trade Commission (FTC). The most commonly reported fraud category after identity theft is imposter scams, where a criminal poses as a representative of a trusted institution or government agency in order to steal money or personal information. Also highly reported is financial identity theft, which occurs when someone uses your personal information without your permission to commit financial fraud. This can happen in a variety of ways, including using your credit card or bank account information, taking out a loan in your name, or using your Social Security number to open new accounts.

  Victims of identity theft come in all types. People with a trusting nature who want to help others, those with a lack of familiarity with technology, or who are isolated or lonely may be prime targets. The elderly, people on fixed incomes, or those who have accumulated a lifetime of wealth are also highly susceptible. However, we are all potential victims of the ever-increasing and ever-sophisticated ways to separate us from our money.

But what do you do when the banks and credit card companies don't believe you and come after you for the money the scammers made you withdraw? If you live in California, there is a way to fight back.

Millie the Luddite

Millie is 78 and in great physical and mental health. She never married and has no children of her own, although she has nieces and nephews whom she helps financially from time to time. Her modest 875 ft² home on the outskirts of Los Angeles is paid for. A couple of years ago, her bank offered her an equity line of credit, and she agreed. She is taking care of her sister who has Alzheimer’s and wanted the money available for emergencies. Most importantly, Millie is technologically challenged. She doesn't have a cell phone or an email account, can't send SMS messages, and has never used online banking.

A Fraud is Afoot

At the beginning of the year, Millie received a call from someone claiming to be Brenda Williams with the Bank of USA, where she has banked all her life. Williams told Millie that someone had fraudulently taken out a loan in her name from Stagecoach Bank, but not to worry because she was there to help Millie cancel the loan obligation and catch the scammers. Millie, wanting to help put the “bad guys” away, agreed to cooperate.

As you guessed, Williams did not work for the Bank of USA, but when Millie quizzed her to verify that she was a bank employee, Williams had all the answers, account numbers, mother’s maiden name, etc. In short, Williams had all her personal identifying information. Millie was convinced she was genuine, and the scam was underway.

Unbeknownst to Millie, the scammers had illegally gained electronic access to her equity line and transferred $150,000 to her checking account. Williams told Millie that the bank was going to catch the scammers by depositing $150,000 into Millie’s checking account, which Millie should then take out in a cashier’s check. Then, Millie should take the check to Stagecoach Bank and deposit it into the account of the suspected scammers. That way, when the fraudsters accessed the funds, they would be caught.

The plan made sense to Millie, especially when she looked at her checking account balance and verified that a deposit had been made for $150,000. She obeyed Brenda’s instructions and bought a cashier’s check for $150,000, payable to the name of the suspected scammer. She then walked it over to the nearby branch of Stagecoach Bank, which took the check for deposit.

Millie waited for days to hear from Brenda but never received a call. When she went to her local branch of Bank of USA to see if they could get in touch with Brenda, she found out she had been scammed.

As it turned out, Bank of USA had not deposited any money into Millie’s account. The money came from her own equity line, on which she now owed $150,000. Also, the balance was secured by a mortgage on her home. If she didn't pay it, the bank would take her house.

After Millie reported the fraud to the bank and to the police, the bank told her they would investigate. They didn’t. Instead, they initiated foreclosure proceedings.

Non-Bankruptcy Relief

Fortunately for Millie, there is a cocktail of California code sections that protect her from the bank collecting on the debt. By combining Penal Code, 530.5 and Civil Code, 1798.93, Millie can stop any foreclosure, cancel the debt, and avoid the lien on her house.  What’s more, if the bank doesn’t do all these things voluntarily, she can sue and get attorney fees, costs, and under certain circumstances, collect a fine of up to $30,000. Here’s how.

Starts with a Police Report

The first step is to file a report of identity theft with the local police or Sheriff as soon as possible after the discovery. Any delay in reporting should be explained in the report. Local law enforcement often doesn’t want to take these reports, but with a little insistence, they will. One should also file reports online with the FTC and with the FBI. In cases like these, there is no such thing as too much documentation.

The report should reflect that someone has "obtained" your "personal identifying information" without your consent and used it for any unlawful purpose, such as to obtain or attempt to obtain credit, as in Millie’s case.

