Shouldn't We Fix The Check Clearing Loophole That So Many Scammers Abuse?
from the simple-questions dept
Slashdot points us to a recent story about a guy who lost his lawsuit against a bank, over a variation on a classic Nigerian email scam. The scam is one we've discussed many times in the past: somehow the victim gets a big check, which they're expected to deposit in a bank. After the check "clears," the victim/recipient is supposed to transfer a large chunk of that money to the scammer, on the belief that they get to keep whatever is left over. What really happens is a few days after the check "clears," the bank finds out it's fraudulent, and tries to void the transaction. But, by then, the victim has already transferred out a big chunk of money (and the scammer has already taken all that cash out of the bank and disappeared) -- leaving the victim footing the bill, with the bank expecting them to come up with the missing cash. In this case, the scam took on all the familiar facets of this scam:In March 2009, Brian Peters received an email from someone purporting to be a citizen of Malaysia. The e-mail informed Peters that certain third parties in the United States and Canada owed the purported Malaysian money, but that "they can not transfer the funds to any bank account outside America continent due to their new company policy [sic]." He asked Peters to "assist me in receiving the funds and forward to me." He offered to pay Peters 12 percent of the money. Peters agreed after apparently negotiating an increase of his fee to 15 percent.This certainly isn't the first such lawsuit. We wrote about a similar case two years ago, which involved some scammers tricking a law firm (who really should have known better). The reason this scam works over and over and over again is pretty simple: most people have no idea that when a check "clears," it's not actually been validated. This is apparently due to various laws that require banks to make money from checks available within a very short period of time. So the way banks deal with this is to just make the money available, and if they later find out that the check was fraudulent, they pull back the money. But, of course, most people don't know this and assume (somewhat reasonably) that if a check "clears" and the money is listed as "available," the bank has made sure the check is legitimate. This is a somewhat unintended consequence of laws to make paying by check work better, but it leads to a huge opening for these types of scams.
Peters deposited the $808,988.90 in checks received from the purported Malaysian at Chino Commercial Bank. After the bank notified Peters that the checks had cleared, Peters wire transferred $468,000 to Hong Kong. Shortly thereafter, the checks were dishonored after the bank detected that they had been altered. Since Peters was personally liable for any overdrafts on the account, which had only a few thousand dollars, the bank sought to attach property owned by Peters to collect on the overdraft. The trial court granted the bank’s motion to attach against Peters in the amount of $458,782.60.
So if they need to do that, shouldn't it make sense for banks to at least put forth pretty clear warnings on money that has not really been validated yet? Or to at least proactively warn anyone seeking to withdraw money that hasn't really been validated that if the check fails to validate, they may be liable? It seems like there must be better ways to deal with this kind of scam than to just let the scammers keep taking advantage of this knowledge gap.
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This is not new
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Re: This is not new
Right - and the vast majority of these victims will be ordinary people who really can't be expected to know better (that's why they were targeted by the scammers).
The only one to blame is this moron in the mirror.
I wonder if you'll still say this when your granny is the victim?
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Re: Re: This is not new
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Re: Re: Re: This is not new
can you not infer this from the biz comment.
The current story concerns a small(ish construction company - so it is still a business.
You didn't specify so I assumed you were talking about the current story.
In any case these scams could be perpetrated against anyone - and the scammers are unlikely to target people who will see through the scam.
This judgment is flawed because it lifts responsibility from the banks (who have the resources and the ability to block these scams) and places it on the general public - many of whom (statistically) can't be expected to realise that if something seems too good to be true it probably is.
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Re: Re: This is not new
Yes.
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Re: This is not new
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Yes, it's old. That's the point.
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Re: Yes, it's old. That's the point.
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Re: Re: Yes, it's old. That's the point.
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Re: Re: Re: Yes, it's old. That's the point.
> grabbing this guys assets specifically.
How does grabbing his assets equate to them making out better than if they just had the original money itself?
Now they have to deal with the time and effort and cost of going to court, securing the assets, auctioning them off, and hoping he has enough assets to cover what was owed after all the expenses.
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Banks are bad guys either way...
They may be able to limit the damage by holding checks over a certain amount before they clear, but I can't think of what else they could do. It does need to be fixed....
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Re: Banks are bad guys either way...
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Re: Re: Banks are bad guys either way...
