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Posted on Mon, Sep. 29, 2003
ANDREW SHAIN
My column last week on a new Nigerian Internet scam brought home a key lesson: Just because you get cash from a check doesn't mean you'll get to keep the money.
Banks can make cash available from a check instantly, but it could take several days before anyone learns the check is bogus.
And customers who cashed the checks many times are responsible and will find they have a large hole in their banking account.
This applies to almost all types of checks -- and to any size transaction whether it's a $10 check used to buy a lamp at a yard sale or a $150 check sent to pay for a winning bid on eBay.
Critics say the banks should do more to protect consumers from fraud.
Several folks around the region have lost thousands to a Nigerian scam where car buyers send checks well above the sales price and want the excess wired back.
This month, a York, S.C., couple lost $15,000 on two bogus cashier's checks, and an Albemarle family expects to learn soon that an $8,000 money order they received is fraudulent.
Super-cautious consumers can sit on the money and wait until the check clears from the issuing bank.
That's how a Charlotte physical therapist avoided becoming a victim of the Nigerian scam this month.
Graham Widrick said he become suspicious when the buyer of his BMW motorcycle informed him he was adding $3,000 to the purchase price for Widrick to forward to the shipper.
The buyer twice sent him checks.
Widrick waited a week each time before calling the banks where the checks were written to learn they were drawn from closed accounts.
In both cases, Widrick's credit union made the money available to him before the checks cleared the Florida and West Virginia banks where they were issued.
Banks have a responsibility to stop a check that appears to be altered or fake, said Bill Pignanelli, a senior vice president at the Federal Reserve in Richmond.
They can hold checks for five to nine businesses days if they're drawn on a new account, for more than $5,000 or drawn from an account with past troubles, officials said.
But if a check looks good, banks will try to make the money available as soon as possible.
Banks are doing a sloppy job, said Ed Mierzwinski of the U.S. Public Interest Research Group, a government and consumer watchdog.
They need to be taken down a notch for not doing their due diligence. They're holding customers accountable.
But that's who's responsible, the banking industry says.
You're vouching for that person who gave you the check, said John Hall, a spokesman with the industry trade group American Banking Association. You're taking their check to your bank and saying, `This is good.'
Criminals know about the lag between when money is made available and when it clears, Hall said.
The Nigerian scammers often insist victims wire the money as soon as possible.
People want their funds available as quickly as possible, and they want to make sure funds are available, and the two aren't compatible, Hall said.
Consumers could end up waiting a week to get money from checks if banks were required to wait for them to clear, he said. Banks process 42 billion checks each year.
Typically banks take one to five business days to clear a check, depending on the distance between the banks, Pignanelli said.
It's up to consumers cashing the check to be cautious about what to do with the money.
Concerned customers can ask their bank to tell them when a check clears. Or they can just avoid taking checks from strangers.
Andrew Shain covers consumer issues. His Mr. Watchdog column runs every Monday in MoneyWise and every other Friday in Local & State. Reach him at: (704) 358-5164; ashain@charlotteobserver.com
Can the Nigerians Get Caught?
The chances of actually nabbing Nigerian scammers who use the Internet to swindle Americans are very limited, a Charlotte-based U.S. Secret Service agent said.
Victims can file complaints with the Secret Service, which has taken an active role in these financial fraud cases that cost U.S. residents about $100 million each year. But finding culprits a continent away is complicated, Special Agent Dan Paulson said.
There's a large criminal element (in Nigeria) that's difficult for us to trace, he said.
Nigeria has become a haven for financial crime because of the country's lax laws and enforcement, authorities have said.
Consumers can protect themselves by avoiding offers from people whose identity they cannot confirm.
Details about the scams: www.secretservice.gov/ alert419.shtml.
Andrew
Shain
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Andrew Shain
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Charlotte Observer
© 2003 Charlotte Observer and wire service sources. All Rights Reserved.
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