“The Spoken Word Takes Flight, but the Written Word is Taken to Court"

Next is a letter to the bank. It’s best at this stage not to have telephone communications with the financial institution. Also, it is often difficult to know if the person on the other end of the line is truly a bank employee. In Millie’s case, it was discovered that she was reporting the fraud to the very scammers that had accessed her account.

The letter can’t just be sent anywhere. The victim, or the victim’s attorney, must determine the "address designated by the claimant for complaints related to credit reporting issues that a situation of identity theft might exist and explaining the basis for that belief." See CC 1798.93(c)(6)(A). That address may appear on account statements or on the bank’s website.

Good Things Come to Those Who Wait

Next, you wait. Section 1798.93(c)(5) requires you to wait at least 30 days if you are to recover costs and attorney fees against the bank. Also, 1798.93(c)(6)(B) suggests you have to give the bank a chance to adequately investigate the alleged crime if you want to claim the $30,000 penalty. In the meantime, it wouldn’t be a bad idea to notify the three major credit bureaus that you have been the victim of identity theft.

The Clock is Ticking

Whether you should file a lawsuit or answer the lawsuit by the bank or collection agency depends on who gets tired of waiting first. But whoever makes the first move should know that there is a set amount of time to do so. This limit is called a “statute of limitation,” which restricts both the time the creditor must sue, and the time you can sue the creditor. In California, as in other states, that limit is four years. After that everyone is out of luck.

If the bank or collection agency has not begun a lawsuit to make you pay, chances are they won’t, and you can rest with the knowledge that you probably will not have to pay the debt resulting from the identity theft. 

When to Play Offense

In some cases, however, you might have to initiate the lawsuit to get all the relieve. For example, in Millie’s case, the bank was no longer trying to collect the debt, but since it was an equity line, the debt figured as a lien against her house and subject to foreclosure at any time, even beyond the time limits the bank must sue.  

For this reason, Millie had to file a complaint against B of USA to establish that she was a victim of identity theft, that she did not owe the money, and that the lien against her property should be removed. 

If you or your attorney decide to sue first, be sure to sue the correct Claimant. The bank who initially was trying to collect from you may have sold the account to a collection agency. If this is the case, the “Claimant” is now the collection agency and must be sued. Suing the bank will only get your case kicked out of court. See Satey v. JPMorgan Chase, 521 F.3d 1087 (9th Cir. 2008).

When to Play Defense

If the bank or collection agency doesn’t believe your claim of identity theft and sues you in Superior Court, don’t worry. They have fallen into your trap. The law allows you file a cross-complaint, sometime called a counter suit, to establish you are a victim of identity theft in connection with the claimant's claim. If you prove this, and you can show you sent the notices to the correct addresses, and allowed the bank to properly investigate, the bank may have to pay your attorney fees and costs, in addition to a hefty fine. Faced with this risk, most Claimants seek a quick dismissal of the case.  

Also Works for Credit Card Debt

  If someone has used your personal information without your permission to create a debt for you, you don’t have to pay.  You can use the same steps outline above to erase the debt and stop the collection agencies from contacting you.  

Summary

When faced with collection from a bank or credit institution for a debt you owe because of identity theft, send a letter priority mail to the bank at the address the bank gives for reporting fraud. Include in the letter: 

1-A statement that you are a victim of identity theft and that you are making sending this letter pursuant to the provisions of Civil Code 1798.93.

2. A copy of your driver’s license or identification card, as issued by the state.

3. Any other identification document that supports the statement of identity theft, like the card or account number of the account that was accessed.

4. Specific facts supporting the claim of identity theft, for example, how it happened.

5. Any explanation showing that you did not incur or participate in the debt.

6. A copy of the local police report or any report to the FTC or FBI.

7. A telephone number for contacting you concerning any additional information or questions, or direction that further communications to the debtor be in writing only.

8. To the extent you have information concerning who may have incurred the debt, the identification of any person whom the debtor believes is responsible.

9. An express statement that you did not authorize the use of the debtor’s name or personal information for incurring the debt.

You might not need to hire a lawyer to write and send this letter. Click here to see an example that attorneys use to fight back. You can adapt it to your needs. If the Creditor doesn’t stop after that, then you might want to consider hiring one.