The fact is, (banks) get money for nothing from the United States Treasury, through the FED reserve scam , and we the taxpayers end up paying massive taxes to cover " interest " to these banking hucksters by way of the "national debt". It doesn't take a rocket scientist to wonder hmmm... The United States of America is the authority that creates American dollars, so why then does the country which creates the money, ever need to borrow the money that it creates? The creation of the United States currency is a government asset that is constitutionally supposed to belong to the people of the United States, And be governed by congress... But for the past 100 years, the government creates the money, issues it to the corporate banking members via the federal reserve, who then Take that free money, and go buy United States saving bonds with it, placing the government in debt, and the taxpayers left distributing our wealth to the bankers! It's the biggest outright criminal act of the past century and wee letting them get away with it! This is not a conspiracy, this is a fact that any person with adequate accounting skills can follow using public governement documents... It's an elaborate magic show meant to suck Americans dry, and it's working flawlessly for these crooks!
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Re: Banks are bad guys either way...
A friendly reminder to RTFA. :)
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Re: Banks are bad guys either way...
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Re: Yes, it's old. That's the point.
Banks are in a difficult position of trying to handle customer's money while knowing little, if any, information about the details of the funds being deposited. In this case, the bank acted in good faith that the customer deposited a legitmate check by releasing those funds to the customer. There is a certain responsibility on the person making the deposit to know that the items being deposited are legitimate. It's no different than if you deposit a check from your deadbeat brother in law that bounces except that processing of international items can take longer.
Banks do not want to take these type of deposits because they have all seen or heard of this kind of thing before. In this case the bank that deposited the check is currently taking a gigantic $450,000 loss for what is likely a very small bank plus the costs of dealing with the bad check.
Should the bank have questioned and probably refused the deposit? Without knowing all the facts, probably yes though bank tellers should get training about checks like this, but smaller banks get less training than larger ones, plus tellers frequently are younger people without a college education. We do not even know if there was human interaction for the deposit or if it was deposited at an ATM.
For every check like this that is deposited, there are literally hundreds of thousands which are held and angering the customer who cannot access the funds immediately.
Ultimately, like putting food into your mouth, there is an expectation that the bank customer should know what is good and what is bad to deposit.
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And because of these people stupidty, the way banks do buisness has to change?
Sorry if you're this stupid, you deserve to be robbed.
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If it is too good to be true, it probably is.
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Why checks haven't gone away is what puzzles me most...but I guess the banks would hear far more grief if they stopped issuing them.
I have, in the past, been involved as a treasurer for an organization, and I never want the job ever again. Talk about denizens for fraud and villainy (and I am talking about the banks here.) We had a non-profit account at a bank, and would collect dues and deposit them in this account.
We'd have a person who would routinely write bad checks (checks that they knew they had no money in their account to cover.) Instead of going after the person kiting checks, they would reverse the deposit and charge us twenty dollars a pop for the bad check (even though it was no fault of our own.) We notified the authorities each time, and after the third time, we stopped collecting checks from this person and removed them from the organization. As far as I know, nothing was ever done by the authorities or the bank to punish the individual kiting checks.
The system only works if you trust everyone, and now-a-days, you can't trust everyone.
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And there are enough stupid people in the world for the criminals to prosper and become powerful - until wiser heads realise that it isn't in the public interest to allow even the stupid to be conned.
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All scams, whether they be Nigerian 401 scam, pyramid schemes or even the classic 3-card monty, all rely on the mark being greedy and wanting to get something by putting out little to no effort. The only real stupidity is when their greed overwhelms their common sense allowing them to trust someone claiming to be able to provide something for nothing, specifically the question: "If their method works so well, why are the telling ME about it?"
For example: the infomercials trying to sell you methods to make money buying/selling real estate or trade stocks (I've considered writing/selling a book that tells you how to get rich by writing/selling a book that tells you how to get rich a humorous concept.)
In real life, if you try to approach business owners in many niches (that you do not know personally) they are usually very reluctant to provide useful information on how to start and succeed at a similar business yourself (training their competition.)
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Easy fix
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Re: Easy fix
The banking industry is horribly hog-tied by regulations and legacy systems. It sounds good to say they should be able to communicate, but half of them are dreaming of the day that they can upgrade their systems to an AS400.
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Don't Be silly
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Re: Re: Easy fix
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Re: Re: Re: Re: Easy fix
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They earned it.
Fixing the "loophole" would require that every check people deposit take anywhere from 10-30 days to clear. It actually requires that the check get forwarded to the original bank, which verifies the check, including the signature, funds, and the like. For larger amounts, the bank might even contact their customer and assure that it is in fact a valid check.
