The Checkout

Consumer Hero #3

You've already met Paul English. He was this blog's very first Consumer Hero, thanks to his Web site that tells all of us how to reach a real live customer-service person quickly in hundreds of companies, thus avoiding telephone hell.

And you've also met Edgar Dworsky, a former consumer-affairs television reporter and consumer-protection official who currently monitors the world of consumer news and outrage through two informative Web sites: consumerworld.org and mouseprint.org. He calls himself Mr. Consumer and that's certainly a good label from Consumer Hero #2.

Now meet Consumer Hero #3: Shawn Mosch. Mosch probably doesn't consider herself a hero; rather she'd tell you she was a victim--of a pernicious fake-check scam that has been rapidly growing in all shapes and sizes these past few years. Mosch knows that all too well. Because after she became a victim, she launched a Web site to help other victims. And that's what makes her my hero today. Consumer advocates and law-enforcement officials often cite Scam Victims United as a key resource in their battle against these check scams.

Begun in 2003, the Web site now has 2,616 current members registered to its message board of 4,000 postings, all a valuable tool for those who have just discovered they've been scammed. And those numbers are growing quickly: Last year, the number of fraudulent and counterfeit checks that banks reported to the federal government totaled 88,986--that's more than triple the 28,670 reported in 2000. Between 2004 and 2005 alone, the number of reports of fraudulent and counterfeit checks grew by 45 percent.

In Mosch's case, she and her husband were trying to sell a 1961 Buick online for $1,600. The Nigerian buyer said someone in the states owed him $8,800. He was going to have that person send the Mosches a cashier's check for that amount and they were to deduct the car's price and then wire the buyer the difference. Shawn said she and her husband were very skeptical, so they asked their bank repeatedly if the check was legit. And repeatedly they were assured there was no problem. But of course there was.

These check scams rely on the vagaries of the banking system to take advantage of unsuspecting consumers. Federal rules require banks to release the funds from a consumer's deposit quickly, usually within one to five business days, depending on the kind of check. However, it can take weeks before a bank discovers a check is fraudulent. So when a teller says "the check has cleared," the teller is "usually thinking in terms of bank rules, that the hold time is over, and the consumer now has access to the funds," said Susan Grant, director of the National Fraud Information Center.
But the average consumer thinks that phrase means "the check is not fraudulent," Grant added.

Scam Victims United is worth reading even if you're not a victim. Sure, you may say, "How can anyone be that stupid?" Indeed, many should have been more careful. But even the skeptical ones, like Mosch, got taken, partly because they were assured by their banks that the checks were legit. So once you read some of the sad stories, you will hopefully become even more careful about questionable transactions, especially on the Internet, where you don't know who you are dealing with.

For more details, read my story in today's paper, which also features some of the questions you should ask before you cash that check. The answers could save you from being scammed.

Meanwhile, if you have any nominations for a consumer hero, please write me at: thecheckout@carolinemayer.com

By  |  June 1, 2006; 8:32 AM ET Consumer Tips
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Comments

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The issue of tellers insisting that the checks are good is a symptom of a larger problem. Tellers and other bank employees are trained as customer service reps, not as bankers. They don't know how their bank works or what rules pertain to the transactions. I'd be willing to bet that tellers are not "usually thinking in terms of bank rules, that the hold time is over." They're thinking just like the account holder would: that it says here the funds are available, so the check must be good.

The lending side of the business is just as bad. When my mortgage was sold and the new servicer was looking for a payment that I had made to the old servicer, I was actually told to have the payment refunded and send the money to the new servicer. That's 100% wrong. The rep didn't even believe me when I told him so (politely and with references to law and regulation). Why? Because he didn'tknow anything about home mortgage lending, they just pay him to answer the phone.

Posted by: Bank employees just don't know banking | June 1, 2006 9:02 AM

Here's my question - if the banks wait several days before the check "clears" and then allows the depositer to access the funds even though the money hasn't been transferred, then why even have a several day wait. If no investigation happens during that time regarding the validity of the check, what is that wait for? Seems to me that either the investigation happens and the depositer has to wait, or the investigation doesn't happen and the depositer shouldn't wait at all. In this case, the bank doesn't release the money for several days, but also doesn't seem to be doing the necessary investigation.

