Yikes! People Can Create Checks from Your Account and Pay Themselves!

Holy cow, where have I been to miss this? Turns out people can create checks on your bank account and pay themselves -- and this is a legal method (though some/many use it illegally, without permission.) Here's the summary of the situation:

Did you know that your bank can pay someone from your checking account because that person says you authorized it - even though you never signed a check?

Telemarketers tap into consumers’ checking accounts using an obscure, out of date method called the “demand draft” or “remotely created check.”

Here is how it works: Step One: You authorize a payment by phone, or a telemarketer falsely claims that you authorized a payment by phone, from your checking account. Step Two: The person you authorized, or the person who is out to steal from you, makes up a check on your account and sends it through the banking system. Wait a minute – someone can create a check on your account and use that check even though you never signed it? Yes.

Yikes! Double yikes!

So, what can you do about it? A suggestion:

Read your bank statements carefully and report and dispute any error, no matter how small. Thieves sometimes put through a small charge first, and if that works, try again with a larger charge, or put the same charge through to your account every month. If you aren’t happy with how your bank responds, file a complaint. For more information on where to complain, depending on where you bank, see this page.

Anyone had this happen to you?

Comments

[beastlike]

Crazy and scary...

[Chief Family Officer]

I've always been afraid of something like this - not that I knew this specific scheme was possible, but I figured it would be a huge hassle if there was fraud connected to my checking account versus a savings account. So when authorizing payments, I use a savings account that never has a lot of money in it. I've never had a company tell me that I can't use a savings account for an EFT program, I just have to make sure that they know it's a savings account instead of checking.

[Sarah]

And check this out: if you banked with Wachovia, they damn well knew people were running this scam on a large scale...and did nothing about it:

http://www.nytimes.com/2008/02/06/business/06wachovia.html?scp=1&sq=wachovia+fraud&st=nyt

But don't worry! The free market's totally looking out for us!

[PatatrooperJJ]

you have never heard of a telephone check? It is the same thing. Actually with your account number anyone can submit a draft and drain your entire account without your permission.

[Valerie]

One way to keep careful check on this kind of thing is to use a Personal Finance program like Quicken or MS Money and download your transactions daily or at least weekly. That way you can eyeball and catch any false transactions and report them immediately. Waiting for the monthly statement can keep you from discovering the problem for weeks.