However, if this system was adopted, you could pretty much kiss the check cashing industry goodbye (you know, the corner "insta-check" types of places) because those businesses would end up having to float the 10-30 days of money while they wait for checks to get processed. They would have no simple way of getting paid rapidly. That cost would have to be turned on the consumer, which would likely break the model.
It would also slow business. Can you imagine the effects on business if every payment took up to 30 extra days to receive?
The 419 scams are nothing more than social engineering. You cannot fix that loophole, there are always stupid people willing to be separated from their money.
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We have to try and minimise this because it is bad for everyone if criminals become rich - not just for their immediate victims.
These scams fund all kinds of bad stuff and everyone is the loser.
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Greedy people...
The wide-scale nature of the problem is the result of current check clearing practices, and that if we clean that up, we can reduce the scam volume by a large factor. And the only things we have to do are:
Allow the banks to hold the funds until the check clears.
Force the banks to clear checks in a reasonable time frame.
If you haven't got the money until the bank gets the money, then you'll be less likely to send the 'excess' to the scammer immediately (there will still be someone, of course). And the reason we don't presently do that is that banks can take weeks to clear a check. With modern technology there's really no reason that they shouldn't be able to get a 'it's good' vs. 'it's a forgery' in a much shorter time period.
While quicker clearing will have other side effects (I imagine it will be easier to pull some other scam), it should reduce this particular scam without too much collateral damage.
I also believe that anything which forces people to pay more attention to their money is a good thing, and having checks take time to clear helps that.
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Re: Greedy people...omeome
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Re: Greedy people...omeome
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So the way banks deal with this is to just make the money available, and if they later find out that the check was fraudulent, they pull back the money...
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Overwhelmingly missing the point.
Take a more legal and probable example from daily life. I have an account in a credit union, and an account in a Big Bank with many many ATMs and branches. I like the credit union but I need ATM access on the go; thus, two banks. And oh by the way, the Big Bank doesn't have the bulk of my funds.
Recently, I wanted to buy a car. Car buying stories aside, we settled on a cashier's check for the balance. Now, acquiring a cashier's check from the credit union involves traveling out of my way to the one late-night branch at a certain day of the week. Inconvenient. So, I wrote myself a check from the credit union to the Big Bank. And Big Bank has branches all over Manhattan, so this would be easy.
Except I *knew* "clearing" wasn't really clearing until 1) both banks showed the funds debited and credited and b) Big Bank authorized my cashier's check. And they wanted two forms of ID, a manager, signatures, and a picture of my face. Which is good.
But what if I didn't know about the clearing delay? I'd be thinking Big Bank has my check and deposited the funds right away. Heck, they even have BIG STICKERS on the ATMs saying funds deposited today before 6PM are available tomorrow.
Oh, that 4-pt asterisk means something? Tied to the 4-pt text I can barely find on another part of the ATM? This is proper and fair disclosure? No. What taught me was the experience of getting burned once, a long time ago. That shouldn't be necessary. Banks should just say, "Based on this check, you'll get the funds in three days." Or four, or a week. Setting consistent service levels is never a bad thing, ever. Allowing customers to assume risks without fair warning is not.
Then again, most businesses rely on exactly that. Statistically, it's worth it to them to allow funds to be available because liability is not theirs, and most people don't have the legal help in their back pocket to make it bother a business.
-C
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Re:
The check on the other hand is treated in a different manner. it is effectively a promise to pay, and the receiving bank must take steps with the issuing bank in order to get paid. The check typically goes through a clearing house operation.
All that the scammers are doing is using people's greed, and differences between two payment systems to make money.
The problem isn't the banking system. The problem is greed.
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Checks are funded on the back side, wires and funded up front. The difference in timing is what makes this sort of scam work.
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Re:
I didn't say it should be held, did I? I said: "houldn't it make sense for banks to at least put forth pretty clear warnings on money that has not really been validated yet? Or to at least proactively warn anyone seeking to withdraw money that hasn't really been validated that if the check fails to validate, they may be liable?"
Why is it that people complain about suggestions I didn't make?
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Re: Re:
Why is it that people complain about suggestions I didn't make?
To clarify, my comment was more of a rhetorical question than a complaint. I was just pointing out how far we would have to go to truely guarantee funds from checks or ACH items.
I work in bookkeeping at a small local bank. Checks simply aren't 'validated'. You deposit a check at your bank & they credit your account. The check image is sent to the Fed, who then passes it along to the bank that it is written on. Then that bank either returns the check (NSF, Closed Account, Forgery, etc.) or it doesn't. The bank you deposited the check at doesn't get any type of "OK" from the bank the check was drawn on. Maybe it should, but that would make a complicated system even more so.