Posted by: Brian | June 1, 2006 9:47 AM

I don't want to be down on Nigerians, but they seem to have a lock on Internet fraud scams. It seems like I'm always getting some AOL mail from Nigeria.

Posted by: RoseG | June 1, 2006 10:22 AM

The banking system seems to work only for the banks. I deposited a check an escrow refund from a lending institution in Oct 05. The first I know of a problem was when the amount was deducted from my cking acct May 06.

So far, I have no rights

Posted by: Liz O | June 1, 2006 11:17 AM

I certainly understand people not liking to be defrauded, but it bothers me that so many people don't understand the nature of the system as it is, and the banks make little effort to see that you understand it, though it's in your depositor contract. Look for words like "All items are accepted for deposit subject to collection."
Basically, the bank is only a conduit. The first party to accept an uncollectible check or any form of IOU is the one who gets stuck in the end. Your endorsement is your own promise of payment to your bank by the maker and previous endorsers. When they try to collect on your behalf, your bank makes a similar promise to the maker's bank: pay me now, I'll give it back if you can't collect.
Banks often receive funds from check clearing (subject to reversal) a couple of business days after you deposit it, and problems are often caught in a week and usually within two, but in principle it takes however long it takes - a promise is for life (or until bankruptcy or a statute of limitations cuts it off).
For the situation Liz O describes, her right is to try to collect from whoever gave her the check, or any prior endorser (by lawsuit if need be). Yes, that might be too costly, or they may be bankrupt, or impossible to find. Then you lose. And even if you win, it's a tedious and painful process.

Posted by: WW | June 1, 2006 1:10 PM

Miss Caroline,
I am writing this letter in confidence believing that if it is the wish of God for you to help me and my family, God almighty will bless and reward you abundantly. My family and I are true Christians and worship's God truthfully. I got your contact through Internet during my research on some one who could help us.

I am a female student from University of Nigeria, Lagos. I am 28 yrs old. I'd like any person who can be caring, loving and home oriented. I will love to have a long-term relationship with you and to know more about you. I would like to build up a solid foundation with you in time coming if you can be able to help me in this transaction.

Well, my fathers died earlier two months ago and left my mother I and my junior brother behind. He was a king, which our town citizens titled him before his death. I was a Princess to him and I and my brother are the only people who can take Care of his wealth now because my mother is not literate enough to know all my father's wealth behind.

He left up to USD 27, 350, 000.00 dollars (TWENTY SEVEN MILLION, THREE HUNDRED AND FIFTY THOUSAND US DOLLARS) with a security company, and I don't know how and what I will do to invest this money somewhere in abroad, so that my father's kindred will not take over what belongs to my father and our family, which they were planning to do without my present because I am a female as stated by our culture in the town. That is why I felt happy when I saw your contact which I strongly believe that by the grace of God, you will help me secure and invest this money. I thereby need your help in bringing the box contaning the money out from the security company, based on your reply I will furnish you with more details on how we can proceed.

I am ready to pay 10% of the total amount to you if you help us in securing this money and another 10% interest of Annual Income to you, for handling this business for us, which you will strongly have absolute control over.

If you can handle this project sincerely and also willing to assist me in lifting this fund, kindly reach me and I will let you know the next step to take towards actualizing this transaction as quickly as possible.

Please, note that this transaction is 100% risk free.
I look forward hearing from you soonest.

Yours sincerely,

Miss Princess Ajana

Posted by: Princess Ajana | June 1, 2006 1:17 PM

So, if someone gets taken, really, they have to pay the bank back? That seems unfair.

