Unwary consumers duped by counterfeit check scams
Banks required by law to give depositors quick access to funds, often before a phony check bounces.
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Check scams aren't the only consumer trap out there, but they are among the most costly to their victims. The NCL receives more complaints about fraudulent Internet auctions and general sales – where consumers pay for an item they never receive – than they do for Internet-based check scams, but the average consumer loss is in the $1,000 range. Consumers typically lose $3,000 to $4,000 when they fall victim to a check scam.
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Other bank-related scams
Check cons aren't the only prevalent banking-related scam. Consumers may be the victim of identity theft after they're tricked into giving out personal information in response to e-mails which purport to be from a trustworthy source – a con known as "phishing." "Phishers" impersonated financial service companies in more than 40 percent of their attacks in the first quarter of 2007, capitalizing on customer confusion during mergers and security systems upgrades, according to the Brandjacking Index released by MarkMonitor, an Internet security company in San Francisco.
But check scams remain a top concern for consumers, in part because of con artists ability to adapt. Victims may be told they've won a lottery, or contacted after they've advertised a room to rent or the sale of an expensive consumer good.
Work-at-home schemes are also common traps, says the NCL's Grant. Consumers may be told they've been hired as a mystery shopper or an account manager, and asked to wire part of the funds of a check they've received back to the company, she says.
The payment may appear to be a cashier's check, postal money order, or traveler's check. The only common link is that consumers are asked to send some part of the money they receive to the person ostensibly paying them.
"There's no legitimate reason why anyone would ask you to do that," says Grant.
Some banks are taking a proactive educational approach to protecting its consumers from check scams.
At customer awareness fairs around the country, Fifth Third Bank educates its customers about different types of check fraud. Account holders play a spot-the-fake-check game, where they try to differentiate between a good and bad check – a feat that's next to impossible. When customers ask about fund availability, tellers at Fifth Third emphasize that the funds may be available before the check has cleared, says Diane Ness, Fifth Third's fraud education manager. Tellers may even take the initiative to ask consumers questions about a check if it appears suspicious.
"First and foremost we want to protect our customers," says Ms. Ness. "The best protection that we have is getting out the information."
Efforts to educate account holders at Illinois' West Suburban Bank about the risk of check scams have saved customers tens of thousands of dollars, says Craig Kelbus, West Suburban Bank's vice president of loss prevention. When an account holder deposits a check worth more than $1,000, tellers hand them a flier which warns them about check scams.
"The fact you can withdraw cash from your account shortly after depositing a check does not necessarily mean the check you deposited is good," the pamphlet says. "Counterfeit and bogus checks can sometimes take weeks to be discovered and returned to your bank unpaid."
Informing account holders of the risks of check scams has reduced customer losses due to check scams by 80 percent, says Mr. Kelbus.
A long road to recovery
A simple notification might have saved consumers like George, the retired home remodeler, from financial difficulties. George, who lives on Social Security, says that the bank took all of the money in his account – including a month's Social Security – to help cover the bad check.
Unable to open a new checking account at another financial institution, he has relied on check-cashing services to cash his Social Security payments, hiding the money in his house. Not having a bank account hasn't been easy for him – he once spent several days searching for money he misplaced, and he is still fighting to regain his financial footing.
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So you’ve received a suspicious check. What now?
1. Ask yourself: Does this make sense?
No, you didn’t win a foreign lottery you never entered. And if anyone sends you a check and asks you to wire them money, that person is extraordinarily trusting: Nothing’s stopping you from just keeping the money yourself.
“The bottom line is simple,” says Susan Grant, director of the National Consumers League’s fraud center. “No one who wants to give you money would be asking you to send money anywhere.”
2. Alert the fraud department at your bank.
They may be more aware of check scams than front-line tellers, and may be able to give you a better idea as to the legitimacy of the check.
3. Try to cash it at the bank of origin.
If the check is drawn off of a local bank, you may be able to withdraw funds directly from that bank for a fee, says Shelley Daniel, manager of incoming returns operations for Wachovia.
4. Report it.
A number of groups collect check scam complaints to warn the public or work with law-enforcement agencies to stop scams, such as the Ripoff Report www.ripoffreport.com, Better Business Bureau www.bbb.org, and National Consumers League www.fraud.org.
5.Keep the check in a safe place.
You may later need the check for evidence, says Ms. Grant, but you don’t want anyone else to get a hold of the check or try to cash it.