As far as warnings about funds and availability - they are given to customers when they open accounts & posted in the lobby of every branch. And if an ATM takes deposits, they are posted there too. In the end, the only real solution (besides an overhaul of the current system) would be to teach a proper finance class in the schools (most do not even teach kids to balance a checkbook). If we are going to live in a capitalist society, then we should teach our children how that system works before they go out into the world.
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Yes, people should be diligent, and too-good-to-be-true usually is... but obviously, there are people who take the banks' word that the money is good.
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What?
Banking is built on trust, you cannot just take trust out of the picture. People that are getting scammed should not be setting the bar for the rest of us who saw that coming.
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Re: What?
You have been absorbing too many megabank commercials.
Other than small time credit unions, most of the US banking industry has, at least for some time now, been all about bottom-line and profit. Nothing else. If the sub-prime loan & derivative market crisis did not illustrate this for you, I'm not sure anything would.
I totally agree that our laws should not be based on the "bottom 10%" - it reminds me of the "Here's your sign" jokes.
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Re: Re: What?
Do I want my bank to hold every check I ever deposit for 11 business days or more? Absolutely not.
Every single time there is a lawsuit techdirt wants to change laws to prevent that lawsuit. Dumb.
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Re: Re: Re: What?
Why would they have to hold it for 11 days if they would just electonically verify the check in the first place? I can deposit money into my bank via digital image of my check (without even mailing the original in!), so why can’t they electronically request verification from that check’s issuer?
Don't read here too often, do you?
First, Mike didn't say 'change the law'. He suggested banks give warning over what the "cleared check" really means and that spending that money may have risk. If my bank says "oh that money is there" and then later they really check into it, where is my fault for thinking it was OK?
Second, if there is a law or procedure that is being taken advantage of by criminals, why would you not want to adjust it to make it harder to exploit? As long as it doesn't hamper legitimate business or infringe upon rights, what's the problem?
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Re: Re: Re: Re: What?
The problem here is PEOPLE not laws or procedures. I say we outlaw people. Maybe we should institute eugenics for those that get scammed. When you are a dumbass it is not the bank's fault or the banks responsibility. I do not want to be penalized because you are a dumbass.
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Re: Re: Re: Re: Re: What?
And why should it be my fault if my bank says "the funds are there" when they're not?
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Re: Re: Re: Re: Re: Re: What?
Because you KNOW that is the way the system works. Because you KNOW that you are responsible for the funds. Your bank discloses all of this to you - if you don't read the disclosures its not my fault or the bank's fault.
http://en.wikipedia.org/wiki/Expedited_Funds_Availability_Act
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Re: Re: Re: Re: Re: Re: Re: What?
Before this article, I did not know there was a difference between "cleared" and "mostly cleared". So no, I don't "KNOW that is the way the system works."
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Re: Re: Re: Re: Re: Re: Re: Re: What?
And, its not clear to you that a large foreign check might not 'clear' overnight?
So, I should suffer because you are clueless?
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Re: Re: Re: Re: Re: Re: Re: Re: Re: What?
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Re: Re: Re: Re: Re: Re: Re: Re: What?
"What are cleared transactions?
Transactions are given a "Cleared" status when they have been posted to your account. "Cleared", or posted transactions, are not always final because there may be certain circumstances when such transactions may be reversed."
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Re: Re: Re: Re: Re: Re: Re: Re: Re: What?
Next, I searched my website to find the checking account agreement. Couldn't find it there. I know I have a copy at home, but most people don't have that after 10+ years of banking at the same bank.
So our original assertion stands: when your only source of information is the word of an employee at the bank who tells you the money is available, and you act upon that information, why is it the individual's fault when the information given to them is wrong?
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Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: What?
If you deposit a large check into your account, especially a large foreign check, then you should know that it will take some time for that transaction to complete. When you make that deposit you are responsible for those funds, its your problem if that check is bad. If the bank does you a favor and makes the funds available before the check has been processed by the check writers bank then your bank is doing you a favor, they are basically giving you a loan until that check gets funded. You bank does you that favor because they trust you, again banking is built on trust. Just because your bank did you a favor does not mean that you are no longer responsible for the check. Its your account, its your deposit, you think its your money - the bank is just handling the transaction and the accounting - the responsibility is yours and yours alone, the bank bears no burden if the check is bad.
I disagree that the 'information given to them is wrong' as you put it. The information given was not properly understood, misunderstanding and wrong are not the same thing. I suppose if you fall for one of these scams then it would be easy for you to misunderstand how banking works too. Like I said, the problem is with people not with the bank. We need to educate people not change banking. No amount of changes to banking will fix the issues surrounding successful social engineering.
