Bust-Out Fraud Law and Legal Definition

Bust-out fraud refers to fraud that occurs on an account that has generally been open for a short time. To commit a bust-out fraud, a perpetrator will first make large deposits in the deposit account opened by them by means of counterfeit check or unauthorized automated clearing house (ACH). Immediately following the deposits of large amounts, fast expenditure of the deposited funds will be made by means of cash withdrawals or by purchases of fence-able goods such as jewelry or electronics. The deposit account opened by the perpetrators of this fraud will be maintained for some period of time to make the bank view them as good customers. Accordingly the account appears to be good and the limit is raised but eventually the perpetrators will stop paying the account. Perpetrators of this fraud apply this bust-out technique to both debit card and credit cards.