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BBB CONSUMER TIPS: Study shows how fake check scams bait consumers

September 9, 2018

An in-depth study by the Better Business Bureau finds that, while consumers may write fewer checks in this era of electronic financial transactions, fake check scams are on the rise. Fake checks are used in a variety of frauds, from employment scams to prize and sweepstakes fraud. In all cases, victims deposit the check and send money back to scammers. BBB warns consumers to be on guard against these serious and pervasive frauds and their perpetrators.

The investigative study – “Don’t Cash That Check: Better Business Bureau Study Shows How Fake Check Scams Bait Consumers” – looks at how fake checks dupe consumers. It digs into the scope of the problem, who is behind it and the need for law enforcement and consumer education to address the issue. Read the complete report online.

Scammers often succeed because consumers don’t realize:

Crediting a bank account does not mean the cashed check is valid.

Federal banking rules require that when someone deposits a check into an account, the bank must make the funds available right away – within a day or two. Even when a check is credited to an account, it does not mean the check is good. A week or so later, if the check bounces, the bank will want the money back. Consumers, not the fraudsters, will be on the hook for the funds.

Cashier’s checks and postal money orders can be forged. A cashier’s check is a check guaranteed by a bank, drawn on the bank’s own funds and signed by a cashier. If a person deposits a cashier’s check, the person’s bank must credit the account by the next day. The same holds true for postal money orders. Scammers use cashier’s checks and postal money orders because many people don’t realize they can be forged.

Fake check fraud is a huge problem, with complaints to regulatory agencies and consumer watchdog groups doubling over the last three years. Fraud employing fake checks is rapidly growing and costing billions of dollars. Fake checks were involved in 7 percent of all complaints filed with BBB’s Scam Tracker. The number of complaints received by the Federal Trade Commission’s Consumer Sentinel database and the Internet Fraud Complaint Center more than doubled between 2014 and 2017.

Based on complaint data trends, the study suggests that there may be over 500,000 victims of counterfeit checks in 2017. The study found the fraud affects victims of all ages and income levels, but consumers between 20-29 reported being victimized by the scam more than consumers of any other age range.

One college student lost hundreds of dollars in a mystery shopper scam using a fake check. After responding to a very professional-looking online job listing for a mystery shopper, he was sent a cashier’s check for almost $2,000. Per instructions, he deposited the check, “mystery shopped” several businesses, and sent $885 to two addresses. His bank informed him later that the check was not valid, and he would have to repay the $885 he sent. Although he was able to set up a payment plan to repay it, the loss has been difficult for the student.

The National Consumers League, which also receives complaints from fraud victims at fraud.org, found that fake check complaints in 2017 were up 12 percent and was the second most common type of complaint over all, after online order issues. Nigerian gangs appear to be behind most of this fraud, often using romance fraud victims and other “money mules” to receive money from victims. Many fake checks and money orders are shipped to the U.S. from Nigeria.

For more tips on avoiding these types of scams, visit BBB.org/avoidscams.

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