Don't Expect Banks To Protect You From Impersonation Scams

Banks are known and praised for the financial protection they offer customers through the Federal Deposit Insurance Corporation, which covers individuals for up to $250,000 in savings. However, the protection only covers losses in the event that a bank fails, while many other scenarios leave account holders in the dust. In other words, banks may not protect your hard-earned money in instances of impersonation scams. In an era where phone scammers can trick you out of thousands, it's a good idea to know exactly when your money is and isn't protected by your bank.

In fact, banks generally don't cover losses from impersonation scams. Although a scammer may impersonate an IRS agent — or even a bank employee — and persuade their victim into transferring funds to an external account, that's still an authorized transaction in the eyes of the bank. On the flip side, banks usually recover funds if a customer's account was hacked and money was transferred out because it would be classified as an unauthorized transfer. Instead of reinstating the funds from an impersonation scam, banks provide transaction monitoring using behavioral analytics that should in theory detect and block transactions that are unusually large or not typical of a customer's past behavior.

While bank fraud detection systems are complex and useful to consumers, they're not perfect. A lot of responsibility still falls on account holders to protect their funds from fraud. So, it's important to know the common tactics they use to lure people in. Most often, scammers go after senior citizens by impersonating a government agent or a tech support representative. They might use urgent or threatening language to make the victim believe they are facing legal trouble or that their account is in jeopardy. Regardless of the victim's age or financial standing, scammers will try all sorts of angles to convince others to pay them or transfer funds to have the fictitious issue resolved.

If you believe you are being targeted in an impersonation scam, the best thing to do is hang up — but that's easier said than done. Some scammers now use AI to aid their crimes, while others employ tactics such as disguising their calls using a bank's actual phone number to make their scheme seem more believable. To verify if a bank is actually trying to contact you, you can contact it directly using a phone number listed on its official website or the back of a debit card. Finally, never share any personal data with strangers. Keep information like account passwords, email addresses, your date of birth, and Social Security number closely guarded, as even small details can be used to reset or guess your login information.