Beware Fake Check Scams!
Many consumers don't realize that if
they deposit a phony check into their bank account and then draw
on those funds, they are liable for the money, even if they've
been swindled.
By Kathy M. Kristof, Personal Finance
Los Angeles Times
May 31, 2009
The woman ahead of me at the bank looked grim.
Could the teller help figure out whether this check was good?
The woman had received it as payment for a "mystery shopping"
job, and she suspected it was a fake.
The teller didn't know either.
Last week, the Consumer Federation of America, a Washington,
D.C.-based consortium of U.S. consumer groups, launched a task
force to deal with fake checks and give consumers details about
the warning signs.
Roughly one of every three adults has been approached by someone
offering a fake check at one point, the group said.
About 2% of those are taken for amounts averaging between $3,000
and $4,000 each.
"Most people are honest and think that other people are too,"
said Susan Grant, the federation's director of consumer protection.
"They get a very real-looking check or money order that comes
with a plausible story and they don't understand that they will
be held liable when it turns out to be fake."
But how can a deposit cost you money? The con artist asks the
recipient of a fake check to pass on a portion of the proceeds
to a third-party conspirator -- by writing a personal check off
the victim's account or wiring money to another bank.
Jill Parker of Chicago, for example, said she and her husband
were trying to rent out an apartment and placed an advertisement
on the Internet.
They were contacted by a man in Britain who said his company
was trying to open an office in Chicago. His company would make
out a check to the Parkers for his moving expenses, he said. Could
they take out their portion for the rent and pass the rest on
to his agent?
Parker said both the executive and his request sounded legitimate,
but the couple waited until they thought the check had cleared
before they wired $22,000 of the $25,000 they'd received to the
agent. Weeks later, the bank called them with the bad news: The
check they'd received was bogus. Their account was being debited
for the entire $25,000. They were out $22,000 and a renter.
Why did their bank clear the check in the first place? U.S. banking
laws demand that banks give customers access to their funds within
one to five working days. (The timing depends on whether the check-issuing
bank is foreign or domestic, local or out of state.) But it can
take several weeks for a good forgery to make it all the way back
through the check-processing system to the point when your bank
determines the check was fake.
It's worth mentioning that many of these fake checks look so
real that they easily fool bank tellers, Grant said. They can
be drawn on a real company and appear to be issued by a major
bank at which that company has an account. That can make it particularly
difficult and time-consuming to figure out that the check is a
forgery. Nonetheless, when the bank determines that the check
isn't valid, it's legally allowed to deduct the money from your
account.
That's something that consumers commonly misunderstand, Grant
said. The Consumer Federation conducted a recent survey and found
that 59% of consumers inaccurately believe that when you deposit
a check or money order, your bank has determined the funds are
good before it allows you to withdraw the money.
The younger and less educated and affluent you are, the more
likely you are to be misled.
This misperception affects 70% of 18- to 24-year-olds and 71%
of those earning less than $25,000 and those who didn't complete
high school, according to the survey. More than half of all the
youths and Latinos surveyed also believed that if the check was
bad, the person who provided it would have to reimburse the bank
-- not the depositor.
Not true. You, the depositor, are responsible for the money that
goes in and out of your account. If you deposit a fake check but
don't draw against it, the worst that can happen is that the money
temporarily credited to your account will evaporate. But if you
use that phony balance, you're responsible for any check or money
order you've sent, even if you've been swindled.
Fake-check scams come in multiple varieties. A common thread
is typically that the crooks have overpaid you, and want you to
reimburse them or a confederate from your own funds or the "proceeds"
from the check they've given you.
A particularly hot variety right now is the mystery-shopper scam,
Grant said, possibly because so many people are out of work and
looking for ways to make ends meet.
In this scam, someone will ask you to rate the service, cleanliness
or efficiency of a retailer or financial institution by visiting
the operation and buying some small item.
Con artists using the mystery-shopper scam say they're providing
an upfront payment for the small purchases the shopper needs to
make to do the job. The check that's provided, however, is for
$1,000 to $5,000 -- far more than what's needed. The victim is
told to wire the remainder to a third party to evaluate the speed
and efficiency of the wire service.
In reality, mystery shoppers are paid after they've completed
the job and turned in their evaluation forms, according to the
Mystery Shopping Providers Assn., a real organization whose name
is sometimes used by the fraudsters.
And it's not a big moneymaking opportunity. Most jobs pay between
$8 and $20, said Kelly Hancock, a spokeswoman for the mystery
shopping association.
Some of the other common tales that purveyors of fake checks
use:
