Internet banking offers real convenience. But some Internet banking services have a potential downside. Do you know what a “demand draft” is? If you’ve ever received an electronically-generated check which had “Your depositor has authorized this payment to payee” on it, or “signature not required” in place of the signature, then you’ve received a demand draft, or “remotely created check”. If you’ve ever used Billpayer, CheckFree, or one of the other services which lets you send out checks automatically each month, then you’ve sent a demand draft.
They’re really convenient Internet banking services, aren’t they?
Unfortunately, they also make it really convenient for scammers to pose as you and issue checks against your checking account.
“Oh Aunty,” you’re probably thinking, “that couldn’t happen to me. I am really careful with my bank account information.”
Well, think again. Because if you have ever given anybody a check drawn on your checking account, then you have handed them all that they need to pull off this little scam.
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That’s right. All of the information they need is right there on a single one of your checks.
Here is how it works.
After receiving a check from you, the scammer goes to an Internet check-issuing service, such as [Page no longer available – we have linked to the archive.org version instead].
Once there, they sign up as you, entering your checking account and bank routing information, from your check, and providing an email address of their own. Then they start issuing checks to whomever they want, drawn on your bank account.
Now, wasn’t that simple?
No. Qchex does not check to make sure that the bank account really belongs to the person who is signing up. In fact, they say, right on their site, “Qchex does not endorse, guarantee, verify or investigate transactions undertaken by its Members.”
And no. Qchex does not make sure that the person signing up the bank account is really authorized to use that bank account. In fact, they say, right on their site, “Registering your bank accounts with Qchex ensures no one else can setup or access your account numbers on the Qchex system.”
Hmm…shouldn’t there be other ways to ensure that, like, uh, them confirming the identity of the person who is signing up the account?
Shouldn’t it already be the case that “no one else can set up or access my account numbers on the Qchex system”?
Apparently not.
In fact, Qchex was just in the news because someone used their services to perpetrate exactly this kind of fraud, writing checks for several thousand dollars and nearly draining the bank account of the non-profit organization Urban Age Institute.
And there was nothing that the Urban Age Institute could have done to prevent it, short of not having a checking account at all.
While researching this issue, Aunty spoke to someone at a local credit union and asked them what consumers could do to protect themselves from this sort of online fraud. According to that credit union spokesperson, the very best way to protect yourself is to get back into a good old-fashioned habit which seems to have gone the way of the dodo: balance your checkbook.
That’s right. Once a week or so actually sit down, and reconcile and balance the transactions which take place in your checking account. Because the reason that this sort of fraud can happen, often unnoticed, is because we have all gotten so used to electronic withdrawals coming out of our checking account, what with ATM machines, ATM cards which double as credit card-type payment cards, automatic electronic withdrawals from your creditors, and “e-checks”, that nobody any longer has any idea what is being electronically removed from their checking account at any given time, and so unauthorized transactions are overlooked and undetected.
It’s time to change that.
So what are you going to do to make sure that you aren’t victimized by someone with your check and an email address?
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once you give your check to anyone, they have your account # and routing #, which is all they need to do a Ton of things, they can ach withdraw out of your account all day long, as long as they have your name and address. on top of that, your not going to be able to avoid the electronic duplication process of the signature (because thats what we are really talking about here), its been going on for some time with check 21. if you really want protection, you may want to set it up directly with the bank, you can set filters for what they will/cant accept, banks are normally willing to work with you on that
check 21 system
It’s completely safe. The big corporate propagandists would have you think otherwise since online check payments is an affordable alternative to HIGH PRICED credit card payment gateway. Paypal, Mastercard, Visa, and the thousands of banks that are contracted with them make BILLIONS of dollars on credit and debit card transaction fees.
The fees related to pay-by-check are zero for most transactions.
If someone is daring enough to illegally cash your check without your authorization they will most certainly leave a paper trail because they must FIRST own a checking account in order to deposit your check.
The propaganda lies that big corporations and their puppets put out about online pay-by-check is jut that – LIES. It’s a part of their global world conspiracy to dominate the world.
This is yet another example of the consumer being sacrificed on the altar of corporate profits. The security provided by requiring paper checks with verifiable (but rarely verified!) signatures was not great, but security has now gone to zero as Big Business cuts their costs by increasing ours.
The only way is actually tto arrange with your bank that no ouutgoing electronic transfer payments are to be made from your checking or savings account, except via your debit card. But good luck with that.
Why do I say “good luck”? Well, when I opened my checking account, I was offered “overdraft protection”. I told the manager I did not want it, I’d rather pay the ten bucks for bouncing a check and deal with whoever I had written the check to.
Then I wrote a check for $0.09 more than was in my account. Oh-oh.
The bank, instead of bouncing it (and charging me the $10), paid it. With a $25 charge for overdraft. And, since I did not know about it until the next statement went out (no, they did not send me snail-mail, let alone EMail), also charged $5/day (after the first 5 days, apparently covered by the first $25).
Total I had to pay? $40. And yes, I complained. And was told they do it as a “service” – and no, there was no way to opt out. I asked if they’d cover a check for $2 million – of course not (there went my plan to live in Bazil). So how much would they cover, exactly? Policy does not specify – seems to be up to whatever person is on duty.
Do other banks do the same thing? Yep. Ask the manager at YOUR bank.
Auntie, Qchex is the tip of the iceberg. I’m glad to see you pointing out an aspect of what has seemed to me a glaring problem. Basically, anyone who knows your routing number and account number can exploit your checking account without constraint. So far as I can tell, the only safeguard is to monitor your checking account DAILY. So far, I’ve not been victimized, but as far as I can see that is fortuitous, not anything associated with technology/reasonable procedures. Charlie