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Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: What?
I'm not arguing the responsibility of the funds... ultimately it is yours. But if the bank says "yes the money is there" when it's not, that's thier mistake, not yours.
The hypothetical conversation Rose posted was pretty straight-forward.
So, if instead, the conversation ended at the teller saying "yes, the money is in your account" with no disclaimer that the money might not really be there, then that's dishonest at worst, sloppy at best.
So when we say that a bank should discuss the in's and out's of the transaction when asked "hey is my money there", to the end results of the customer having a better understanding on how their account works, how is that NOT educational? Should the government be pressured into introducing legislation that would require that kind of discussion? No. Not at all. But if legislation exists that’s keeping banks from taking that action, or preventing banks who want to change their practices to protect their customers from fraudulent checks, why should you or anyone else say “no, the customer is stupid, don’t change anything”?
We've heard from others in this post that there are FDIC regulations which may keep banks from changing their funds availability policy. If the banks want to change their processes and can't, then how is that customer stupidity? Sounds to me like you're so angry at dumb (and I can't blame you) that you're unwilling to look at alternatives.
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Re: Re: Re: What?
I think this hits on a major problem. It should simply not take this long with the technology we have available to us today. Really, it should be near instantaneous. A person submits a check. The teller inputs the info into the system. The system contacts the bank on the check to verify that the funds exist. The contacted bank performs a query and returns an answer. All while the customer is waiting.
If banks were simply required to communicate with other banks and at least use systems from this decade, clearing checks wouldn't be such a problem.
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Re: Re: Re: Re: What?
http://en.wikipedia.org/wiki/Batch_processing
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Re: Re: Re: Re: Re: What?
But what's really needed it simple communication between banks. Obviously they already send the physical checks, so what's so hard about making that data available to be queried electronically first to expedite the process?
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I think we can all see now that most banks will take whatever money they can. If they thought they could just grab money out of your account and get away with it, I'm sure they would do it. The thought would probably horrify the nice teller at your local branch, but they're not the ones making the decisions.
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Re: Re: Re: Re: What?
I cannot believe that you seriously believe that the goal of any bank (or any legitimate business) is to steal from customers.
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Yes, I believe that it is paranoia to believe that many if not most large corporations have little or no qualms about acting illegally for profit.
Corporations are run by people. Do you think that most people have no qualms about acting unethically/illegally for profit?
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I didn't switch, I'm just talking about both.
Yes, I believe that it is paranoia to believe that many if not most large corporations have little or no qualms about acting illegally for profit.
How about unethically? Do you think most big companies would refrain from screwing someone over if the only reason not to do so is because it would be unethical?
Corporations are run by people. Do you think that most people have no qualms about acting unethically/illegally for profit?
I think the type of people who rise to the top of large corporations generally have no qualms about acting unethically for profit. Their reluctance to act illegally IMO stems from fear of legal repurcussions, and not from ethical objections.
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I think the execs at large corporations have qualms about acting unethically, yes. I don't think anyone is looking for ways to rip you off - that is an irrational fear that you seem to have.
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This made me laugh out loud. I wonder if maybe you haven't been paying attention the past couple of years.
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Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: What?
There is a difference between saying, 'How can we extract more money from nasch? Let's just remove some money directly from his checking account!' And saying 'I can increase my bonus this quarter by showing sales on the books that won't really happen until next quarter.' No one is trying to steal from you directly. I get the impression that you are more upset by the way corporations protect their interests by stacking incentives against you, which is not unethical or illegal.
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shrude
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Just so you know
To understand the funds availability read the following Wiki. It explains very well the rules banks must follow.
http://en.wikipedia.org/wiki/Expedited_Funds_Availability_Act
In the end, remember that it is up to each customer to be aware of what they are depositing. Banks try to help with holds to make sure checks are good. If they can't place a hold within the regulations provided, there is nothing they can do to prevent the fraud.
IF your are upset with this, look at your government. They are the ones making the regulations that banks must follow. Most of it works, the remainder is up to customer intelligence. Tellers try to help, but can't refuse a deposit unless it is known to be fraud. Banks have their hands tied.
In this specific case, I do believe that there should have been a hold for the maximum time period allowed to teh bank. If that was followed, the total available right before the expiration of the 10 day hold would have been $5600.00. After the 10th business day had passed, everything was required to be made available, even if the other bank had not confirmed the validity of the check or sent the funds to the bank. If this was followed, then yes, the customer is 100% responsible.
