Sunday, June 04, 2006

Don't Trust a Bank to Tell You Whether a Check is Good, or Not

Just because someone at the bank tells you a check is good, it might not be the case. Here is a story written by Caroline Mayer of the Washington Post -- where someone selling a car on a auction site received a check for more than the amount of the purchase -- and was asked to wire the extra money back to the buyer.

The seller was suspicious and asked a teller at his bank (twice) to verify the check and was told it was good. Here is what happened next as Caroline Mayer reports:

"Four days later, as he reviewed his account online, he discovered the check was not good. Even worse, the bank was demanding that he repay the $5,000."

"Had I made the deposit and not tried to make sure it was legitimate, I should have full obligation to make good on it," said Schaefer, 34, a facilities manager in Brattleboro, Vt. "But I checked with the bank twice, and now I find out they have no accountability."

"Schaefer is one of thousands of consumers who have been victimized by an increasingly common check scam that relies on the vagaries of the banking system to take advantage of unsuspecting consumers."

"Federal rules require banks to release funds from a consumer's deposit quickly, usually within one to five business days, depending on the kind of check. However, it can take weeks before a bank discovers a check is fraudulent."

Full story, link here.

This is a typical advance fee scam, where counterfeit checks, or money orders are used to dupe a seller.

So far, as the bank involved, I would recommend that they do a little "fraud awareness training" with their tellers to protect their customers from getting ripped off. Counterfeit checks often use good account numbers, which can be deceptive.

In my experience, the best way to verify a check is to contact the issuer of the item. If the check is counterfeit, or a forgery, laws in most areas allow it to be charged back for a year, or more.

And that is a long time to wait!


T.L. Stanley said...

I would have never thought about this fraud. The bank in this case is unknowingly part of the fraud. Good post. Take care.

prying1 said...

At my work the bookkeeper has a heck of a time trying to verify checks. - They won't tell her whether to deposit it or not so she has to 'guess' when it will be good for some of our more 'careless' regular customers.

She tries to get the boss to make 'em cash only but... - These regular customers make good on the checks but if they know the cash is not there why write them?

I guess my point is the bank knows saying it is good or not doesn't matter. They know the system sucks.

Anonymous said...

I have 10 years of banking experience between three banks.

Here is the scoop- I have seen it all.

If you're accepting a check from a new customer I would hold that check for 10 business days before releasing any merchandise. Truth be told, even if that check IS good at the moment it doesn't mean it will be good when the check is presented. Lastly, when dealing with Fraud, generally speaking the fraudulent checks are almost always GOOD.

However, once the check clears and is available, the rightful owner of the account or monies can claim fraud and your bank can hit you with a late return literally months after the fact.

Ed Dickson said...

Good advice above!

Anonymous said...

does anyone know what happened at the end? Did the seller end up repaying the money? or the bank took the responsibility?