Consumer Alert: Don’t Be Fooled

Phony check fraud is surging. Here's how to spot this scam.

By Ed Shanahan from Reader's Digest | June 2007

Phony check fraud is surging. Here’s how to spot this scam.
Get the facts on fake check fraud at FakeChecks.org

What do Alcoa, Welch’s and Bank of America have in common? They all have had their corporate identities stolen and placed on fake checks in a new scam that rips off consumers.

The average victim of this type of con — in which people trade their own cash for a counterfeit check — loses from $3,000 to $4,000, according to the National Consumers League (NCL). And consumers aren’t the only ones who suffer. The reputations of legitimate corporations whose names are being hijacked are also tarnished. Our own company, Reader’s Digest, has fallen victim to these thieves, as have other well-known firms.

“We are highly concerned about reports of scam artists using our name and good reputation to try and deceive consumers through these fake check scams,” says Chris Irving, a senior executive with Publishers Clearing House. “If you have received what appears to be a legitimate check with a request to send a portion of that check back, stop immediately.”

Too Good to Be True

There are several versions of the scam, which is spreading, probably because technology allows hustlers to create convincing counterfeits.

In one scenario, a potential victim gets an unexpected check from what looks to be a trusted source. The check is labeled as an award, prize, lottery or other windfall.

The “lucky winner” is instructed to deposit the check into a personal account and then wire back a portion of the funds to cover fees, taxes or other charges.

Inevitably, once the money is sent, the bank discovers that the check is a fake. By law, the person who deposited it must repay the funds.

In another version, a person selling an item on eBay or via an online classified ad is contacted by a potential buyer who offers to pay by check. The catch: This person insists on sending a check for more than the purchase price and wants the extra amount wired back. The seller who agrees to this deal later learns the check is no good.

In yet another version, scammers recruit so-called secret shoppers. Each is sent a check and instructed to cash it and wire most of it back to the sender. They’re also told to keep a portion as payment for rating the performance of the person who handles the transaction. The check, of course, proves to be bogus.

Fake corporate checks are so real-looking, they fool even bank tellers. Counterfeit cashier’s checks are also popular with these con artists, who are savvy about bank rules. In many cases, the amount of a cashier’s check must be posted to a depositor’s account by the next business day, before anyone is likely to verify its legitimacy.

Such swindles are on the rise: The NCL says that from 2005 to 2006, fake check cons shot from fifth place to first on its list of the most common telemarketing scams. Adds Steve Baker, director of the FTC’s Midwest region: “We became aware of these schemes about three or four years ago, and lately, the incidence is really going up.”

How to protect yourself

  • Discard offers from sources that ask you to pay fees, taxes or other charges to claim a prize. No legitimate company would do that.
  • If selling something, never accept more than the sale price.
  • If accepting payment by check, ask for one drawn on a local bank or on a bank with a local branch. That lets you personally verify the check’s validity.
  • And remember, if something seems too good to be true, most likely it is.

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