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Do IT this week: Layering
Just because it clears doesn't mean that you are protected from fraud
Published on Sunday, Aug 12, 2007
Here's a sobering warning: When you deposit a check in your bank, even if it clears the originating bank, you'll still be left holding the bag if the check is eventually deemed fraudulent.
That's what's happening to Gary Tisor and he's fighting mad because he said he took extra precautions and trusted his bank.
''Who am I supposed to trust?'' he asks.
Tisor had heard about scams where someone sends you a check for an amount larger than you're owed and asks you to send or wire the difference to another party.
He knew those scenarios are most often scams where the original check is ultimately discovered to be a fake and the consumer, who usually has already spent the money or sent the remainder to the third party, is left responsible for all of the funds.
So the Akron widower, who had advertised a room for rent in his house via an online bulletin board through the University of Akron, was cautious when he received an e-mail from an international student in England responding to the ad. The student said his uncle, who worked for an insurance company in Texas, would send Tisor a check for $3,500. He asked if Tisor would deposit the check, keep the $750 to cover a security deposit and two months' rent, and wire the remaining $2,750 to him for his plane ticket.
Tisor said though he knew there were red flags about the transaction, he also knew that sometimes college students, and international students especially, will have parents write one large check for all expenses instead of smaller checks. Tisor said he also knew from experience traveling abroad that sometimes it's difficult to get access to funds from your bank when you're outside your home country.
So he agreed to deposit the check but he also waited until the bank told him the check had cleared.
The check did turn out to be fraudulent and Tisor is now fighting with the bank because he's out $3,500, as well as a number of bounced checks and subsequent fees.
Tisor is upset because he feels that the bank let him down. He waited four days to use the funds after the U.S. Bank branch teller told him that the check had cleared, because he was concerned about a scam. Once it cleared, he figured, the funds were safe to use.
''I know you have to be careful and I was being careful,'' Tisor said. ''I can't go to anyone else and ask if the check is good.''
Tom Zirbs, senior vice president and regional manager for U.S. Bank, said he sympathizes with Tisor's situation, but said banks can't be held responsible when fraud takes place.
''Ultimately, each consumer is responsible for deposits made into their accounts. When it comes to fraud, things can clear and still come back,'' Zirbs said.
In fact, Zirbs said, sometimes it might take one to two years to discover checks are fraudulent.
There's also a difference between a check clearing the originating bank and fund availability. ''Clearing'' means the bank that the check was drawn from verifies that there is an account with funds, though often the check was never really written by that party.
When you deposit a check, say, a paycheck from your employer banks are required to make those funds generally available within a day or two, but not immediately. Zirbs said that means the funds are available to use, but that doesn't guarantee that when the check reaches your company's bank, the funds will be there. (Of course, you'd hope so.)
That's why direct deposits of paychecks and other checks that are deposited electronically into your account are a better way to go, Zirbs said. Direct deposits are available as soon as they show up in your account, he said.
As for Tisor's situation, he's complained to a few U.S. representatives to take up his beef with what he calls an unfair banking regulation. Zirbs also was trying to connect with Tisor to waive his overdraft fees and discuss his situation.
Here are some tips to keep in mind, from Zirbs and the Office of the Comptroller of the Currency, the administrator of national banks:
When you deposit a check, it generally might take up to five days to clear the bank for legitimate checks. Fraudulent checks will take longer. If you have any concerns about a check you're depositing, tell the bank, so it can be flagged.
If a check is found to be fraudulent, you can pursue the check writer for restitution. But often, if it's a scam, that person is long gone.
Banks carry Federal Deposit Insurance Corp. protection, but it is not for theft or fraud. The FDIC protects against the loss of deposits if an insured bank or savings association fails.
Try to know the people with whom you do business. When possible, verify the information from an independent third party, such as a telephone directory. Don't call the number of the bank printed on the check. If you're dealing with scam artists, they've probably faked that phone number. Find your own number. That other bank might not be able to tell you whether the check is real, but it might be able to say whether it's getting other reports about fraudulent checks on that account.
Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@ thebeaconjournal.com.
Here's a sobering warning: When you deposit a check in your bank, even if it clears the originating bank, you'll still be left holding the bag if the check is eventually deemed fraudulent.
Get the full article here.
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