Fake Check Scam

The National Consumers League (NCL) has joined with the American Bankers Association (ABA) in warning consumers of the growing problem of fake check scams.

Based on complaints reported to NCL’s National Fraud Information Center/Internet Fraud Watch database since last December, when the fake check category was added, these scams are now the sixth most common Internet fraud. Consumers who reported fake check scams to NCL’s fraud programs between January 1 and June 30, 2004 lost an average of $5,000. In many cases, the contact is initiated by email.

The Scam

There are many variations of the fake check scam, but the common thread is a stranger proposing to send the victim a check and have the victim wire money in return. “It may start with someone offering to buy something you advertised for sale, pay you to work at home, or give you an advance on a sweepstakes you won,” explained Susan Grant, director of NCL’s National Fraud Information Center and Internet Fraud Watch programs. “Whatever the set-up is, the bottom line is if someone you don’t know wants to pay you by check but wants you to wire money back, it’s a scam.”

Often the crooks claim to be in other countries and say it’s too difficult to make payment directly, so they’ll have someone in the U.S. who owes them money send the victim a check. The amount of the check is more than the victim is owed, so the victim is instructed to deposit the check and wire the excess back. Or scammers may tell victims to wire some of the money back as fees to collect their “winnings.”

The checks sent to victims are forgeries, but they’re so realistic that even bank tellers may be fooled. By the time the checks bounce, the victims have already wired the money to the crooks. Because bank customers are responsible for the checks they deposit, the victims of these scams are left to repay the bank the money they withdrew against the bad check.

“Federal law requires banks to make the funds you deposit available quickly, but it’s important for consumers to know that just because you can withdraw the money doesn’t mean the check is good,” said Edward Yingling, executive vice president for ABA. “We want to help prevent victimization by alerting consumers and bank personnel to this fraud.”

 NCL and the ABA have partnered to create new tips at NCL’s www.fraud.org Web site about fake check scams and are conducting educational outreach to both consumers and bank personnel. Consumers should be aware that:

There is no legitimate reason for someone who is giving you money to ask you to wire money back;

Just because you can withdraw the money doesn’t mean the check is good, even if it’s a cashier’s check;

If a stranger wants to pay you for something, insist on a cashier’s check for the exact amount, preferably from a local bank or one with a branch in your area.

For more details about how fake check scams work and how to avoid them, visit the telemarketing or Internet fraud section of www.fraud.org.