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.
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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, 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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How would you like to see “Anne P. Mitchell” on a website immediately followed by the words “Fraud OR Lien OR Judgment OR Suit OR Convict OR Investigate OR Investigation OR Alleged OR File OR Bankruptcy OR Crime OR Scheme OR Inquiry OR Enquiry OR Settlement OR Discipline OR Disciplinary OR Plea OR Barr OR Terrorist OR Defrauded.” That’s what I may do if you don’t remove “Glenn Welt” from that paragraph by 5PM PST on May 10, 2012. I say “may” because I’m considering filing a defamation suit against you.
After receiving a check from you, the scammer goes to an Internet check-issuing service, such as Qchex.
yea, i had the Exact same thing happen to me, although they went through http://www.webmasterchecks.com
grrrr
I have a little used account that got hit twice between back statements. Under “Description” of the payee is “CHECKFREE SERVIC DIRECT DEB RMR” Yes, the spelling of SERVIC was without the final E. On bank statement next to the first withdrawal is also the name “Training Club (The)”. The only Training Club I can find on the internet is in SanDiago and I live a couple of states away. I called anyway and the SanDiego club does not have me listed as a member. I googled CHECKFREE SERVIC but came up empty. Anybody know anything about CHECKFREE SERVIC or The Training Club? Dry Dave
Commentors must live in a foreign country. In the USA bank drafts drawn on business and personal checking accounts CAN be disputed up to 60 days. If any readers doublt me and want to make a bet, bring your money to Vegas and i’ll show you a few. The CFR that applies to credit card disputes also applies to checks and drafts.
Regarding scams… If anyone contacts you by email, phone or US Mail saying they will share a large sum of $$$ with you if you help them get money out of their country RUN THE OTHER WAY!!! They’ll ask you for your bank info so they can “supposedly” wire the money into your account. Instead they create a bank draft and drain your account. This scam has been going on for over 20 years and according “60 Minutes” it still costs Americans HUNDREDS OF MILLIONS OF DOLLARS A YEAR. From my experience, most of the emails and lettters originate from Nigeria which is why this scam has also been nicknamed “The Nigerian Letter.”
On the flip side, many legitimate attorneys, banks, credit unions, businesses and even law enforcement agencies do process thousands of bank drafts a day. I know because for over 12 years, I’ve provided them with the software, paper and special MICR toner cartridges.
Glenn Welt, Owner and Publisher of ChecksNet Software
Red flags should be wildly flying if Qchex and/or Nigeria or Indonesia are involved…..
Gosh, heaven forbid anyone go to http://www.nacha.org (National Automated Clearing House Association) or to their bank and actually *read* these regulations. Urban legends are better. X__X
If you have a business checking account, follow the advice you were given WHEN YOU OPENED THE ACCOUNT. Just check your account daily, because NACHA gives only one day to dispute fraudulent transactions. A court of law, of course, has greater power. Follow the advice you were given, though, and you can avoid seeking a judge’s help reversing a transaction.
If you have a personal checking account, check your account *monthly* for unauthorized charges. As long as you catch them within 60 days they can be disputed.
In either case, your money doesn’t just vanish when an unauthorized transaction is processed. Every movement of money within the banking system leaves an audit trail. Hollywood != real life.
(Or, to summarize, call your bank and speak to an actual banker if you’re concerned. That’s what we’re here for.)
Disclaimer, in case anyone figures out who I am: I am a bank employee but this is not banking advice. Situations vary, so contact your own banker for situation-specific advice.
Hmmm… Finally – a good reason to just get rid of checks completely!
Neither the author of this editorial nor any prior commentors have provided the REAL FACTS about bank drafts. As the publisher of ChecksNet Software which is used by banks & credit unions, criminals are constantly trying to purchase my software and/or use it to steal from businesses and individuals. Thus, years ago, I had to learn the laws and develop techniques to protect all of us. First, federal law says you have 60 days or 2 statement cycles to dispute a draft that you did not authorize. Most banks will require you to sign a sworn affadavit within that time frame. Then BY LAW, that bank MUST refund your money and send the document back through the banking system as unpaid. Second, unlike my competitors such as Qchex, ChecksNet Software includes a Banks Database and other tools for the sole purpose of verifying Accountholder information BEFORE a bank draft is deposited so that we know if it’s a legit transaction or a case of stolen ID. We use our own database to verify EVERY new order before we deliver anything that allows purchasers to create even 1 bank draft. Third, as one Chicago detective told me by phone one day, “criminals really aren’t that smart or they’d find honest ways to make a living.” Thus, criminals continue to try and purchase ChecksNet Software using stolen or bogus bank info. As my staff & I catch them, we inform victims, their banks, law enforcement and we post suspect information on the checksnet.com website so law enforcement agencies can cross-reference cases and arrest criminals. Fourth (and this one may surprise you) giving someone permission to draft your account is SAFER than mailing them a check because, checks are frequently stolen from US mailboxes AND anyone with your check also has a copy of your signature. Therefore, with the aforementioned 60 day rule and lack of your signature, doing a check by phone/fax/email or website to pay a bill or make a purchase really is the safer choice. – Glenn Welt, Owner/Publisher of ChecksNet Software
Does saying “Qchex.com does not endorse, guarantee, verify or investigate transactions undertaken by users of Qchex.com” really shield them from liability if someone uses their service to fraudulently write a check?
Should I preemptively sign up just to protect my own accounts?
How many other “services” are there like Qchex?
This is insane…
You’ve got about 24 hours to reverse demand draft checks if you knew beforehand they were submitted for payment from your account, otherwise it’s a lawyer and a criminal case if you can get the evidence together. The paying bank (your bank account) has only 24 hours after receiving the check to determine if it’s fraudulent. If nothing raises flags, you have lost the money. Given the high state of automation today, nothing will raise an exception. See MSNBC “Easy check fraud technique draws scrutiny”.
73% of demand draft checks audited at one bank were fraudulent.
Qchex does not in any way verify that the person opening an account has any rights to the routing and account numbers used. Treat ALL CHECKS from this company as suspect.
If a criminal has set up an account using your bank routing number and account number, verbatim “Qchex also protects you from unauthorized use of your bank accounts by locking out ALL your bank account numbers from use by any other Qchex user without your explicit approval.”
Any recourse, verbatim “Qchex.com does not endorse, guarantee, verify or investigate transactions undertaken by users of Qchex.com.”
And how does Qchex guarantee security from fraud? Once again, verbatim “Registering your bank accounts with Qchex ensures no one else can setup or access your account numbers on the Qchex system,”
This is only one of many such avenues for demand draft check fraud, but I’m trying to find where this particular site might have a fraud hotline to report misuse of account information.
It needs to be up front and personal.
Crazy.
So, essentially, we should monitor everything that goes out of our checking account via the printed and online statements?
So what exactly happens if such fraud occurs? Will a bank consider us “innocent until proven guilty”, or vice versa?
This sounds like a total mess.