Warning: Be Suspicious of Fraud Alerts on Your Financial Accounts

In this day and age, many of us keep tabs on our financial accounts electronically, which allows us to do things like transfer money and get balance updates and fraud alerts. But what happens when the fraud alert is itself fraudulent?

Money expert Clark Howard is warning about fake fraud alerts that could jeopardize your financial well-being by tricking you into giving up your personal information. And the crooks have been at it for a while.

Receive Financial Fraud Alerts? Read This

A University of Illinois-Chicago report details instances in which "scammers are sending text messages with phony fraud alerts stating there has been a request to withdraw or transfer a large amount of money from your bank account. These texts may appear legitimate and contain the name of a bank you do business with."

Clark says the scam, which has many different layers, wrinkles and versions, has a common theme.

Here’s How the Fraud Alert Scam Goes

“You’ll be contacted any number of different ways by someone who pretends to be from your bank, credit union, brokerage, mutual fund company or retirement account. I’ve not heard of it yet with HSAs,” Clark says.

"What will happen is that the person will pretend that they are from the fraud department of whatever organization it is. And it's possible, maybe they used to work in one and they know the procedures and lingo so well," Clark says. "They will trip you up and they will tell you that there is a threat or possible fraud going on with your account."

In many cases, the criminals may already have information because of repeated data breaches or having moles inside the financial institution, Clark says.

“They’ll use all the right lingo to the point that very knowledgeable people — people who never get taken in a scam — end up thinking that they’re really communicating with a fraud specialist at their bank, credit union, brokerage or investment account and they end up giving key details,” Clark adds.

What Scammers Are Really After: Access To Your Financial Account

“They already know your account number. They may even have access to your password — who knows how — but what they need is access to your two-factor authentication,” Clark says.

Clark is a big fan of two-factor or multi-factor authentication because it utilizes a strong password and an access code that only lasts temporarily before becoming invalid.

Beware of a “fraud specialist” who pretends that they are stamping out a fraud attempt and pushes you to act urgently because time is of the essence. “Gosh, you’ve got all that money in there. We’ve got to make sure we protect it,” Clark says the scammer may say.

“They may even know enough to tell you the balance on your account. They say, ‘We’re sending you a code. Please let me have that code, and we’ll be able to shut down that activity.'”

How To Protect Your Financial Accounts

One entity that will provide no or only limited help is your financial institution, Clark says. Once you get scammed, “then the financial institution is like ‘Wow, isn’t that terrible? You lost your life’s investment? All your retirement funds are gone?’”

Clark says too many times those financial institutions show that they simply don’t care. “I do care and you need to care. You need to make sure every friend and relative knows that this is hot, hot, hot in the con game world,” he adds of the fraud alert scam.

Here are some steps Clark says you need to take if so that you don’t fall victim:

Talk As Little As Possible or Not As All

“If you’re ever alerted by text or email or phone call or anything that there’s a potential fraud problem with an account, say, ‘Thank you so much for the alert. I’ll check on it.’ And hang up the phone,” Clark says.

As for suspicious phone calls, Clark personally doesn't answer them. Read up on his rule about handling phone scams.

No matter what, Clark says you don’t engage with con artists. “Don’t feel like you’re playing detective and you’re going to expose the scam. Nope,” Clark says. “Do not engage with them at all.”

The more information you divulge, it could come back to bite you: You may slip up and reveal some personal information that you shouldn't have. Also, crooks may record your voice as part of a voice-cloning scam to defraud you later.

Safeguard Any 2-Factor Authentication Code

"If somebody from a fraud department is legit and they're contacting you, they're never going to ask you for the code being sent to you, they're not going to ask you. That code is for you, not them," Clark says.

Contact Your Financial Institution

"And then you go to the app on your phone or the website that you know is the website for whoever the financial institution is. You sign into your account, and you'll be able to see right there if there's any danger in your account," Clark says.

Once you make contact with a customer service representative or agent, that’s your opportunity to find out if there’s any activity related to an attempt of fraud or hacking into your account.

“Because what these people are trying to do is get you to spill the beans they need to steal your money,” Clark says.

Final Thoughts

Faux fraud alerts are real and a real danger to your finances. Clark says the worst thing you can do is leave it up to the financial institution to protect you or reverse any harm done to your wallet.

“You have to be there for yourself,” Clark says. “You have to be your own police officer.”

And remember, if you do receive a sketchy fraud alert and you can’t verify its authenticity, Clark says to be as uncommunicative as possible.

“Number 1, they may be dangerous,” Clark says. “And you want to just completely withdraw yourself from them. Say, ‘Oh thank you so much for letting me know’ and hang up that phone. You’re done.”

Want more scam-proof financial advice? Read our guide on how to fight fraudulent bank charges.

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