Fraudulent Cashier's Checks

Have you ever placed a "For Sale" ad in your local paper or posted an item for sale on-line?  If so, you should be aware of a type of scam involving fraudulent cashier's checks, money orders and other official-looking bank checks. 

The scam occurs when a "buyer" contacts a consumer with an offer to purchase an item.  The buyer tells the consumer - aka, "seller" - that the payment will be made with a cashier's check and, that for various reasons, it will be made out for an amount greater than the selling price of the item. The buyer will then ask the seller to wire the excess funds as soon as possible after depositing the cashier's check.  The buyer might pressure the seller to send the funds immediately by claiming a family emergency, such as a death or illness, or shipping charges. 

The seller becomes trapped in the scam by depositing the cashier's check into his or her own bank account and wiring the excess amount to the buyer.  It is not until sometime later that the bank notifies the seller that the check is phony.  The buyer gets away with stealing the seller's money, and the seller, as the depositor of the phony check, is liable to the bank for the amount of those funds.

PLEASE NOTE: In Connecticut, a depositor may be held liable for depositing a fraudulent check.  A bank may charge a customer's account for any credit that was given by the bank for a deposited check that was later returned unpaid.

Consumers should review their bank's Deposit Account Contract for the terms of liability for a deposited check that is returned unpaid.  (A typical Deposit Account Contract might include sample language such as: "We have the right to charge back your Account if we have given credit for an item that is returned to us unpaid.")

Even though your bank has made the funds "available" for withdrawal, according to the Deposit Account Contract, you may be held liable for the amount of funds credited because of the deposit of a fraudulent cashier's check.  Be aware that the check clearing process sometimes takes several weeks.

The Expedited Funds Availability Act requires banks to follow a timeline for the availability of deposits.  However, the availability of funds in the seller's account does not guarantee that the funds from the cashier's check were actually paid to the seller's bank by the bank that issued the cashier's check.  It can take several weeks before a bank will learn whether a deposited check is counterfeit.  By the time a fraudulent cashier's check is returned through the collection process, the unsuspecting seller may have already forwarded the credited funds to the scam artist posing as a legitimate  buyer.  Unfortunately, that seller may become liable if he or she withdraws those funds before the check has completed the check clearing process.

Complaints to the Department of Banking involving fraudulent cashier's checks have become more frequent in recent years.  Scam artists rely on the fact that consumers generally place more trust in cashier's checks, especially if their bank accepts them for deposit.  

Be very cautious if you decide to wire money or hand over merchandise before the check you accepted is confirmed as paid (cleared) by your bank.  Remember, this process could take several weeks.  The Department of Banking recommends you take the following measures to protect yourself:

• Independently confirm the name, address and phone numbers of the buyer.  Check out the phone book, directory assistance or try an on-line database.

• Insist on an official check drawn on a local bank or a bank that has a local branch.  If the purchaser is not local, call the bank where the check was purchased.  Be sure to obtain this phone number yourself, not from the person who gave you the check.

• Be suspicious if the cashier's check is made out for an amount higher than the asking price and you are asked to transfer the excess amount to another bank account.

• Be especially cautious if the purchaser is long-distance or if you are dealing with them over the Internet.

• If the check shows it was purchased by someone else, not the person you are dealing with, or if the check doesn't have the look or feel of a real check, contact the bank to check its validity.  It might be counterfeit.

• Listen to your instincts.  If something about the business transaction doesn't feel right, it probably isn't.

If you have a complaint regarding a fraudulent cashier's check, contact the Department of Banking.  You may also notify the Internet Fraud Complaint Center if you believe you might be an online victim of this type of scam.

The Federal Trade Commission provides additional information on counterfeit cashier's check scams.