Check fraud occurs when someone steals your actual checks or reproduces them and is then able to cash those checks, pulling money right out of your bank account.
How Does Check Fraud Work?
There are many ways to steal checks. Someone can intercept mail to your mortgage company, the IRS or a local vendor and cash it themselves with an account opened in the fraudulent name of whomever or whatever the check is written to. For instance, someone could open an account with the name IRS or Irene Sarah Samuels and say that's her initials or turn the I into an M to create MRS. (insert name here).
Check fraud is a common type of identity theft that can happen in a variety of different ways—including forgery, illegally printing checks, and even thieves using chemicals to alter checks.
How Do You Protect Yourself From Check Fraud?
Because resolving check fraud can be so difficult (compared to credit card fraud), the absolute best solution is to avoid sending checks by mail to prevent them from being stolen.
Identity theft protection services don't work in preventing check fraud, but there are still actions you can take, says Rod Griffin, Experian Director of Public Education. For instance, putting the flag up on your mailbox is a sign there's mail going out and could quite possibly be checks.
Instead, he says to submit payments electronically when possible and online checks that are absolutely necessary. For instance, his lawn care provider only accepts checks. It's a small amount that he sends by mail. Everything else is sent electronically. If you must mail a check, take it to the post office or drop it in a USPS box.
Tip: Don't send checks for more than $100 in the mail because if something happens, you could be out the money for months… or longer.
He also says to invest in a shredder. "Everyone should own one," says Griffin. Thieves do go through garbage and can find your bank and credit card numbers.
What Should You Do if You're the Victim of Check Fraud?
Discovering you're the victim of check fraud can be an overwhelming experience. If you are one of the unlucky victims, there are steps you can take to rectify the situation.
1. Report the Fraud
Your state's law and the bank's terms and conditions will generally determine how long you have to report a stolen check, says Matt Smith, State of Connecticut Department of Banking Director of Government Relations and Consumer Affairs with the State of Connecticut Department of Banking.
This rule applies whether the theft is by mail or if you lost your checkbook. Checks are like mini contracts between you and the person to whom you wrote the check. Thus, it's often handled by the courts. You'll want to file a police report immediately.
Diligence is important and you should check your statements immediately. State guidelines may differ slightly in the amount of time allowed and if courts can make exceptions if you waited more than a statement or two to check your account, but fast action is vital to solving these cases.
If your fraud was mail related, submit a complaint to the postal inspector. In 2016 alone the U.S. Postal Service received 60,000 complaints of mail theft and 2,000 claims were prosecuted.
The Identity Theft Resource Center (ITRC) also has advisers that can walk you through the resolution process. Eva Velasquez, president and CEO of the ITRC explains, "They can assist you with a plan which includes important steps like reporting the crime to the police as soon as it's discovered and obtaining a copy of your police report.
From there you'll be instructed to send copies of your police report to the check verification companies, merchants and financial institutions. It's extremely important to account for every check made out to a particular business in question and continue to review all your new bank statements to spot any additional instances of check fraud."
2. Contact Your Creditors Immediately if You Need a Payment Extension
To avoid serious repercussions, contact your creditors, landlord, or mortgage company immediately if you need an extension on payment. Since the process to recover your funds can unfortunately be a bit lengthy, if you have good credit, you may want to consider a small personal loan before you miss a payment.
Community organizations may be able to help, too. Consider calling your city and county government's main number and asking for a community resources division. You may also want to talk to your place of worship, human resources department at your employer, and/or your local credit union. Veterans and military members should also turn to their local VA office.
Everyone should immediately contact utility providers and other creditors for extensions beyond the one the check was written since everyone extension gives you that much more time to deal with the problem.
3. Follow up and Continue to Keep an Eye on Your Statements
It may take time to close the loop on the entire process. Keep detailed documentation along the way so you have all the information and can follow up with various parties—the court, your bank, the police department, etc.—as needed. Reviewing your bank statements each month will help you catch anything else quickly as well.