Banks under scrutiny have not partnered with fraudulent schemes, but rather have facilitated and enabled efforts to cheat Americans out of their money.
Two banks—Zions Bank of Salt Lake City and First Bank of Delaware—have been singled out in lawsuits by federal authorities and a consumer law firm. In both cases, bank officials were accused of allowing shady merchants to illegally withdraw funds from accounts belonging to victims.
Justice Department attorneys are considering civil and criminal actions against numerous banks for allowing tainted money to flow through branches, for failing to safeguard against suspicious merchants, and for originating transactions on behalf of businesses that they know make unauthorized withdrawals from customer accounts, according to The New York Times (NYT).
“You can’t close your eyes anymore to the fraud that you are allowing to happen,” Michael Blume, director of the Consumer Protection Branch at the Justice Department, told the NYT. “Banks are in business to make a profit. Unfortunately, this is a moneymaking operation at consumers’ expense.”
First Delaware reached a $15 million settlement last November with the Justice Department after it was accused of allowing merchants to illegally debit accounts more than two million times and withdraw more than $100 million. Its assets were liquidated and it has ceased operations.
Zions has been criticized for helping National Health Net Online, which has defrauded numerous individuals, by establishing a banking relationship with an intermediary, Modern Payments, that handled payments for National Health.
In doing so, Zions received a cut of the fee received by Modern Payments for each person whose account was accessed. Between 2007 and 2009, Zions allowed about $39 million to be withdrawn from hundreds of thousands of its accounts, much of which was transferred to other bank accounts in India, Canada and the Caribbean. This enabled Zions to charge $20 million worth of insufficient funds fees to its customers who had been scammed.
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