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Check Forgery & Identity Theft: Risks & Lessons for the Consumer

  • Introduction
  • Consequences of Check Theft and Forgery
  • Recommendations
  • Affidavit of Forgery
    •
  • Lessons for the Future
  • Check Service Companies
  • Links
  • History
    •

    Rev: 01 Nov 2004.

    Introduction

    In July of 1999 my wife's purse was snatched while she was sitting at an upscale cafe. The assailant took a small amount of cash, her license and health insurance card, a credit card, and a money market checkbook with 8 checks in it.

    We cancelled the credit card immediately, and had our mutual fund stop payment on the stolen checks. We thought we'd gotten off lightly. HAH! It would have been much better to have lost few hundred dollars in cash, or to have had bad charges on our credit card, than to have lost those checks.

    Consequences of Check Theft and Forgery

    1. The thief and their accomplices will be able to use the checks. They needn't even bother to convincingly forge your signature.
    2. You may be vulnerable to identity theft, particularly if the thief has obtained your social security number.
    3. You may be liable for the forged checks, though this is unlikely in most states. This isn't like fraudulent credit card charges; there's no liability protection for check forgery. In practice if you can show you took reasonable precautions you may not lose any money -- but there are no guarantees.

    If you stop payment (checks bounce at bank)

    1. If you are able to stop payment on the stolen checks so, then the checks will "bounce". The vendor  who's been stuck with a bad check will turn the check over to their check service companies. You will receive intimidating and threatening letters from these companies and from larger vendors who have their own internal recovery programs. Some of the letters will allow that the bad check might have been forged, others will assert that you are a thieving scum who will be hounded forever. Sometimes the same check service company will send you both kinds of letters.
    2. You have to cancel your checking account. If checks have bounced, then your account has been marked as 'bad' by the check service companies. There's no way to undo this. You need a new account. You will have to fix up your direct deposits and automatic withdrawl arrangements.
    3. If the thieves use your stolen driver's license to cash the checks, that license number will be entered as 'bad'. You will not be able to use your driver's license to cash checks again. If you are in a state, like Minnesota, where it is hard to change your license number, you will be unable to use checks in the future. (Of course you probably shouldn't use checks anyway!)
    4. For each bad check, you will have to submit an affidavit of forgery. You will need copies of the police report! (You must report this crime to the police, or you'll have a hard time proving forgery occurred.)

    If bank accepts check before payment can be stopped

    If you don't stop payment, and you discover the forgery with your bank statement, your bank will handle the matter. Surprisingly, this may be better than if you'd stopped payment! The bank is likely to be a lot easier to work with, and they are prepared to absorb the cost of the forgery (or fight it out with the merchant). They are much less likely to destroy your credit rating.

    Recommendations: Stolen Checkbook

    Assuming you have a check book stolen, try the following:

    1. Notify the bank and stop payment on stolen checks and all non-outstanding checks. Open a new account. Keep the old account only until outstanding checks have cleared, then close it.
    2. If your state allows you to change your license number, that may be worth doing.
    3. Consider trying to contact Check Service/Recovery Companies before you hear from them and get started on the tedious reporting function. Good luck trying to deal with them.
    4. Keep a log of everyone you speak to, including name, time of call, and what was discussed.
    5. Once a creditor confirms fraud, request that they send you a letter of confirmation. Check Service/Recovery Companies will not send this automatically, you have to request one. You may need this in the future. In any cover letter you write, request that this letter be sent you when your case is resolved.
    6. When speaking with any of the Check Service/Recovery Companies, request direct numbers and extensions, especially 800 numbers. These are not easy to find.
    7. Contact law enforcement. Insist on getting a case number and attempt to get a report filed and get a copy of it.
    8. Prepare a general file and a file for each creditor or Check Service/Recovery Company. Create a standard cover letter with all important information that you can revise for each.

    Affidavit of Forgery

    A notarized affidavit of forgery is your statement that you did not authorize use of your check. It typically goes either to your bank (if they got stuck with the forged check) or to a check service (recovery) company if the merchant was stuck with the forged check.

    Banks are pretty straightforward. The check service company may not be. Some of them make the procedures clear, others make them deliberately hard to follow.

    The package you send may include:

    Lessons for the Future

    1. Do not carry checks. Carry cash, traveller's checks, a check card, or a credit card. Checks should be stored in a locked, secure box at home and never leave the house. If you must carry a check, don't have it in your purse or wallet.
    2. Do not allow your social security number (SSN) to be used on any document that keep in your wallet or purse. Many health insurance companies will use your SSN as an identifier; most will honor your request to use another identifier.
    3. On the checks which you keep locked in a secure box at home, have printed below your address the phrase 'CHECK PHOTO ID AND SIGNATURE BEFORE ACCEPTING'.
    4. Follow the general security procedures prescribed for victims of credit card fraud. In particular, be sure to have the credit bureaus add a fraud alert to your credit reports.
    5. Get a shredder and use it (see Identity Theft).
    6. Consider eliminating all use of checks (a minor act of revenge on the sometimes obnoxious Check Service/Recovery Companies)

    Check Service/Recovery Companies

    Check service/recovery companies are used by businesses to manage check transactions and to recover funds for bad checks. They vary in professionalism from tolerable to unpleasant. Any information you provide them may be used to 'collect a debt'; if the service holds you responsible they will pursue you.

    They are almost always confused and overloaded, with archaic information systems that don't function well. As of Aug 1999 they are drowing under a tidal wave of forged checks.

    The businesses that do check verification at the time of service are not regulated (at least in Minnesota). If they decide to mark your license number or check account as "bad" there's not much you can do about it.

    The Check Recovery Companies (which may do verification as well) are regulated. In Minnesota they are regulated by the Enforcement Division of the Department of Commerce. If you have a good state representative (ours is excellent) they can provide you with names and numbers to contact and help out if you have problems. A check recovery service cannot collect on a fraudulent check (in Minnesota).

    Some of the information and numbers below come from Equifax, at least one of those numbers was incorrect.

    Check Rite

    Chex Systems

    Equifax-Telecredit Check Services

    Reasonably professional, they provide a phone number for contacting them and you can speak to a human. One of their two letters was pretty civil. Their 800 number is 800-337-5689. (Another number, untested, is: 800-437-5120)

    NPC

    800-526-5380

    Scan

    800-262-7771

    TeleCheck Recovery Services, Inc

    Their correspondence is unpleasant. Their letters don't tell you how to indicate that the check was forged, you have to wade through their voice mail.

    Contact numbers:

    If you call their information number (), you'll find a voice mail message with directions to write to their fraud office. The directions will repeat if you strike any key. There's no way to reach a human. They want Fidelity to provide an affidavit of forgery instead of us -- this makes no sense.

    If they persist we'll be calling our State Dept of Commerce for help.

    Links

    Misc

    Identity Theft

    History

    Author: John G. Faughnan.  The views and opinions expressed in this page are strictly those of the page author. Pages are updated on an irregular schedule; suggestions/fixes are welcome but they may take weeks to years to be incorporated. Anyone may freely link to anything on this site and print any page; no permission is needed for citing, linking,  printing, or distributing printed copies.