Your paycheck is stolen out of your mailbox. Your checkbook goes missing, and then later your bank statement says you bought a Porsche. Someone cashes a check made out to you by forging your signature -- relieving you of a substantial payment. These are three of many different unfortunate banking incidents that can occur when you're a victim of check fraud -- when a thief forges your endorsement signature in order to receive a check payment. Checks, both consumer and business, were the payment instrument with the highest average value of unauthorized transactions in 2012, according to a 2013 Federal Reserve study, with the average unauthorized check transaction valued at $1221.
With those statistics in mind, it goes without saying that consumers writing checks had better be careful out there. And while it's true that banks are responsible for knowing their customer's signature, and flagging an account for fraud if a signature is discovered not to match, banks are prone to error, especially because they do not manually process checks. Each day a huge volume of checks are processed through clearinghouses for payment by machines that read the MICR-encoded routing number. In addition, while consumer protection laws have been put in place to protect you from losses incurred by check fraud, in reality the outcome of check fraud cases varies, as the bank might not have to comply with these protection rulings if certain factors are in play.
How it works:
When it comes to most national banks, customers will be reimbursed for any forged, altered, or improperly endorsed check signatures, with the debit on their accounts reversed, according to HelpWithMyBank.org, the consumer aid website of the national Office of the Comproller of the Currency (OCC). But based on the circumstances of the case, a bank has the right to investigate the situation to determine if the customer is indeed entitled to a reimbursement or not. If the bank is successful in proving two things—that it accepted the check in good faith and the tellers used ordinary care and diligence in managing the financial transaction—it's a possibility that the bank might not be found liable for the debit charge on your account. In addition, if it's found that your financial reporting was not up to snuff, andthe way the check or checkbook was handled, issued, completed, or made payable contributed to the making of the forgery, you could be at least somewhat liable.
To get to the bottom of your case, the bank will require you to complete an affidavit, a sworn statement in writing before a proper official, such as a notary public. It could also request that you file a police report.
When it comes to informing your bank about fraud, time is of the essence. As the consumer, you are responsible for reviewing your periodic statement. In general, if you see problems, you have 30 days from the statement date to locate the error and tell your banking services. But if you're only dealing with one problem transaction, your time frame is much wider. You usually have up to one year after the statement date to notify the bank, but time frames vary by bank. To be sure about how much time you have, you should review the deposit account agreement given to you when you opened your account, notes the OCC.
Besides being mindful of the time, the Identity Theft Resource Center, a company that educates consumers about fraud crimes, has other tips for consumers who find themselves dealing with an unauthorized debt:
First, ITR recommends that you call your bank to shut down the checking account entirely. You don't want the fraudster to continue to work on your account. Moreover, you should file a police report to report the missing check book or check on your own accord, whether or not your bank asks you to do so. You should also ask your bank to inform you if any checks come in on the closed account so that you can be ready to clear up the matter with any merchant or bank. It's also recommended to have the bank write a letter that includes the date and the reason the checking account was closed.
The second step ITC recommends is contacting check verification companies because although the account has been closed, any checks deposited on the account will be denied payment by your bank. As a result, check verification companies will unsuccessfully try to collect on the fraudulent check for the company that accepted the check. The company that took the check will not be informed of the reason why it did not clear; it only knows that it was denied payment by your bank. Its best to clear up that matter as soon as possible.
The third step of ITC's process is about taking extra precautions so that your identity is not mixed up with that of the fraudster. You should ask your bank about what identification was used by the person when it was presented to the teller or clerk. You need to check to see if it is your driver's license or state identification card number. If it turns out to be your driver's license, yit's best to request a new number from your motor vehicle office.
By following these precautions, and keeping tabs on your financial reporting and checking account, you've got the means to contest and hopefully win out against a fraudulent check endorsed in your name.