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 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 c’mon,” 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.
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.
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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.”
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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”?
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, we 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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