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Watch Out for ‘Cleared Check’ Scams

by Staff
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Photo: Andrey_Popov (Shutterstock)

For scammers, fake checks are the Toyota Corolla of cars—safe, reliable, and have been around for ever. And over the years, fake check scams have only become more sophisticated and one of the most successful frauds for scammers, so they are still something to be aware of so you can avoid becoming a victim.

How do check scams work?

At its root, the fake check scam works like this: A scammer gives you a fake check that you deposit into your account and convinces you to give them money. This usually works because the checks are seemingly “cleared” by the bank, and you see the money hit your account quickly. That happens because of a law that, ironically, was intended to help customers.

“By law, banks and credit unions must release at least part of a deposit whether the check is good or bad,’’ said Melissa Morgan, chief retail manager of Patelco Credit Union. “Which is why you should only deposit checks from someone you trust.”

The law is called Regulation CC, and it was passed in 1987. It says banks must let you use at least part of your deposit right away—even before they are able to tell wether it’s real or fake—in order to help fast-track the slow process of check-clearing when people would deposit their paychecks from work in the 1980s. Although technology has made depositing checks more efficient, it has also made fake checks more sophisticated.

“Advanced graphics and printing technologies allow scammers to easily create fraudulent and hard-to-detect counterfeit checks in a matter of minutes, adding a sense of legitimacy to their scams,” the Federal Deposit Insurance Corporation (FDIC) said in a press release. “Fake checks can look so real that it’s very hard for consumers, or even bank employees, to detect.”

Once you think the funds are in your account, the scammers ask you to send them money in different ways, including cash, personal checks, gift cards, wire transfers, or unsafe person-to-person transactions like Zelle, Venmo, or PayPal Friends and Family—all ways that, once your check actually bounces, there’s nothing anyone can do to retrieve your money.

The different types of fake check scams

These are some of the most popular fraudulent check scams you’ll find:

  • Saying you’ve won the lottery: This trick claims you’ve won the lottery or a lot of money and are given a fake check that you actually see in your account (temporarily). The catch is that to claim the money, you must first pay “taxes and fees” before receiving the full amount.
  • Buying items from you: Scammers will buy something you’re selling online, such as a service, or a deposit for a car or apartment. Then they will send you a fake check with more money than you were asking for. Once you see the money in your account, they’ll ask you to refund the extra amount (or the full amount) and make it seem like it was a mistake on their part. Most people do, and once that’s done, the check bounces and you’ve lost the amount you sent them to make up for their “mistake.”
  • Offering you a “job”: You are offered a job and are paid an amount to start working or for “supplies” or other hiring needs. Then your “boss” asks you to use the funds from the fake check to pay for things like “account activations,fees, or other “job duties. Some scammers “hire” people to “evaluate” money transfer businesses: Victims are asked to take the funds out of your account and send them your employer and evaluate the transfer process. Of course, all you’re really doing is giving your money away.

How to spot them

To avoid these scams, here are the recommendations by the Federal Trade Commission and FDIC:

  • If someone sends you a check and tells you to send back money—whether by wiring money or buying gift cards—you can bet it’s a scam.
  • Even if you see the money in your account, the bank can still take it back if the check later bounces. If you don’t know the person who wrote the check, don’t send money.
  • If you’re selling something online, never accept a check for more than your asking price.
  • Make sure the check was issued by a legitimate bank. While some counterfeit checks will include a legitimate bank’s name, a fake name is a sure giveaway. The FDIC’s BankFind Suite allows you to locate FDIC-insured banking institutions in the United States.
  • Check with the bank that supposedly issued the check to make sure it is real. Make sure you look up the phone number on the bank’s official website—don’t use the phone number printed on the check because it could be a direct line to the scam artist. Next, call the official number and ask them to verify the check. They will likely need to know the check number, issuance date, and amount.

What to do if you were scammed

If you think you’ve been targeted by a counterfeit check scam, report it immediately to any of the following agencies:

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