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how do you know?
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Re: how do you know?
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Re: Re: how do you know?
The bank's "clear" is only that it clears the basics. If you read the terms on your banking agreement, you will see that there is plenty of time between "clear" and "confirmed". This is doubly so for checks that come from outside of the country, that can take 30-60 days to truly be 100% certainly confirmed as paid.
The issue isn't anything the bank is doing, it is people who are greedy enough to think that random people around the world are going to email them and offer them millions of dollars to cash a check for them. It isn't a poor banking system, it is stupid people. You can't cure stupid.
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Re: Re: Re: how do you know?
The bank's "clear" is only that it clears the basics.
No mention of 'basics' appear in my banking agreement.
If you read the terms on your banking agreement, you will see that there is plenty of time between "clear" and "confirmed".
No, my banking agreement says that it can take awhile to clear, and specifically uses that term. So when I go to the bank and deposit a check, and then call and ask if the check has cleared, I want to know if done what my banking agreement talks about. When they answer 'Yes, it's cleared.' but it hasn't actually cleared, there's a problem.
The issue isn't anything the bank is doing, it is people who are greedy enough to think that random people around the world are going to email them and offer them millions of dollars to cash a check for them.
This doesn't just affect people falling for idiot scams. This affects businesses and people who accept checks and wisely wait for them to 'clear' before spending the money, only to find out that 'clear' actually means 'That check looked okay to the idiot teller, so we told you it was clear.'.
You can't cure stupid.
No, but you can help mitigate it. See my comment below.
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Re: Re: Re: Re: how do you know?
Ahh, but did you ask if the check CLEARED cleared? Therein lies your mistake!
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Re: Re: Re: how do you know?
Granted, my high school education was a while ago and my BA in Business Management only had 2 classes of Accounting, but I don't remember any part of any educational curriculum that explains the intricacies of banking you're talking about. Your points would be better received if you weren't taking such petty little snipes at people.
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Re: Re: Re: Re: how do you know?
1. I wasn't homeschooled, but I homeschool my three brilliant kiddos, which my stalker loves to mention as he's stalking me around Techdirt.
2. My children are 4, 7, and 9. Banking practices aren't likely to make an entrance in our curriculum any time soon.
3. As Gabriel pointed out, banking practices aren't a standard part of a public or private school education, so it's silly to mention it in reference to homeschooling.
4. Most importantly, I don't have to be current on every subject that I'll eventually teach my children. It's more than enough to brush up on each subject and lesson before the start of the year and unit. In short, I can make a mistake now and still manage to not teach that mistake next month.
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Re: Re: Re: Re: Re: how do you know?
It was very basic, but it was there.
Oh yeah, they also taught english, which allowed us to read contracts if we so desire. Was that optional in your school too?
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Re: Re: Re: Re: Re: Re: how do you know?
Neither my state's standards nor the nationally recognized Common Core Standards include check writing as part of their curriculum, much less as part of a civics course. (Maybe you mean Home Ec.?)
Oh yeah, they also taught english, which allowed us to read contracts if we so desire. Was that optional in your school too?
And despite your best troll efforts, no one's English class includes contract law, although my high school did offer Street Law, which helped us understand contracts, like the part where my account agreement defines the term 'cleared', said definition being ignored by the tellers that are telling people that their checks have 'cleared' when they have not, in fact, cleared.
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Re: Re: Re: Re: Re: Re: how do you know?
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Yeah good luck with that
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Idiots? Not so much.
No one is saying that the banks should hold deposits for five days or a week or thirty days, or whatever. As the post said, we want banks to give people an honest disclosure about their money. Like this:
Teller: "Right now, it looks like the funds are available, and that this check will eventually clear successfully. However, please note that it hasn't actually cleared yet. Would you like me to make those funds available to your account now or when the check actually clears?
Customer: Now.
Teller: Please note that you'll be liable for these funds if the check is not cleared. You may also be assessed a fee for each purchase or withdrawal that occurs.
Customer: Oh... Well, nevermind. Just deposit the money when the check actually clears.
Teller: Alright, no problem. Check back in x days, and we'll let you know if it's actually cleared the issuing bank.
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Re: Idiots? Not so much.
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Re: Idiots? Not so much.
When you deposit a check, the CURRENT balance is updated, but the funds are not AVAILABLE until it is cleared. The AVAILABLE balance is updated when the check clears. Local checks take 3 to 7 days, International takes 30 to 45 days to clear.
If you need the money quickly, you can go to the check cashing places, but they charge a fee, usually 15%. But they absorb the risk if the check doesn't clear. (They'll try to look for you if they can find you)
Tell me why this doesn't work better?
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Re: Re: Idiots? Not so much.
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Clearing
I recall there was a similar case about 2 years ago, where the patsy was someone who got a big cheque for some ebay sale like $2000 for a $500 item, "and send me the excess money". They insisted on asking the bank 3 ways from Sunday "this cheque is good? I definitely have the money?" and the bank personnel said yes. When they tried to renege a few weeks later, they lost the case in court.
I guess it depends on what words you use to assure the client the cheque is OK.
I think a bank stupid enough to cash a cheque for $800,000 written by a random stranger, totally out of pattern from the client's usual banking habits, without fully verifying it was correct, deserves to lose their shirt.
The "trust" that banks work on is based on normal behaviour - GM or McDonalds is not suddenly going to bounce a million-dollar cheque to make $500,000 but Joe Schmoe who just opened an account might. If they have software that can detect that I'm trying to scam their credit card out of $400, why can't the same software detect this sort of fraud?
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Re: Clearing
Because the bank is liable for one, and you are liable for the other.
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You can't please everyone, unfortunately.
And to those posting that banks don't care about this, don't be ridiculous. Banks lose money on these schemes all the time. You aren't getting the money back after grandma loses it to a scammer. She can't pay it because she didn't have it to begin with. That's a loss for the bank.
Banks preach on these types of scams all the time. The problem is people not listening.
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Double Standard?
1) Person A sends Person B some check that will bounce.
2) Person B sends Person A some check that will bounce.
3) Person A gets the money!
4) Person B is on the hook?
I may be a bit off, but how does the scammer withdraw the money before it "clears". It seems to me the bank that allows the scammer to withdraw the money before the second check's funds have completely cleared should also be involved.
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Re: Double Standard?
The only reason that person B is highlighted in the story is because he's the one they could find, person A is gone.
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Xfer
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Make Sure People Know
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Bank errorin your favor - do not collect 40,000
After 30 days I took out the $40K.
After 90 days, the bank called and asked about the extra money.
Not 100% sure how long they do get to "pull back money" - but they did make demands after 90 days.
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The banks are too busy blocking wikileaks to try and block illegal scams.
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What the H does "cleared" mean?
If a bank can back out of a "cleared" transaction then we have nothing.
Maybe the bank should take longer, double check everything, etc. but when funds are cleared it should mean something.
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http://www.youtube.com/watch?v=CS9ptA3Ya9E
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A few points
Having been a bank teller, I can assure you, no matter how good you are, no matter how much you look, you can't catch every one.
The specific laws I believe are in the Community Reinvestment Act along with the Federal Reserve Act. While that money is allowed to be available, you can have a hold placed on it. Then, there's rules on whether the check is from the same state or not! And with all of these holds, you have to remember that approximately 15-20 days after you've started, that money is released.
The problem again comes when, as others have mentioned, the back office can catch up with you.
We won't get into other problems such as fraudulent money, ACH laws, and all other sorts of fraudulent activity.
The point is, no matter how much you warn someone, it may not be enough.
I've had at least one person get mad at ME for my warning to him. He'd received a check for a large amount (over $2K) where the check had been deposited. Then, I tell him how a scam operated. He proceeded to take the money out of his account and Western Union the money in another area.
A few hours later, he comes back because the WU folks told him about the same scam. I do further research into the check and find out that it was a bad one. Yes the money was processed, but the check was going to come back negative. All the while, it's my "fault" because I told him that hey, it takes a little bit of time to check these things and you may want to wait.
I would seriously consider the banking side before faulting them for the effectiveness of this scam.
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Re: A few points
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Re: Re: A few points
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Re: Re: Re: A few points
So again, why can we not have a system that verifies the checks quick enough that a 'hold until verified' isn't so long a time that it slows business down too much?
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Re: Re: Re: Re: A few points
That is actually kiting, which does occur, but nowadays less often. With the other methods of scheming, this isn't all that efficient. Though there ARE some effective methods to preventing this, this is mainly a short term gain that is easier with the scams that abound.
"Please show where the FDIC prevents the introduction of a system that would electronically validate a check?"
Link
First, I'm going to merely discuss the FDIC insured banks since the non FDIC compliant banks are a different system unto themselves.
I would look into these Acts specifically:
Economic Growth and Regulatory Paperwork Reduction Act of 1996
International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001
My main point is that in order to be FDIC insured, you have to play by the rules of the government. Where is the incentive to create the system when you're mainly looking to keep the status quo?
