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William G. Fig

Check Scam

June 2010

William G. Fig

Published in the NACM Business Credit Journal, June 2010

One "up side" to the tough economic times is that it seems to have sparked people's creativity and ingenuity.  Unfortunately, this "reawakening" has also reached the scam artists.  Almost everyone is now familiar with the email from a rich, deposed Nigerian official needing to relocate money in America.  You can share in his/her wealth in exchange for offering some very basic assistance.  Of course, the only wealth that is transferred is yours to the artist behind this scam. The new generation of scam artists have taken this model to a new, more believable level.  The scam usually starts with a potential new client or customer tendering a check (sometimes what appears to be a valid certified check or cashier's check) for services or goods to be provided.  Shortly after the check is tendered, the new customer reduces his order or scope of work and asks for a partial refund of the amount paid to deal with some urgent matter or emergency.  The check tendered by the customer subsequently turns out to be bad, and the "refunded money" is pocketed by the alleged customer, who is never to be seen or heard from again.

As a result, it is good to remember a few important, basic rules about checks.  First, a check, even a cashier's check or a wire transfer, is not good until it clears the issuing bank and funds are deposited into your account.  A stop payment can be put on a wire or any type of check.  Second, when you endorse a check, you are agreeing to indemnify the bank for the amount of the check, if it turns out to be non-negotiable.  This can be of critical importance!  If you endorse and cash what turns out to be a "bad" check ,and give the funds to a third party, the bank will take the funds out of your account to cover the amount of the check.

The easy solution to this problem is to take payment via a debit card.  If you have questions about a check, you should immediately try to cash it or convert it to certified funds at the customer's bank.  Do not endorse the check.  Lastly, if you do accept and endorse check, you should not refund any money or provide any goods or services until the check clears the issuing bank and the funds are deposited in your account. 

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