Check Scams

Thinking of selling a car or another valuable item through an online auction or your newspaper's classified section? Is there someone you do not know who wants to pay you by check and have you wire some of the money back to them? If so, you should know about fake check scams. It could cost you thousands of dollars.

There are many variations of the fake check scam. It could start with someone offering to buy something you advertised, pay you to do work at home, give you an "advance" on a sweepstakes you have supposedly won, or pay the first installment on the millions that you will receive for agreeing to have money in a foreign country transferred to your bank account for safekeeping. Whatever the pitch, the person may sound quite believable.

Fake check scammers hunt for victims. They scan newspaper and online advertisements for people listing items for sale, and check postings on online job sites from people seeking employment. They place their own ads with phone numbers or email addresses for people to contact them. And they call or send emails or faxes to people randomly, knowing that some will take the bait.

How does the scam work?
It is simple! They tell you to wire money to them after you have deposited the check.

If you are selling something, they say they will pay you by having someone in the U.S. who owes them money send you a check. It will be for more than the sale price; you deposit the check, keep what you are owed, and wire the rest to them.

If it is part of a work-at-home scheme, they may claim that you will be processing checks from their "clients." You deposit the checks and then wire them the money minus your "pay." Or they may send you a check for more than your pay "by mistake" and ask you to wire them the excess.

In the sweepstakes and foreign money offer variations of the scam, they tell you to wire them money for taxes, customs, bonding, processing, legal fees, or other expenses that must be paid before you can get the rest of the money.

Why does it work?
The fake checks look real. In fact, they look so real that even the bank tellers may be fooled. Some are phony cashier's checks; others look like they are from legitimate business accounts. The companies whose name appear may be real, but someone has dummied up the checks without their knowledge.

You do not have to wait long to use the money, but that does not mean the check is good. Under federal law, banks have to make the funds you deposit available quickly - usually within one to five days, depending on the type of check. But just because you can withdraw the money does not mean the check is good, even if it is a cashier's check. It can take weeks for the forgery to be discovered and the check to bounce.

You are responsible for the checks you deposit!
That is because you are in the best position to determine the risk - you are the one dealing directly with the person who is arranging for the check to be sent to you. When a check bounces, the bank deducts the amount that was originally credited to your account. If there is not enough to cover it, the bank may be able to take money from other accounts you have at that institution, or sue you to recover the funds. In some cases, law enforcement authorities could bring charges against you because it may look like you were involved in the scam and knew the check was counterfeit.

How can you avoid being scammed?

• Know who you are dealing with. In any transaction, independently confirm the buyer's name, street address, and telephone number.
• Do not accept a check for more than the selling price, no matter how tempting. Ask the buyer to write the check for the correct amount. If the buyer refuses to send the correct amount, return the check. Do not send the merchandise.
• If you accept payment by check, ask for a check drawn on a local bank, or a bank with a local branch. That way, you can make a personal visit to make sure the check is valid. If that is not possible, call the bank where it was purchased and ask if the check is valid. Get the bank's phone number from directory assistance or an internet site that you know and trust, not from the person who gave you the check.
• Consider an alternative method of payment. As a seller, you can suggest an escrow service or online payment service. There may be a charge for an escrow service. If the buyer insists on using a particular escrow or online payment service you have never heard of, check it out. Visit its website, and read its terms of agreement and privacy policy. Call the customer service line. If there is not one or if you call and cannot get answers about the service's reliability, do not use the service.
• If the buyer insists that you wire back funds, end the transaction immediately. Legitimate buyers do not pressure you to send money by Western Union or a similar company. In addition, you have little recourse if there is a problem with a wire transaction.
• Resist any pressure to "act now." If the buyer's offer is good now, it should be good after the check clears the issuing bank.
• Throw away any offer that asks you to pay for a prize or a gift. If it is free or a gift, you should not have to pay for it. Free is free.
• Resist the urge to enter foreign lotteries. Most foreign lottery solicitations are phony. What's more, it is illegal to play a foreign lottery through the mail or the telephone.