Money Education

7 Ways of how Banks commit Fraud With You? Part 1


Adnan Ul Haq

Module 4:Money

7 Ways of how Banks commit Fraud With You? Part 1

Adnan Ul Haq

7 Ways of how Banks commit Fraud With You? Part 1

Banks can commit fraud with you in many ways. Sometimes they convey false or misleading information to you, drain your money away, and leave you unaware of what has happened. 

The 7 major ways that banks commit fraud with their customers include securitization, mortgage lending, an extension of credit for consumer goods, credit cards, and more.

Let us discuss these points in detail:

  • False Commitments

Some bank salespeople lie to you and take your money. For example, when you buy a house, the salesperson might give it to you at 4% interest, but they get the documentation with 20% interest signed by you.

When you ask about the documentation, they say that the increase in the rate is only for the documentation, and you will pay what we have promised. Therefore, there is a contradiction in what they are saying.

  • Hidden Charges

Banks often charge hidden fees and penalties. Banks will refer you to other departments to read the hidden charges and fees policies when you borrow money from them or buy a car or a house. But they change the hidden charges in the schedule all the time, so when you go to pay off your loan early, they may add additional fees.

You do not learn about all of the charges associated with a contract from the start. But once you have to start paying installments and remain stuck in the contract, you end up learning about these hidden charges.

  • Money Value

The bank earns money through the time value of money. Each year, the bank replaces a part of your money with new money, and that part is called interest. The bank keeps investing your money and keeps earning, but you keep losing money because the value of your currency deteriorates over time.

  • Fraud in the Documentation

Banks get your signature on various legal documents, such as waivers and additional forms, by saying they are just formalities or extra documentation. However, when an emergency arises, they show you those very documents, signed by you earlier, to prove that you owe the bank money. 

In a similar vein, they make you sign documents without explaining them to you. In contrast, it is ideal to get these papers verified by a lawyer. It is especially important to read the fine print and request an explanation of any terms or conditions that you do not understand. This is because once you have signed a document, there is no turning back.

  • Credit Pull

Banks tend to pull back your credit line in case of an adverse event in the economy, such as a stock market crash or a natural disaster. Banks will generally make you aware of this policy, but sometimes they may not. If you are ever in need of cash and you find yourself unable to borrow from the bank, it is better to try and borrow from someone else than to take out a payday loan. 

  • Account Types

The bank may not always tell you which of its accounts is the best for your needs. For example, you may need an account that can be used to make 50 transactions, but the one recommended by the bank can only be used for 20 transactions. Thus, when you make a transaction, you will have to pay a transaction charge.

When you open an account, check the type of account. Different types of accounts charge you differently. If you open the wrong kind of account, you will pay more in fees. Choose the right type of account.

  • Delays

When you take your bank cheque to the bank before it is due, they will delay handing it over to you by 2-3 days. Sometimes the teller will say that your signature looks strange or there is a dividend in your account and ask you to come back later. The bank's objective is to have more cash on that date.

For example, if you have PKR 1 crore in the bank at a 10% rate, then other people will have different amounts of money as well. The bank will hold that money for some days and charge interest while you suffer in the meantime.

Before you apply for a bank account, be sure to understand all the terms and conditions so you can avoid scams.