Thursday, December 07, 2006

Walmart Employee Scams Customers via Electronic Checks

Processing checks electronically is becoming a standard practice, brought about the Check 21 law, or ACH (Automated Check House) processes.

Electronic checks save businesses a lot of money in processing costs.

Walmart is one business taking advantage of electronic checks - and when a check is written to Walmart - it's scanned in their point-of-sale system - then returned to the customer. From there, everything is handled "electronically."

I read a story put out by KRTK Houston about a Walmart employee, who scammed a customer by keeping the check (supposed to be returned), then used it to purchase merchandise and gift cards numerous times.

KRTK Houston story with video presentation, here.

When the customer noticed the fraudulent transactions on her account, she reported it to the Walmart and the employee was arrested.

The story also indicates that there are other victims out there that haven't been identified yet.

According to the story, the customer isn't being made whole by her bank because she didn't discover the transaction within thirty days and Walmart isn't refunding her money, either.

When check fraud occurs, victims are normally made whole by their bank, who goes after the business by charging them back for the transaction. If a business refunds the customer for their losses, the customer might be able to have the transactions charged back to them, also.

My guess is that Walmart isn't refunding the money because the bank still might charge-back the transactions to them?

Of note, it's probably not completely fair that Walmart is the only one being mentioned in the article. There is no mention of what bank is involved. I hope Walmart and the bank have since sorted this whole thing out and taken care of the people, who were victimized as a result of this.

After all - it only makes sense to do so - processing checks electronically saves them a lot of money by not having to process paper and if more stories surface (like this one), it's likely to affect "consumer trust."

I read consumer tips all the time that we should use our credit cards versus debit cards because they offer better protection in the case of fraud.

Tom Fragala (CEO of Truston) wrote a great post about this, here.


Anonymous said...


Actually, this type of check transaction is NOT covered by Reg E (Electronic Funds Transfer Act). Electronic check conversion (i.e., where information from a check is used to create an automated clearinghouse (ACH) debit) is similar to but separate from the check substitution process authorized by the Check 21 Act. That means the 2-day and 60-day notice protections do NOT apply. Consumer protections, like with all check fraud, are VERY limited. The time to report comes down to the agreement between you and your bank, as long as it is "reasonable." (The only specific laws that apply are UCC.) It is a contract between the account holder and the bank, as outlined in the documents given when account is opened. It could be as little as TWO WEEKS to report fraud. There are NO specific consumer check fraud protection laws, like EFTA or FCRA. Everyone you should read the contract for your account and CHECK YOUR STATEMENTS REGULARLY.

Tom Fragala

Anonymous said...

Excellent news to be reporting on Ed.
I bookmarked the FDIC page and bankersonline, thanks. Good info to keep up on.
Again, If people are not checking their banks account online, they have to wait till the paper statemet arrives.
I get both.

I had submitted a check to my credit card company last year for $20.00 dollars, clearly written for $20.00 dollars. I checked online, and they electronically deducted $70.00 dollars!

I called about it, and they said they had 60 days to correct it! 60 days! I said that they were not authorized to deduct the $70.00 dollars only $20.00 dollars that it was written for and I want it corrected Immediately!
A mistake by them should be cleared ASAP, not 30 or 60 days! I have carbon copies and I requested a photocopy of that check. And it certainly was written clearly for $20 dollars.
They credited my account the full $70.00 dollars within 2 weeks. And never asked for the difference.

You gotta watch everything these days.
Take care Ed.

Ed Dickson said...

Thanks Tom -

Have updated the post to take care of this.