Consumers defrauded by telemarketers can file claims

Wachovia Bank has entered into a settlement agreement with the Office of the Comptroller of the Currency (OCC) to pay restitution to consumers who were defrauded by certain telemarketers and third party payment processors. The companies that defrauded consumers included Payment Processing Center, LLC, FTN Promotions, Inc. dba Suntasia, Inc., Netchex Corp., and Your Money Access LLC, and related companies.

After an 18-month investigation, the OCC determined that the companies were getting bank account information over the phone and withdrawing funds from the accounts without authorization. The telemarketers had very a very high number of their transactions returned by the consumers as unauthorized. This high rate should have alerted the bank that these account holders were engaging in fraudulent transactions. Wachovia is believed to have participated in these fraudulent schemes because it profited from the fees collected on the telemarketers' accounts and transactions.Wachovia will pay out a maximum of $125 million, but is hoping for less if fewer consumers file claims. Consumers who have already been reimbursed for their losses cannot collect any additional money through this process. The bank also has to give $8.9 million to consumer education programs for the elderly, and must pay a $10 million civil penalty to the U.S. Treasury.

So all told, Wachovia will be on the hook for about $144 million at the most. That's about 2% of the company's profits of $6.3 billion in 2007. Is that a fair price to pay for looking the other way when consumers were being defrauded?

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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