If It's a Bank Check, It's Gotta Be Good ... NOT!

I had a call today from a reporter for a major U.S. newspaper. He wanted to know if there was nationwide activity on counterfeit official checks. When I told him the problem is unfortunately more common than we'd like it to be, he wanted to know just what the financial institutions are doing about it. His attitude was sort of a "Why-do-you-let-this-happen?" And when he asked why customers and members are being charged back with these counterfeit items, "...when it really should be the responsibility and loss to the financial institution - not to the individual", he finally got to my grumpy persona.

Now, I know you have to be careful when you talk to reporters, because the old hack about being misquoted is not fiction. It happens more often than it doesn't happen. And there are security directors and professionals who refuse to even talk to reporters. Most of us have been burnt at least once by an unscrupulous or inattentive, confused reporter that has to hit a deadline and so will make up what they don't know or didn't research properly.

I asked, "Why do you think it should be the loss of the financial institution?"

"Because they're the ones that said the check would be good in three days" came the answer."Aha!" said my inner brain. "This is not an article. This is a reporter who got burned." So I asked some questions.

Seems the check was for $15,000. My hapless reporter sold a sports car for $11,000, had the title transferred and the car was driven away on the strength of the check. He had insisted on a bank check in order to accept the offer for the car, "...because everybody knows cashier's checks are just like money - they're always good." In this case, the check was for more than the price of the car so (stop me if you've heard this before) he actually went to the bank and withdrew $4,000 out of his savings account and gave the buyer change! He even had the guts to tell me he didn't want to cash the check, because he knew about the IRS form!!!

Following all of this, he deposited the check, and was charged back with it when it was returned 'counterfeit item'. Turns out all information from the individual who bought the car was fraudulent. He tried for two days to find a central government agency to whom he could report this theft, and discovered there isn't any. "Why," he demanded, "is there no central location you can go to in order to check the validity of a check or to report stolen checks?"

Why, indeed?

All his bank will tell him (it's a very large one) is that the loss is his and he should read his deposit agreement. It gives them the right to return the check and charge him back for it. He still feels like the loss should be the bank's and not his loss. "They're the ones who accepted the deposit,"he said. There seems to be a lot of confusion on that score. One banker told me she had a state trooper who was investigating a large loss on a counterfeit item say that her bank should take the loss because everybody knew it wouldn't cost the bank anything anyway. It says right on the window that the bank is "Insured by FDIC"!

The truth of the matter is that no longer do we have the prestige of saying that if it's a check drawn on a financial institution it's bound to be good. It's a perception that we've enjoyed for many years. The fact is that if an account holder makes a deposit of a large bank check, drawn on any part of the country and the deposit is 'out of the ordinary' for this person, or makes a large bank check deposit and asks, "How soon will the funds from this check be available?", red flags should go up and bells should go off. And the check should be sent for collection, not accepted for deposit.

I sincerely hope that reporter is not writing an article. If he does, and you read it ... please be advised, "I was misquoted!"

Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 7, 7/05