I recently reordered checks online. I confess I have no loyalty when it comes to check printers. I just look for cheap checks, and as long as the site is secure, I take whatever deal I can find.
As I completed my order, I was offered EZ Shield fraud protection as an optional add-on for $1.95 per box. The service offered to reimburse me within 72 hours – and up to $25,000 – if my checks were misused by a crook.
$1.95 isn’t a lot of money so I would imagine it is a no-brainer for some customers. But being a cheapskate, I wondered whether I should pay for it. And being a financial writer, I decided to investigate.
While I am very familiar with the rules that protect consumers if their credit or debit cards are used fraudulently, I had no idea what happens when the same thing happens with checks. As it turns out, it wasn’t as easy as I thought to track this information down. I didn’t find the usual government fact sheet explaining my rights. So I dug a little deeper.
First, though, some background: EZ Shield promises to “expedite the payment(s) owed to Customer for the Reimbursable Items on terms for which Customer would later be reimbursed by the financial institution on which the subject checks were drawn.” (In other words, they offer to speed up reimbursement on fraudulent checks financial institutions are likely to reimburse customers for anyway.)
EZ Shield features two levels of services: “Assisted,” where an adviser will walk the consumer through the steps to get reimbursed, or ”Fully Managed,” where the customer signs a limited power of attorney and other documentation including a police report and fraud form. Copies of the canceled checks may be required as well. It covers three types of check fraud:
- Forged signatures,
- Forged endorsements, and
- Altered checks
I tracked down Beau J. Hurtig, an attorney with Fredrikson & Byron, P.A. in Minneapolis who has represented banks in instances involving check fraud. He explained that fraudulent checks are covered by the Uniform Commercial Code Articles 3 and 4, and many of the details focus on establishing liability among the financial institutions involved.
“Typically the real fight in these cases is between the depository bank (where the payee deposited the check) and the drawee bank (the bank of the customer who wrote the check),” said Hurtig. Unless a consumer is somehow negligent – gives checks to someone, or doesn’t check their statements within 60 days of receiving them, for example – they are usually off the hook and it’s the banks that are left to fight over who is stuck with the bad check.