True or false: If a check “clears” within the typical one to five business days but later is discovered to be fake, the bank customer who deposited the check and subsequently spends the money cannot be held financially responsible for the fraud.
If you answered false, congratulations. You know something about how the banking system works.
But if you answered true, you could be conned one day.
Just because you may have access to the funds deposited via a check does not mean that the check is “good.” Federal regulations require financial institutions to make funds from a deposit available generally within one to five business days, but it can take weeks before a bank discovers that a check is worthless.
The National Consumers League reports that fake-check scams are alarmingly on the rise. In 2006, counterfeit-check scams shot to the top of the league’s telemarketing fraud list and ranked third in Internet-based scams.
“We are seeing just a little snapshot of what’s going on,” said Susan Grant, director of the league’s fraud center.
There are a number of ways people end up with fake checks, she said. Leading the way are work-at-home schemes. In one variation, a person is “hired” as an account manager by a foreign company and asked to deposit checks from what turn out to be fake U.S. customers. The person is instructed to deposit the checks and take her pay from the deposited funds.
Fake checks are also being sent to people who believe they have won a sweepstakes or lottery. These victims are told to cash the checks and wire money to pay taxes or other fees.
In another fake-check scheme, someone selling an item through a newspaper or an online auction is sent a check for far more than the item is being sold for. The seller is asked to wire the difference back.
Later, the seller learns the check was counterfeit.
According to the Federal Deposit Insurance Corp., a depositor will most likely be held responsible for all the money if a deposited check, cashier’s check or money order comes back as a fake or counterfeit.
I know what you’re thinking.
Isn’t it the bank’s job to verify checks? A check is only provisionally cleared at first, and you’re responsible if it’s fraudulent.
Take these precautions offered by the FDIC (go to www.ftc.gov and search for “fake checks”):
Don’t spend any money received from a stranger until the branch manager of your financial institution says the funds have been truly cleared.
If you’re selling something, don’t accept a personal check. Insist on a money order or cashier’s check drawn at a bank with a local branch.
Contact Michelle Singletary at singletarym@washpost.com or c/o The Washington Post, 1150 15th St. NW, Washington, DC 20071.
