Do banks refund scammed money? Means of recovery and tips for scam prevention

Do banks refund scammed money?

The short answer is: it depends. While getting a refund after losing money to scammers is possible, the outcome depends on factors like bank policy, the type of scam, the amount lost, and how quickly the scam was reported.

According to US federal law, banks must reimburse you for unauthorized transactions. However, this protection does not extend to authorized transactions, so depending on the circumstances, you might have to bear the loss yourself.

Most common money scams online

While people may consider themselves immune to money scams, the reality is quite different. According to the Federal Trade Commission (FTC), scammers defrauded US citizens of at least $10 billion in 2023, surpassing the 2022 data by $1 billion.

It seems that scammers are continuing to find ways to trick people into transferring money, using various methods, from Zelle and Cash App scams to social engineering attacks such as phishing. The most common money scams include:

• Imposter scams.
• Investment scams.
• Social media scams.
• Blackmail scams.
• Charity scams.
• Debt collection, debt settlement, and debt relief scams.
• Mail fraud.
• Man-in-the-middle scams.
• Money mule scams.
• Romance scams.
• Paypal scams.
• Selling of nonexistent products or services.

Imposter scams seem to be the most popular of these money scams. According to the FTC’s estimate, in 2023, scammers stole at least $2.7 billion from US citizens while pretending to be a bank’s fraud department, the government, a relative in distress, a well-known business, or a technical support expert.

Steps to take after being scammed

The first thing to do after you realize you’ve been scammed is to report it. Getting this information as soon as possible can help hinder the scammer’s exploits and potentially recover your money. You can report it to your bank, FTC, and any other agency that can help you (for example, the police).

After you report the scam, you should immediately follow these steps:

• Freeze your cards. Contact your bank or credit card provider and ask them to freeze your transactions. Double-checking your bank account information and address before requesting a replacement card is also a good idea.
• Update your passwords. In case of leaked passwords and identity theft, it’s important to change all your current passwords as soon as possible before malicious actors do that for you. Losing access to your bank account makes it harder for agencies and banks to help you.
• Use two-factor authentication (2FA). This step can and should be taken before getting scammed. 2FA is a reliable layer of security that can save you from getting scammed. Securing your bank accounts, social media platforms, and other important information with 2FA will only help prevent data theft and unauthorized transactions.
• Scan your device for malware and viruses. You should do so if you get scammed by downloading any suspicious files (and occasionally for general maintenance). In some scams, malicious actors convince victims to download files containing viruses and software capable of sweeping personal data from a mobile or computer. Scanning devices for such files and removing them should be the first step before changing compromised passwords.

It’s also important to note that after getting scammed, you’re likely to become a target once again. Suffering a scam means that your personal identifiable information (name, surname, email, and possibly financial data) got exposed to malicious actors, which they can reuse in a different scheme or even sell to other fraudsters. As a result, you are likely to become a target once more, so you should be vigilant of any spam, suspicious emails, or money requests and double-check before clicking on suspicious links or transferring money.

How do banks refund scammed money?

Depending on the amount of stolen money, the type of scam, and the time it took to report it, banks can reimburse (or recover) your lost money. Here’s how this process differs, depending on the circumstances.

If there is a charge in your bank that you don’t recognize

Upon receiving a report of a suspicious charge, the bank will begin investigating to verify the details (merchant name and location). The bank will also freeze their credit cards and financial accounts at the clients’ request to prevent further unauthorized purchases and transactions.

During the investigation, many banks provide their clients with a provisional credit, temporarily reimbursing them for the disputed amount. If it turns out that the charge was unauthorized or erroneous, the provisional credit will stay in the victim’s account. In addition, the bank will closely monitor your account to detect and prevent future fraud.

If you sent money to scammers via a payment app

If clients lose their money via payment app scams (such as CashApp or Venmo scams), the chances of getting bank reimbursement drop. However, getting a reimbursement is possible if the bank has a zero liability policy (provided that the client contacts the bank or credit card company as soon as possible and has a zero liability policy in their contract).

If the bank doesn’t offer reimbursements for transactions via payment apps, that doesn’t mean you shouldn’t report the scam. Upon receiving your report, the bank can initiate a dispute with the payment app provider to reverse the payment and launch an investigation to determine the type of fraud and its perpetrators. If you’re lucky and the investigation yields results, the payment app will freeze the scammer’s account and return the stolen money.

If you sent money to scammers via wire transfer

In case of wire fraud, the bank can offer limited financial protection. While some lenders still offer a zero liability policy (and, therefore, reimbursement), retrieving funds from wire transfers can be notoriously difficult.

Your best bet to recover stolen money is to immediately contact your bank or credit card issuer and inform them of the situation. The faster you do that, the higher the bank’s chances of withdrawing the transfer and recovering your money (though the chances are still small). The bank will try to freeze or reverse the payment and offer you some reimbursement (provided the circumstances and the fact that you have a zero liability condition in your bank contract).

If fraudsters gained access to your bank account

If scammers hijack a bank account, there’s a good chance the bank will reimburse the victim for an unauthorized transfer. However, it’s crucial to report a hijacked account as soon as possible because delayed reporting can result in the bank considering the victim liable for the charges and potentially refusing reimbursement. These practices vary among banks, so it’s important to carefully review the terms and conditions before opening a bank account.

How long does it take banks to refund scammed money?

The time it takes for the bank to refund scammed money can vary based on numerous factors, such as bank policy, the type of card you use (debit or credit), and even the location (for example, different conditions apply in the EU and the US).

If you were scammed when using your debit card

In the US, banks are required by law (Regulation E) to complete their investigation within 10 business days. They can extend the investigation to 45 days if they need more time but must provisionally credit the account within 10 business days. On the other hand, banks in the EU typically have up to 15 business days to resolve a complaint and refund the transferred money. Sometimes, this can be extended to 35 business days if the situation is complex.

If the bank concludes the payments were fraudulent, it will return your money and remove the charge from your account.

If you were scammed when using your credit card

Under the Fair Credit Billing Act (FCBA), credit card issuers have 30 days to acknowledge your dispute and 90 days to resolve it. Like in the EU, issuers often provide a provisional credit during the investigation, usually within a few days. In the EU, the refund process for credit cards can take up to 45 days. However, card issuers often provide a provisional credit while the investigation is ongoing, which usually takes around 10 business days.

How to protect your bank account from scammers

The best way to avoid scams and bank refunds is to avoid getting scammed. To safeguard yourself from fraudsters, all you need to do is to be vigilant and follow a few simple tips:

• Use strong and unique passwords.
• Enable 2FA.
• Don’t share sensitive data with anyone (passwords, account numbers, and PINS)
• Don’t click on suspicious online links.
• Regularly review bank statements (and your annual credit report) and inform the bank of any irregularities.
• Make sure your bank uses end-to-end encryption for bank accounts.
• Use a VPN to prevent malicious actors from swooping your personal data (including financial information) while using public Wi-Fi networks.

Finally, remember that speed is of the essence in money scams. Report any suspicious activity to your bank immediately and increase your online banking security by using a VPN. If you use NordVPN, you can further protect your online presence with a malware scanner that can prevent malicious links from sweeping your data, reducing the chance of being exposed to money fraud and other cyberattacks.