Fake Check Scams

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We may live in a world of contactless credit cards and mobile payment apps, but old-fashioned paper checks still exist.  In certain cases, checks are the only way to pay a bill as some small retailers may not accept credit card payments.  Checks are still used to pay tax bills to the IRS, rent, household utilities, and gift-money.  There is also the off-line factor, some people don't use the internet and rely on payment by check. 

The use of paper checks creates an opportunity for scammers to steal your money through a variety of fake check scams.  The approaches differ, but these cons have the same end game: To get your money, often by convincing you to deposit a counterfeit check in your bank account and return a portion of the supposed funds to them. 

How the Scam Works 

An individual receives what appears to be a legitimate cashier's check, money order, or a standard check from someone they don't know and are asked to wire part of the deposited amount back to the sender or to a third party only to find out later that the check was fraudulent. 

One common con is the overpayment scam. You put something up for sale in a newspaper classified ad or online post. Someone makes an offer and sends you a check - perhaps even a cashier's check, which seems safe. The check turns out to be for considerably more than what you charged for the item. The "buyer" will pretend it's a mistake and ask you to deposit the check and refund them the difference. 

That's a scam. Crooks exploit the fact that banks must make funds from a check deposit available to the account holder within days but can take far longer to discover that the check is phony - sometime weeks, according to the Federal Trade Commission (FTC). By the time the bank discovers that the check was written on a non-existent account, you're out whatever you sent the scammer plus any other funds from the fake check that you've withdrawn or used. Banks do not assume those losses. 

Con artists run numerous variations on this scheme. 

  • Foreign Lottery - You get a letter, with a check enclosed, saying you've won a foreign lottery, but you have to wire a portion of the winnings back to cover taxes and fees.  

  • Government Grant - You get offered a government grant or scholarship money and sent a check that includes extra funds for taxes or processing. 

  • Work-From-Home - A seemingly lucrative work-from-home job requires you to use some of your first paycheck to purchase necessary supplies. A popular twist on this is the mystery shopper scam. Work from home scam victims frequently become unwitting accomplices in other fraud and are used as money mules to mail fake checks or to participate in reshipping scams.

These scams remain popular with fraudsters because they're easy to pull off. With the help of a scanner and a good printer, a crook can fabricate a bogus check - even a bank draft, certified check, or cashier's check - that's hard to distinguish from the real thing. Some fake checks even contain authentic-looking watermarks, according to the FTC. 

The bottom line is that, while the funds may be available in your account within days of your deposit, the check may take weeks to clear or bounce. Scam artists prey on those who mistakenly believe that once the funds are available, the check is legitimate. Furthermore, once a victim wires funds onward from such a check, he or she may be liable to the bank for the amount wired.  Typically, the bank will not cover the loss and expects the victim to pay the difference.   

If you have spent the money before the bank realizes the check is fake and debits your account for the full amount, it's possible your account could be overdrawn and you could face overdraft fees.  The bank may close or freeze your account.  If you have bills linked to your checking account and the check bounces, you could miss payment deadlines damaging your payment history, be assessed late fees, and damage your credit.   

How to Avoid Fake Check Scams 

  • Cashier's checks are NOT the same as cash!  The money may appear in your account within days, but that doesn't mean the check has cleared and is legitimate.  

  • Avoid foreign lotteries. Foreign lotteries are always illegal! If you didn't enter the lottery, you didn't win. You do NOT need to pay to "collect your winnings."   

  • Do not wire money to strangers!  Many people think that wire transfers can be canceled at any time. This is not true. If you wire money via Western Union or MoneyGram, it's impossible to retrieve the money once it's picked up at the other end.  Because it can be picked up anywhere in the world, the money is virtually untraceable.  

  • Beware of overseas buyers. Never wire money to someone overseas that you don't know! 

  • Always be wary of someone who wants to pay more than your asking price.   

  • Be suspicious of "third parties" or "agents."  If a third party is really owed money, their client should be making the payment, not you.  

  • Attempt to locate the source of the check and verify its legitimacy by contacting the issuing bank.  Do not use the contact information that appears on the check.  Instead, conduct an independent search for the bank's contact information.  

  • Be realistic about the item you are selling.  If you are having trouble selling your old car locally, why would someone from England be so eager to buy it from you and ship it halfway around the world.  

Where To Report Fraud 

If you wired money to a scammer, call the money transfer company immediately to report the fraud and file a complaint.  While it is unlikely that the money transfer company will be able to return your money, you should nevertheless ask the money transfer company to reverse the transfer.  Contact information for two popular transfer companies include: 

If you paid a scammer with a money order, contact the company that issued the money order right away to see if you can stop payment.  Also, try to stop delivery of the money order: if you sent it by U.S. mail, contact the U.S. Postal Inspection Service at 877-876-2455. Otherwise, contact whatever delivery service you used as soon as possible.  

If you think you've been targeted by a fake check scam, report it to: 

REPORT FRAUD 

To report fraud or if you have a general consumer complaint, contact the Attorney General's Consumer Protection team at: 

Consumer Protection 
P.O. Box 30213 
Lansing, MI 48909 
517-335-7599 
Fax: 517-241-3771 
Toll free: 877-765-8388 
Online complaint form 

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