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Scams zero in on home equity lines

The HELOC scams are increasing, according to Brad Mundine, regional manager for CUMIS' credit union protection and risk management division. He wrote an advisory last month that said HELOC account losses from theft have "increased significantly" this year, with the insurer losing more than $4 million so far in 2010 ( Dec. 23).

As a result of some HELOC thefts, lawsuits have cropped up, pitting consumers against their lenders, and lenders against their insurance companies over who pays when someone makes unauthorized charges. Credit unions are involved in at least two lawsuits related to thefts from HELOCs.

Last week a lawsuit was filed by a member against a Burnsville, Minn.-based Affinity Plus FCU after he was told he would have to pay nearly $90,000 in unauthorized charges against his $200,000 HELOC account. The member, Mike Calcutt, found out about the theft during a conversation about interest payments on the loan in March. The thefts occurred after someone set up telephonic banking privileges on his account, then executed nine transfers of $10,000 each from his credit line to his savings account, and then instructed the credit union to wire the money to a drop account in Boston. Once there, the money disappeared.

In a separate case, Citizens Financial Bank in Indiana refused to cover $26,500 in bogus charges on a couple's HELOC after money was wired to a bank in Austria, where the money disappeared. A third case, filed in Philadelphia, involves another credit union, SB1 FCU, which covered a member's $220,000 loss from a HELOC and sought to recover the loss from its insurers, who denied the claims.

The Credit Union Information Security Professionals Association told the Star Tribune that of the 131 banks and credit unions participating in a 2008 webcast, 29 reported HELOC wire fraud incidents.

HELOCS aren't the only scams circulating. During the holidays a number of credit card scams surfaced. Here's a roundup of the latest scams:

* In Panama City, Fla., Bay County Sheriff's investigators reported a string of credit card fraud claims from members/customers of local financial institutions, including Innovations FCU and Tyndall FCU. The fraudulent charges began Dec. 23. Investigators said hackers breached a Visa retailer's data base, stole account information and used the information to make replica credit cards for frauds generated in Australia, Canada and Italy (The Walton Sun, News Herald and Panhandle Parade Dec. 27). The holiday season is the busiest time of year for credit card use, and the easiest chance that thieves can use the stolen numbers without anyone noticing right away, police said.

* Last weekend a teller at Auto Body CU, DeWitt, Mich., recognized a lottery scam and advised a woman not to wire the caller $3,000. The member left the credit union with her money still safe and secure, said WILX 10 (Dec. 27).

* In Butte, Mont., members/customers of several banks and credit unions reported fraudulent activity on their accounts. So far investigators have not found a common denominator in the fraud. The credit unions involved were not named (Associated Press Newswires Dec. 13).

* In Bellingham,Wash., Pacific Northwest CU warned that phony automated phone calls alerting recipients about debit card "problems" were reported across Whatcom County. The messages advise recipients to call a special phone number that leads to another recording that asks for account and personal identification numbers. Earlier in 2010, the county reported a rash of fraudulent text messages in January and July warning about credit union account "problems" (The Bellingham Herald Dec. 7).

These are just the incidents this month. Scams targeting members of credit unions as well as the general public, were reported in Oswego, N.Y.; Raleigh, N.C.; and Cheyenne, Wyo. The Federal Bureau of Investigation (FBI) also alerted media outlets that social networking sites and search engines were expected to be hit hard by cybercriminals, and that variations on phishing (e-mails), vishing (voice or phone calls) and smishing (text messaging to cell phones) would be making the rounds during the holidays. These typically target members/customers of credit unions and banks.