Posted by: Deb | June 1, 2006 2:16 PM

These "victims" are lucky they aren't being criminally prosecuted! They passed a bogus check and got real money for it. They get an unsolicated e-mail and think they are going to make large amounts of $$ for doing nothing? These people are one of two things, too stupid to be allowed to procreate or are using the "victim" excuse to commit a crime. It is fair for them to pay back the bank. It's unfair for the other customers to have to pay for their stupidity by having to pay more fees. If they don't have to pay back the bank, then all of us as customers will have to. It's the same (for us other customers) as any business that will pass along the additional costs to the honest consumers.

Posted by: Hello!!! | June 1, 2006 3:20 PM

I'll share my personal embarrasment with readers of this blog for your own safety...

I'm a former financial consultant (17 yrs) and got scammed this way. I was EXPERT at recognizing financial scams that came through the office.. .so I checked the cashier's very carefully when it came in the mail... The water marks were there, the correct safety devices were in place... Stupid me... never thought about theft of blanks and the purchase of a legit machine to create them at will.

Yes, I had to repay the bank...still am doing so. They were understanding and helpful, offering a credit line to assist in repayment so my accounts would not be frozen in the meantime... but I had to repay them.

You see the minute I deposited that check and wired the "extra money for shipping" via western union I was toast... Western Union fnds cannot be retrieved once sent.

The worst part is Nigerians applaud the criminals - they even have pop songs on the radio praising these scams because "westerners are greedy".

While this may upset legit business people in nigeria there is a very simple way to end this international crime wave...

NEVER DEAL WITH NIGERIANS. PERIOD.
NEVER USE WESTERN UNION. PERIOD.

Whe the nigerian Government sees the economy in worse shambles than it already is, when Nigerian Gov't officials are publicly embarrased, then they will do something. And, of course, when the scam stops working the criminals will look for another way.

I REFUSE TO EVEN SPEAK TO A NIGERIAN VIA THE INTERNET, AND WILL NOT DO BUSINESS WITH A NIGERIAN UNDER ANY CIRCUMSTANCES.

I suggest you adopt my strategy.

Posted by: Long Beach, CA | June 1, 2006 4:19 PM

The easiest way to avoid these scams is to call the bank that issued (or didn't issue) the check BEFORE making the deposit. They can compare the numbers, date, amount and payee name on the check against their records. They will tell you on the spot if the check is good. By the way, these checks don't always come from Nigeria.

Posted by: Carol Gibson | June 2, 2006 12:24 PM

I was surprised by how common these scams are. I recently tried to sell a play station on craigslist. Within a few hours of posting I had over 10 replies, all of them saying they would like to buy the item. Several seemed like legit buyers. When I responded to their initial inquiry I received messages, most with the same wording, telling me that they would like the item and offering to send a Cashiers Check. Some offered to pay me more than my asking price (a sure sign of a scam. I mean come on, does any real person actually offer to pay more than they have to for anything? ). I'm assuming this scam works because the check is fake but you've already sent the item before you find out. I also got several of the...a friend will send you the check and can you please wire me the difference...type scam letters. One person even asked me if I could provide a receipt to prove the item wasn't stolen. I thought for sure this one was legit. Does a scammer care if I have a receipt? But when the replay can back offering to pay me more than the asking price (by cashiers check) I realized it was yet another scammer. I was impressed with the asking for a receipt part though. Pretty sophisticated for a scammer.

Posted by: cw | June 2, 2006 4:24 PM

I've had the same experience selling on Craigslist. The scammers seem to monitor the electronics boards pretty hard, probably using the RSS feed to do so. I've had responses within minutes of posting. The clever twist I saw was the one where the "buyer" sent me a mocked-up Western Union payment. When I couldn't verifiy its validity through Western Union, I sent a "what's going on" inquiry back to the buyer, who had been hyper-responsive up to this point. I never heard back from them.

Posted by: CLSeller | June 2, 2006 6:39 PM

If it sounds too good to be true, it is. Nobody ever gets paid for doing next to nothing. Our electronic financial infrustructure is still in it's infancy, only deal locally and in cash.

Posted by: ithurtswhenipee | August 2, 2006 12:22 AM

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