June 02, 2009|By EILEEN AMBROSE
Who couldn't use a windfall these days when money is tight? But that could make us more susceptible to falling for one of the widespread fake-check schemes.
These are schemes where, out of the blue, someone claiming to be a business, lottery or grant-maker sends you an authentic-looking check or money order. You are supposed to deposit it in the bank, but send back a portion of the money for shipping, taxes or another drummed-up reason. By the time you discover the check or money order is bogus, the con artist has your cash. And you could be in hot water for depositing a counterfeit check with your bank.
"It's just a massive problem," says Steven Baker, director of the Federal Trade Commission's Midwest region.
According to a recent survey of 2,000 adults by the Consumer Federation of America, nearly one-third had received a fake-check pitch. Of those, 2 percent took the bait.
"Which is about the same response rate a legitimate direct marketer would get," says Susan Grant, CFA's director of consumer protection. Victims on average lose $3,000 to $4,000.
One reason people fall for fake check schemes is confusion over bank regulations, consumer advocates say.
When you deposit a check, the bank must allow you to withdraw money against it within a few days, says Susan Greenberg, executive director of the National Consumer League. This requirement is designed to give faster access to your money.
But consumers often assume if they can withdraw money from the bank based on the deposited check, then the check must have cleared.
Instead, a bank might not discover that the check is phony for days or even weeks. And any money you withdrew assuming the check was good must be repaid. "Banks have prosecuted consumers for passing off a fake check," Greenberg says.
Some of the more common fake-check schemes involve lotteries, sweepstakes, grants and offers to work at home or as a mystery shopper.
In some cases, con artists pretend they want to hire a law firm or rent a summer home, Baker says. They send a bogus check for the retainer or a deposit, and then say they have changed their minds and ask for their money back. The law firm or homeowner can lose thousands of dollars when they send back a legitimate check.
Harry Smith of New Jersey became a victim of a fake-check scheme a few months ago. The 25-year-old responded to a job posting on Craigslist from a company in the United Kingdom that claimed it needed help processing orders in the United States. The company had a Web site and corresponded with Smith via e-mail. Smith's job was to deposit checks from customers in his account, keep 10 percent for himself and wire the rest to the company.
Smith says he deposited three checks totaling $6,000. "They looked real," he says, and he figured everything was fine when the bank accepted the deposits. Still, he was a bit suspicious and did some research online. That's when he learned about fake-check schemes. And when his bank discovered the checks were counterfeit, it closed his account and kept the little he had left in it, he says.
He filed a police report against the British company, but the police told him his money was probably lost. Many of the perpetrators of these schemes are outside the country, making it hard to trace them, experts say.
The best protection, of course, is to avoid the schemes in the first place. So if someone you never met sends you a check, money order or prize and then asks you to send money in return, look out. "You're involved in a fraud," says the FTC's Baker.
