JUNE 17, 2013 VOLUME 20 NUMBER 23
Last week a colleague told us a story that we think needs to be shared. Patricia Sitchler, a nationally-known San Antonio lawyer with the prominent Texas firm Schoenbaum, Curphy & Scanlan, P.C., described her client’s eye-opening experience with a fraudulent attempt to access her bank account. We asked Patty if we could share her client’s story. Patty wrote:
This is how I spent last Thursday. I thought it might be helpful information.
I spent most of last Thursday helping an elderly client who was scammed. Fortunately, “Doris” discovered the scam and we were able to avert disaster. Take a minute to see just how easy we have made it for the crooks.
The driver helped Doris put her packages in the car. Doris was still living independently, buying her own groceries and curtains and copy paper, writing her own checks, balancing her own checkbook. After putting the goods away in her apartment, it wouldn’t take long to balance the checkbook. She only wrote about 10 checks a month-the utility company, the phone bill, her rent and the few checks she wrote shopping at various stores close by. She was so lucky. She and her beloved deceased husband had planned well and she was comfortable knowing that although she wasn’t wealthy, she probably had enough to live out her life.
But in only a few minutes, Doris would find out just how vulnerable technology has made her. Balancing her checkbook she noticed that there were 13 cancelled checks, more than she realized she wrote. Looking more closely, Doris saw a new name: Josiah Klinger had signed three of her checks (fictitious name, of course). The bank must have made a mistake and applied his checks to her account. Then she looked even closer with the magnifying glass–the account number at the bottom of each check signed by Klinger was identical to her bank account even though his name and address were on the check. What was going on? As realization hit, Doris knew somehow her name had been eliminated from the check and John Klinger’s name was printed on her checks with her bank number, debiting her precious funds.
How could this be? Enter the world of technology. The bank fraud investigator assured Doris that because she reported the theft of over $1,500 so quickly, the bank could stop the fraudulent withdrawals and would replace the funds in her account. But, he pointed out, such fraud was as simple as buying $20 software for your computer and printing your own checks in your own name but inserting someone else’s account information in a magnetic strip at the bottom of the check. “But I have all of my checks,” Doris stressed. “No one has stolen my checks.” “They don’t have to,” the investigator told her. “All a crook needs is the bank identifier and account information at the bottom of your check-information that can be copied anytime you hand over your check to a stranger in payment for goods or services.”
Check out a compilation of ads from a business supply store and the internet: “Good check writing software should include several check design templates with options to customize the templates by changing font styles and colors and adding logos and graphics. Financial institutions require checks to include a magnetic ink character recognition (MICR) line, so software that includes a MICR font will save you money on check stock with pre-printed MICR lines. In addition, the MICR line must be printed with magnetic toner or your checks will be rejected. For example, MySoftware Checksoft Personal Pack costs just $19.99. Just a few of the features of this check printing software includes 900 personal checks, allows the user to print sequential check numbers, include the bank’s address and logo, and print the bank code line.”
So the next time you write a check and hand it over to a stranger, is your account safe? Do you balance your checkbook the same day you get your bank statement in the mail like Doris? Do you get photocopies of your checks with your bank statement? You may have just 30 days from the date of the bank statement to report theft in order to possibly recoup the funds.
Taken from FAQs on the Texas Banking website:
“What are my rights and responsibilities when a check has been forged on my account?”
Answer: Ultimately, the forging party is liable for items forged by them. However, banks do have a responsibility under Section 4.401 of the Business and Commerce Code to pay only authorized items from a customer’s account, and a forged check is not an authorized item. Most banks employ automated check processing techniques which do not verify the signature on each check to the signature on the deposit account. Under Section 4.406, the customer has a duty to discover and report unauthorized signatures or alterations with reasonable promptness. Typically, the depository contract will limit the discovery period to 30 days. Once reported, the bank generally must credit the item back to the account unless it can prove that the customer failed to comply with his or her discovery and reporting duties as imposed by the law. However, once a customer has notified a bank of a forgery incident, and has had at least 30 days to examine previous statements, he or she may not recover a loss on items previously forged by the same party and paid by the bank before it was notified. A customer can also be precluded from asserting against the bank if the customer was negligent in protecting his or her checks (Section 3.406).”
It could have been disastrous for Doris. Although only 6 checks showed up on her bank statement the check numbers that showed up on her statement indicated that at least 23 checks were written but only 6 had cleared when the bank statement was issued and she caught the fraud Technology can be so convenience but beware.
Postscript: Under Texas law the Bank must refund the money to Doris so long as she properly reports it to the bank. Based on my contact with Plano, Texas, attorney Keith E. Davis, however, the biggest vulnerability I see for people is use of a DEBIT card. Debit cards do not carry the protections of a credit card (limit on liability for theft if properly reported) or bank account. Once the scammer figures out how to access your debit card, your bank account can be in real jeopardy and you can only hope that your bank will be nice and help you try to recover.
Patricia F. Sitchler, CELA
Schoenbaum, Curphy & Scanlan, P.C.
112 E. Pecan St., Suite 3000
San Antonio, Texas 78205
Thank you, Patty. Word to the wise.