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Bank Accounts - Fraud / Forgery


I deposited a check/money order into my individual consumer account but the bank later told me it was fraudulent. I had already used some of the funds, and now my account is overdrawn. The bank says that I am liable for the entire amount. Is this true?

Depending on the circumstances and your State's laws, you may be held responsible for the entire amount of the fraudulent check that you cash at the bank or deposit into your account. If your bank credited your account, it can later reverse the funds if the check is found to be fraudulent.

This could be a Check Overpayment/Money Order Scam. It's an example of why you should never accept a check from someone you don't know.

As the payee, it's up to you to pursue the maker of the check. If you think you have been targeted by a scam, you should file a complaint with the Federal Trade Commission (FTC) or by calling 1-877-382-4357.

I just received my account statement and noticed there were forged checks. When I notified the bank, it claimed the forgeries were due to my negligence. What can I do?

National banks are generally required to reimburse customers for forged checks. However, based on individual circumstances, the bank can investigate to determine if the customer is entitled to a reimbursement.

Whether the bank is liable for the customer's loss depends on the specific circumstances of the case. Generally, a bank is liable for accepting a check that has been forged, altered, or improperly endorsed. However, if the bank can prove two things—that it accepted the check in good faith and exercised ordinary care and diligence in handling the transaction—it may not be liable.

If your actions—the way the check or checkbook was handled, issued, completed, or made payable—contributed to the making of the forgery, you may be at least partially liable. Generally, the bank will require you to complete an affidavit. It may also request that you file a police report.

There are several forged checks—all from the same person—against my account. But the bank claims that since more than 60 days have elapsed, it doesn't have to do anything. Is this true?

You are responsible for reviewing your periodic statement. If there was only one forged transaction, you generally have up to one year after the statement date to notify the bank. But if there were multiple forged transactions from the same person, you generally have 30 days from the statement date to find the error and inform the bank. (Please note: the time period for this prompt notification may vary by bank and State.)

Your Deposit Account Agreement specifies your bank's specific time requirement. Take a look at that agreement and contact the bank directly regarding any alleged error.

My bookkeeper handled all of my business's deposits and balanced the monthly statements. He stole some checks payable to the business and forged the endorsement, which the bank honored. What can I do?

Even though a bank pays over a forged endorsement, it is the account holder's responsibility to discover the problem and notify the bank.

There is very little the bank can do to protect you from the actions of your employees. It is your responsibility to have separation of duties—for example, the same person should never make the deposits and balance the monthly statements.

If you have an account with multiple forgeries (e.g., stolen checks), you should consider closing the account.

The bank paid a check when it was obvious that the signature was not mine. Why didn't the bank catch this?

National banks are responsible for knowing their customer's signature, but they do not manually process checks. Each day a huge volume of checks are processed through the clearinghouse for payment. Checks are processed by machines that read the MICR-encoded routing number.

You are responsible for reviewing your periodic statement. Generally, if there were multiple problem transactions from the same person, you have 30 days from the statement date to find the error and inform the bank. However, if there is one problem transaction, you generally have up to one year after the statement date to notify the bank. (Please note: the time period for this prompt notification may vary by bank and State.)

Your deposit agreement specifies your bank's specific time requirement. Therefore, we suggest that you review your Deposit Account Agreement and contact the bank directly regarding any alleged error.

A company sent me a check that supposedly was for lottery winnings. The company told me to cash the check and to return some of the money to cover processing fees. I deposited the check, but it turned out to be fraudulent; the bank then stated that I had to repay them. What can I do?

Depending on the circumstances and your State's laws, you may be held responsible for the entire amount of the fraudulent check that you cash at the bank or deposit into your account.

If your bank gave you credit for a check that is found to be fraudulent, the bank can reverse the funds from your account. As the payee of the fraudulent check, you must pursue the maker of the check for restitution.

Two tips: Never accept a check from someone you don't know. And throw away any offer that asks you to pay for a prize or gift.

If you think you have been targeted by a scam, you should file a complaint with the Federal Trade Commission (FTC) by calling 1-877-382-4357.

I deposited several checks/money orders that were fraudulent or did not clear. The bank took the money from my checking account and then froze and/or closed my account. Can it do this?

Depending on the circumstances and your State's laws, you may be held responsible for the entire amount of the fraudulent check that you cash at the bank or deposit into your account.

If your bank gave you credit for a check that is found to be fraudulent, the bank can reverse the funds from your account. As the payee of the fraudulent check, you must pursue the maker of the check for restitution.

Generally, national banks may close deposit accounts at any time and for any reason (e.g., inactivity or low usage). Federal banking laws and regulations do not address the closing of deposit accounts by banks.

Also, the bank may freeze the transactions in the process of closing your account.

This topic is governed by the Deposit Account Agreement provided to you at the time the account was opened. Review your Account Agreement and contact the bank directly for additional information.

I cashed a check at my bank that was found to be fraudulent. Doesn't the bank have insurance to cover the loss so that I don't have to repay the bank?

No. FDIC insurance does not cover losses due to theft or fraud.

Depending on the circumstances and your State's laws, you may be held responsible for the entire amount of a fraudulent check that you cash or deposit into your account.

I was passed a fraudulent cashier's check. What should I do?

For information about fraudulent cashier's checks, read the OCC Consumer Advisory on Avoiding Cashier's Check Fraud.







Copyright 2007 by Mark McCracken , All Rights Reserved