Maybe you’ve received one—a document that appears to be a real cashier’s check.
Maybe you had your suspicions about this check, but they vanished when your bank accepted it and deposited the funds into your account. After all, if anyone should be able to spot a phony check it’s a bank teller, right?
But then months or even years later, without any warning, your bank discovers that the check was a fake and deducts the funds from your account, perhaps triggering a cascade of overdraft charges.
Ouch. What’s going on?
The FTC receives tens of thousands of complaints about fake checks every year. The worst part of this scam is that if you deposit a fake check into your bank account, your bank’s not liable for it: YOU are.
There are many different kinds of fake check scams. In one common example, someone buys something from you—maybe a used car, maybe something on eBay. Or maybe someone pays you for work you’ve done for them. Perhaps you’re informed you’ve won a prize.
In any case, the check you receive is for more than what’s owed. The person who gave you the check asks you to return the excess funds via a wire transfer, Western Union, or some other electronic payment service. Maybe they tell you that the excess is to cover taxes and fees. Maybe they say they made a mistake and paid you too much and ask you to refund them the amount of the overage. In one variation, you’re led to believe that you’ve been hired as a “secret shopper” to evaluate the services offered by Western Union or a similar money transfer service. You receive a fake check with instructions to deposit it, withdraw the funds in cash, and wire the money to someone.
In any event, you wait a few days until your bank balance shows that the check has been credited to your account and then wire "excess" money to the person or company who sent you the check.
But though the check you deposited is phony, the money you’ve sent back to the scammer is real. So when your bank discovers the fraud, you lose the money that was promised to you and the funds you wired to the scammers. To make matters worse, if you’ve written other checks or made other withdrawals against the (nonexistent) funds, you may overdraw your account and get hit with hundreds of dollars of bank fees.
The law requires banks to make funds from cashier’s checks, certified checks, and teller’s checks one business day after deposit. With other checks, banks must make the first $200 available to you one business day after deposit and make the rest of the check available on the second business day.
But here’s the kicker: just because your bank makes funds from a check you deposit available to you doesn’t mean that the check is good. Detecting and unraveling phony checks can take weeks—or even longer. And when your bank discovers that a check you deposited is fake, it can yank the money out of your account, leaving you with an unexpectedly low bank balance. There are some reports of banks taking money out of consumers’ accounts to cover fake checks that were deposited three years earlier. By then, it’s often impossible to track down and prosecute the people who defrauded you.
The only ways to protect yourself are to contact your bank to confirm that the check has actually cleared or to contact the bank that supposedly issued the phony check. Neither of these things are particularly easy to do.
So how do you protect yourself against this scam? First and foremost, never accept a check that’s written for more than the agreed amount. If you get one, contact the person who sent it and insist that he or she send a check for the proper amount. Stay firm on this. Second, if you do feel tempted to send funds from a check you received back to the person who sent it to you, make absolutely certain that the check is real and has cleared.
Fake check scams, like a lot of other rip-offs, depend on creating a sense of urgency in the victim. You might be told that you have to return the amount of the overage to the people who gave you the check immediately or forfeit the whole transaction. You might be threatened with a lawsuit or a criminal complaint if you don’t return the excess funds. The scammers want you to be thinking in panic mode. Don’t oblige them.
And if you have been duped by a fake check, report it immediately to the FTC, the US Postal Inspection Service, and the Attorney General of the state you live in.