Counterfeit checks an Internet menace

Some victims get a check and a letter that is made to look like it’s from Publishers Clearinghouse, Reader’s Digest, or some other sweepstakes.

A few days after depositing the check, they get a call or e-mail saying they have won another prize. But this time they must send some money to cover shipping or taxes. It is easy to assume this is legitimate, since the money from the prize check is already in their account.

Warning: There is no second prize and the original check is going to bounce. So, you will lose twice! “It’s a hideous scam,” says Christopher Irving of Publishers Clearinghouse, “one we are very concerned about.”

Remember, no matter what the pitch, you never have to send money to enter a contest or collect your prize. Never! That’s a sure sign of a scam.

“There’s a basic lack of communication between customers and banks,” says Susan Grant of the National Consumers League. The con artists know that most people don’t understand the difference between the funds being available and the check being good.

Under federal law, you have the right to withdraw money after making a deposit relatively quickly — within one to five days — depending on the type of check or money order that you’ve deposited. But it can take weeks or months for a counterfeit to be discovered.

“When you ask your bank ‘has the check cleared’ and you are told ‘yes,’ it means the funds are available to you,” Grant explains. “It doesn’t necessarily mean that the check is good. The bank doesn’t have any way of knowing that until and unless it comes back as bad.”

When the check or money order bounces, the bank comes after the victim to replace those missing funds. For some people that means taking out a loan to pay back the bank. I spoke to a woman who had her car repossessed to cover the bad money orders she cashed. In some cases, customers are being sued by their bank.

Grant says some victims are having their accounts closed. If this information is reported to the banking industry database of “deadbeat” customers, that person may not be able to open another bank account anywhere.

There are also cases where victims of this scam are arrested and prosecuted for check fraud because it looks like they are trying to pass bad checks.

Victims such as Parker say more should be done. “We would have backed away from the deal,” she says, “if the bank had indicated to us in any way … that there were any issues with the money.”

“Everybody wants to blame the bank,” says Nessa Feddis with the American Bankers Association, who told me the industry has been working to warn people about this scam for years.

No matter what story accompanies the check, the con artist is usually overseas and always wants some money wired to him or one of his associates right away.

The bottom line: Avoid any transaction that involves a check or money order where you are required to wire back any money. There is no legitimate reason for that.

More information

• FakeChecks.org
• Giving the bounce to counterfeit checks
• Fake Check Scams

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