The old checkbook is becoming a bit of a historical artifact, as far as financial products go. They’re still a favorite tool for fraudsters, and as one woman found out the hard way, they don’t have the same consumer protections as credit cards and debit cards.
NBC Los Angeles reported the story: Someone got into Maili McHenry’s unlocked car a few months ago and stole her checkbook from her locked glove compartment, so when she noticed a $500 check clear her account days later, she called her bank.
“I called my bank right away and they told me, ‘Oh, this isn’t going to be a problem. It’s clearly not your signature,'” McHenry told NBC.
Later, the bank denied her fraud claim, saying her negligence led to the theft. After reporters at NBC asked the bank to review the claim again, McHenry got her money back.
This story has a happy ending for the consumer, but it’s also a cautionary tale: Banks can deny check fraud claims because of negligence. Banks would have to prove negligence on a case-by-case basis, said Nessa Feddis, senior vice president and deputy chief counsel for Consumer Protection and Payments Center for Regulatory Compliance Government Relations Regulatory & Trust Affairs at the American Bankers Association.
“Usually banks will not impose liability unless there really was some significant negligence or if it had been occurring over a long period of time,” Feddis said. She gave an example: If your roommate takes your checkbook and repeatedly writes fraudulent checks, but you don’t report it for few months, you may be considered negligent.
Typically, banks will pay for fraudulent checks, but Feddis said consumers shouldn’t count on it. She said it’s important to guard your checkbooks and immediately report it if checks are missing.
This is a little bit different than how credit card and debit card fraud protections work, because these products are regulated by different laws. Some card networks and issuers have zero-liability policies, but there’s a chance you could be liable for fraud. If your credit card is stolen, you’re liable for only up to $50 if the physical card is used and $0 for phone or Internet charges (where the card is not present). Debit card fraud, on the other hand, must be reported within two business days to keep the fraud liability to $50. After that, it goes up to $500, and you could be liable for all fraudulent purchases if the spree goes on unreported for long enough.
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