Updated: 8/10/2011 10:50 PM ET|
Cash a check, maybe go to jail
Did you get conned into joining a check-cashing scam? Even if authorities decide you're an innocent victim, you could find yourself owing a bank thousands of dollars.
Cash a check, go to jail. Or at the very least, empty your own savings account and ruin your credit.
It has happened to hundreds of thousands of Americans who believed that banks don't make funds available unless the checks they've deposited are genuine.
As unemployment hovers at its worst levels in generations, scammers are finding a growing pool of victims all too willing to deposit strangers' checks, then return part of the money by wire transfers.
"There's a knowledge gap that these scammers are clearly taking advantage of," said Susan Grant, the director of consumer protection for the Consumer Federation of America. "Under federal law here in the U.S., financial institutions have to give consumers access to the money from checks and money orders they deposit pretty quickly, usually within one to five business days. It can take much longer for counterfeits to be discovered, by which time the consumer has already sent the money."
"The problem is the con men are very persuasive," said Nessa Feddis, a vice president and senior counsel at the American Bankers Association, which is working with the Consumer Federation to educate consumers about check fraud. "People are desperate. They want to work. They want a job."
How the scams operate
Fake-check scams lurk under a number of disguises, but they share a common framework that depends on:
- A U.S. law that requires banks to make funds available to depositors in five business days or less -- more quickly than the bank typically can verify the check is genuine.
- Willing victims.
A fake check -- often drawn on a real account but printed in some scammer's basement -- may arrive as part of a work-at-home job offer or a sales transaction that feels like the answer to a desperate prayer. The scam artist will instruct you to cash the check, keep a percentage and wire the balance to a designated account.
A Consumer Federation study found that 1.3 million Americans have fallen for fake-check scams, losing an average of $3,000 to $4,000 per victim. Fake-check scams are the No. 1 fraud reported to the National Consumers League. The American Bankers Association estimates that bank losses from counterfeit checks totaled $307 million in 2008, up from $252 million in 2006.
Why you're on the hook
When the counterfeit is discovered, you -- the person who deposited it -- are responsible for paying back the money. After all, the bank gave you the cash, and you chose to wire it to the scam artists. It's illegal for the bank to deny you access to the funds, even if a teller suspects the check may be phony.
"It's a balance between giving people access to their money and preventing fraud," Feddis said. "The consumer is in the best position to know that they should be suspicious. . . . The bottom line is, why are they asking you to wire money when they're sending you a check?"
In the Consumer Federation survey, 59% of people wrongly believed that the financial institution confirms a check is good before allowing you access to the money.
The most common consequences
If you fall for a check-fraud scam, when the bank discovers the counterfeit checks it will deduct that amount from your account or freeze your account if there aren't sufficient funds.
That's what happened to Harry Smith of Union City, N.J. Smith answered a Craigslist ad for a paper company purportedly based in England that claimed to need a U.S.-based worker to expedite order processing. He cashed three checks totaling $6,000, kept 10% and wired the balance to the "production managers."
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It it the bankers jobs to find and detect counterfeit and fraudulent money and cheques. If they think something is not on the up-and-up, the damn bankers need to do something, not just blame the victim and cry, while taking in millions, if not billions, in profits.
Wouldn't it make sense to change a "A U.S. law that requires banks to make funds available to depositors in five business days or less -- more quickly than the bank typically can verify the check is genuine." Seriously, this is a loophole for crooks that's been exploited at the expense of the average Joe. The person who Writes a bad check should be held responsible, not the person who receives it, then passes it in Good Faith. Once again the government sides with the banks rather than the public.
How come people are still this foolish?
I get these emails in my junk and promptly delete them, but I guess I get it. "There is no such thing as easy money."
If it sounds to good to be true it isn't good, true and most likely illegal, but these people deserve what they get. I don't buy into the victim excuse.
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