The Danger of Draft Checks
There are some of you out there who are diligent about maintaining a budget, shredding important but dated documents, keeping your check register up-to-date, and checking each transaction on your monthly bank statements. The rest of us, however, tend to write checks assuming there’s enough funds in our account, and when the monthly bank statement comes in the mail we file it away neatly in your file cabinet or throw it away without much more thought.
My friend is stingy to the point of annoying. His credit score is very good and he always seems to have plenty of savings in his accounts. But there was one critical flaw in his financial system: he didn’t own a paper shredder. The man isn’t willing to split an appetizer with you at dinner, but he didn’t mind throwing whole voided checks into the trash?go figure.
A couple months back he received a letter from a company by the name of Qchex, telling him that they had authorized a payment from his checking account for $480. Considering this was a complete surprise, he immediately went down to his bank looking for answers. The bank had one, but not the one he was looking for. They showed him a “draft check“, also known as a “demand draft”, that contained his account number and the words “Signature Not Necessary” stamped on the bottom where the account holder’s signature usually goes. As he put it, “it might as well been a big red ‘PLEASE RIP ME OFF’ stamp”.
After some research we learned that 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 or draft check. All a scammer needs to use the money in your account is your account number and a bank routing number, that sound you hear is the laughter of scammers and identity theirs laughing in the distance.
Looks like all those un-shredded voided checks came back to haunt him after all. It took him weeks to call the company who had issued the payment, file an affidavit of fraud and get his money back. In the meantime he was so overwhelmed by the entire situation that he missed a credit card payment: just like that he was slammed with a $39 late payment fee and an interest rate hike. Even after calling his credit card company and explaining the situation, he was only able to negotiate half of the payment back and the interest rate stuck.
For his birthday I bought him a paper shredder, something tells me it will get good use.
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Two Comments
September 14, 2008
June 11, 2008
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