In a class action lawsuit in Philadelphia seeking to hold a bank liable for facilitating telemarketing fraud, the plaintiffs have appealed denial of class certification and AARP filed an amicus brief in support of the victims.
In November 2007, a telemarketer convinced Reynaldo Reyes that he was eligible for a government grant that could be deposited directly into his bank account. Reyes provided information about his account, but instead of receiving a grant he found transactions deducting almost $400 that he did not authorize. The withdrawals overdrew his account and he was charged overdraft fees on top of the unauthorized charges. It turns out the telemarketing effort was part of a widespread scheme to transfer money directly from tens of thousands of legitimate bank accounts of unsuspecting victims to offshore accounts in the Caribbean, Canada, and India.
In his lawsuit against Zions National Bank, which facilitated the unauthorized transactions, Reyes pointed out that banks routinely flag such high volume offshore transactions in order to comply with money laundering laws and their own business needs. He says Zions, which initiated the transactions for the telemarketer, should have known these transactions were frauds but looked the other way because of the high fees these transactions were generating for Zions. Reyes argued that Zions deliberately ignored the problematic transactions and facilitated unlawful conduct.
Reyes’ class action lawsuit on behalf of himself and others who similarly fell prey to scammers seeks to hold banks accountable for processing transactions they should have known were frauds. A trial court denied his motion to certify a class action, ruling that in order to prevail Reyes would have to provide “absolute proof” of fraud in order to hold the banks liable. Moreover, the court found that the allegations of victimization differed too much in the details to support a class action.
AARP Foundation Litigation attorneys filed AARP’s friend-of-the-court brief along with the Consumer Federation of America, asking a federal appeals court to review and reverse the decision denying class certification. The brief cites the numerous studies reviewing typical scams involving unauthorized transactions from bank accounts, and documenting how they specifically target older and low income people. Government regulators are not effective at preventing or remedying such fraud, leaving individuals such as Reyes to bring private actions to stop them. Moreover, the Federal Reserve Board has noted that banks have perverse economic incentives to participate in such fraud, rather than to prevent it. A class action, according to AARP’s brief, is essential to hold banks responsible and protect older people from this kind of fraud.