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Re: Re: Re: Re: Re: A few points
Expedited Funds Act
The point remains there's a LOT of regulation and it can make the loopholes pretty damn hard to close.
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Re: Re: Re: Re: Re: A few points
But you do answer my question with the point that the FDIC's bureaucracy inhibits improvements. I didn't think about the "play by our rules to get our protection" angle of this whole thing. You're right.
But I still don't buy that there's no way to put in place a system to verify checks faster than our current way. And if the status quo the banks are trying to protect is the environment where their customers are being taken advantage of by exploitation of the banks' own systems... I refer back to my initial post about 'paranoid diligence'
http://www.techdirt.com/articles/20101226/23370012415/shouldnt-we-fix-check-clearing-loophole-that-s o-many-scammers-abuse.shtml#c788
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Re: Re: Re: Re: Re: Re: A few points
Float
Banks make money from the hold. Not a lot of middle managers understand this. So yes, there's a LOT of areas that need fixing.
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what loophole ?
No bank just clears the cheque as soon it is deposited , there are types of clearance
1st .normal domestic clearance 2/3 days, depending on bank, branch but max 3 days.[is governed by the country banking laws]
2. bank might purchase the cheque on a few conditions, [1] the previous track record of the customer. [2] local manager calls the other bank to verify if the cheque is legit . [3] if you know the branch manager well enough for him to ask for urgent clearance [ happens in very rare cases in small towns, but does happen. this case most likely belongs to the 1 or 3rd category , in no way the bank is responsible for this.
3] urgent clearance or high value clearance , this applies to cheques above a certain amount which have to deposited before a certain time in the morning and is only applicable to local intra city banks , in that case the cheque is send via hand to the issuing branch or bank for immediate clearance , totally safe , rules change from country to country .
there is no loophole to fixed . also you people are debating this from the American banking laws which are very different from the one in question. each country has it's own rules regarding clearances of cheques.
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Bad math?
Regardless, the bank is a service provider. Why should they take the hit for this guy's stupidity and greed?
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current Regs are the issue
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Re: current Regs are the issue
Really? Regulations prohibit banks from giving their customers full disclosure when they deposit checks, and explaining that the terms 'available' and 'cleared' don't actually mean 'available' and 'cleared'?
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Re: Re: current Regs are the issue
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Re: Re: Re: current Regs are the issue
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Re: Re: current Regs are the issue
ALL banks disclose that information by law (I want to say it's the Privacy Act, but I forget parts of the law.)
By the Community Reinvestment Act regulations, it's disclosed and on display in a public area where customers can question these laws. There are also numbers to call to check up on a check to see if it's been cleared and what not.
But think about it like this. The funds are available in 10-15 days. It does not mean that the funds have been cleared through another bank where the account number could have been stolen, closed, etc.
That is the main problem and loophole that can't really be closed unless you call on every last check.
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Re: Re: current Regs are the issue
read Reg CC section on funds availability:
http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=f71a7c1a2eb297503a09ec b82b4a3909&rgn=div8&view=text&node=12:3.0.1.1.10.2.8.3&idno=12
then read the following sections of Reg CC related to timelines and responsabilities for returning checks:
http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=f71a7c1a2eb297503a09ecb82b4a 3909&rgn=div8&view=text&node=12:3.0.1.1.10.3.8.1&idno=12
http://ecfr.gpoaccess.go v/cgi/t/text/text-idx?c=ecfr&sid=f71a7c1a2eb297503a09ecb82b4a3909&rgn=div8&view=text& ;node=12:3.0.1.1.10.3.8.2&idno=12
http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&si d=f71a7c1a2eb297503a09ecb82b4a3909&rgn=div8&view=text&node=12:3.0.1.1.10.3.8.3&idno= 12
Match up the timelines associated with mandated funds availabilty schedule with the timelines provided by the reg for returning items and you see the issue very clearly.
Could a system be built to clear and validate checks faster? Yes - doesnt sound so difficult ....... but if Reg CC doesn't change it wouldnt close the loophole ......
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Re:
Seriously, as one of the countries still holding on to the imperial measurement system, are you terribly surprised we have checks? I have a checkbook for one reason: cutting money to my parents when I owe them because I don't carry cash and I can't electronically pay them (my dad refuses to set up PayPal.)
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simple answer
If the bank where the cheque was ISSUED doesn't support this system, tough, you gotta wait the full 30 days...
Within a short period every single bank would upgrade their systems or be left in the dust.........
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