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Who Pays for the Losses due to Check Fraud

If you're balancing your checkbook one night and find an expense you don't remember writing a check for, you're likely looking at a fraudulent charge. But don't worry – if you can prove that the charge is a fraudulent one, you won't have to pay for someone else's free lunch. What's more, many banks are just as committed as you are in finding and charging the perpetrator.

After identifying the charge, it's important to notify your bank or credit union right away, according to the consumer financial protection bureau (CFPB). Most states have a statute of limitations which give you a one to two year window for reporting check fraud. Best to do it as early as you can to avoid any deadline problems.

While reporting a legitimate fraud case will mean that your bank can't ask you to pay for that expense on your account, you do have to ensure that your bank trusts that your claim is legitimate. In order to do that, you must prove that the signature on the endorsed check in question is not your own. To determine that, your bank you will bring up the signature on the back of the endorsed check and compare it to your real signature. During this process, it's rare that you'd need a lawyer as most banks have a strict plan in place to deal with check fraud and forgery.


If check fraud is indeed proven, the bank that accepted the check in the first place is usually responsible for paying for it. Known as the 'depository bank,' this financial institution is charged with reimbursing your own bank for the unauthorized charge.  

When you can't recover the expense

There are some times, however, when you can't get your money back after a fraud occurs. If you sign a blank check, and then someone else takes it, writes in his or her own name and then cashes it, you will have to cover that expense, according to the CFPB. To prevent this from happening, make sure that if you signed a check and ended up misplacing it, that you stop payment on it immediately to prevent it from being cashed.  According to a personal finance article from Demand Media, it's also likely that you will have to cover at least some of a fraudulent expense if the bank can prove that you are a negligent customer via a regulatory body known as the Uniform Commercial Code (UCC.) This can come into play if you hire a bookkeeper without credentials.

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