Protect Yourself From Check Fraud

Check fraud is a challenge for all businesses and financial institutions today. With the advancements of technology in so many areas, it has become increasingly easy for criminals (whether individually or in organized gangs) to manipulate or forge checks. In the United States, a significant amount of check fraud is caused by counterfeiting (using desktop publishing or chemical alteration). In nearly every instance, check fraud begins with the theft of a financial document.

Preventing Check Fraud

Unfortunately, check fraud can happen to anyone…whether someone steals a blank check from your wallet or home, or looks through your garbage for a cancelled or old check. Let’s take a look at some preventative measures you can take against this crime.

Documents and Storage: Store checks, deposit slips, monthly and quarterly statements, and cancelled checks in a secure and locked location. Reconcile your checking statement within 30 days of receiving it to detect any irregularities. Unless needed for tax purposes, destroy all old cancelled checks, account statements, deposit tickets and ATM receipts. Never leave your checkbook in your vehicle (whether locked or not).

Sharing Information: Never give your checking account number or any other account number to someone you don’t know, especially over the telephone. Be particularly aware of unsolicited phone calls. Limit the amount of personal information on your check. DO NOT include your SSN, driver’s license or telephone numbers on your check.

Double Check Security Features: Make sure your financial institution endorses your checks and incorporates security features that help combat counterfeiting and alteration. Order checks from a legitimate, established company, most notably, your financial institution. You may pay a little more in the short-run, but you will be grateful for the security measures provided in the long-run. Examine new check packages carefully for evidence of tampering. Report any irregularities to your financial institution immediately.

Writing or Depositing Checks: Never endorse a check until you are ready to cash or deposit it. Don’t write your credit card number on your check. Use dark ink on your checks that can’t be easily erased or covered over. Avoid leaving large blank spaces in the check boxes or amount line of the check. Start written dollar amounts as far to the left as possible and put a slash between the cents and the 100. Also, draw a line between the cents value and the right side of the dollar line.

Click here to view an example of how to write a check appropriately.

Check the number sequence for each pad of checks and make sure each number matches the check register or duplicate slip as it is used. Always verify your check numbers after each shopping trip, paying close attention to the back of the pad. Do not mail bills from an unlocked mailbox.


Are You Liable?

In most instances, you will not be held liable for the amount written on a check if you are a victim of check fraud. In fact, if you notify your financial institution that a check paid on your account is altered in some way, the financial institution should re-credit the altered amount of the check to your account.

Conversely, if you knowingly write a check against a closed account, you will be held liable for the amount written. However, if an employee at the financial institution accepts the check, knowing that the account is closed, the employee and possibly the financial institution may be held responsible for the amount written.

What Does the Law Say About Check Fraud?

According to the Uniform Commercial Code (UCC), if a person fails to use “ordinary care” with respect to his/her checks, and the “negligence” contributes to a forged signature or alteration, the financial institution cannot be held responsible for paying an item in good faith.

For example, let’s say you decide not to purchase checks with security features from a financial institution, but instead purchase cheaper checks online without any type of security features. If your checks are forged or altered, you may be liable for the amount lost because the checks have no security features on them.

More recently, the Check 21 Act was enacted as a step toward controlling check fraud and protecting the consumer. First of all, it requires checks to clear sooner (as quickly as 24 hours), eliminating the “float time” when some fraud occurs. With that said, substitute checks (which is a photocopy of the front and back of a person’s check) are considered to be a legal equivalent of the original check, and are required if a person wants the right to re-credit disputed funds.

More specifically, when a substitute check is returned to you, you then have the right to have funds of up to $2,500 re-credited to your account in 10 business days if the check is paid twice, paid for the wrong amount, or otherwise paid in error.

So what does this all mean to you?

Take the right precautions to protect yourself against check fraud. Make sure you follow the guidelines provided so you are completely protected by the law if you are a victim of check fraud. It just takes a little more time and effort to protect yourself from fraud.


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