Who is responsible for a stolen and "washed" check?
December 20, 2005 11:04 AM   Subscribe

Who's responsible when a bank cashes a check that has been stolen and "washed"?

My parents had a check stolen from their mailbox (originally written for $25), which was then "washed," and a new amount was entered ($1000). The thieves took it to the bank where my parents have an account and cashed the check rather than depositing it into an account, i.e. there is no traceable trail to the person who cashed the check (except for a grainy bank video).

My question is this: is the bank responsible for cashing a sketchy check for $1000, or is it my parents' fault for being naive enough to put a check in the mailbox? Has anyone experienced anything similar? Did the bank reimburse you? This took place in the US, btw.
posted by elquien to Law & Government (14 answers total) 1 user marked this as a favorite
How did the bank cash the check without ID? Whenever I've cashed a check I'm always either badgered for an ID or my own account #.
posted by rolypolyman at 11:08 AM on December 20, 2005

How did the bank cash the check without ID? Whenever I've cashed a check I'm always either badgered for an ID or my own account #.

They used a stolen driver's license to cash the check, so that doesn't really help at all.
posted by elquien at 11:12 AM on December 20, 2005

An acquaintance had the same experience. The bank took responsibility and refunded the money to her (in the SF Bay area, in 1999).
posted by agropyron at 11:17 AM on December 20, 2005

Clearly if the bank cashed a stolen check, they're responsible. If they aren't being cooperative, you must go to the police yourself (although it sounds like you already have). I would also contact the postal inspector, since it sounds like the check was stolen from a mailbox, i.e. federal property.

The relevant federal statute is UCC 4-406:

* (c) If a bank sends or makes available a statement of account or items pursuant to subsection (a), the customer must exercise reasonable promptness in examining the statement or the items to determine whether any payment was not authorized because of an alteration of an item or because a purported signature by or on behalf of the customer was not authorized. If, based on the statement or items provided, the customer should reasonably have discovered the unauthorized payment, the customer must promptly notify the bank of the relevant facts.
* (d) If the bank proves that the customer failed, with respect to an item, to comply with the duties imposed on the customer by subsection (c), the customer is precluded from asserting against the bank:
o (1) the customer's unauthorized signature or any alteration on the item, if the bank also proves that it suffered a loss by reason of the failure; and
o (2) the customer's unauthorized signature or alteration by the same wrongdoer on any other item paid in good faith by the bank if the payment was made before the bank received notice from the customer of the unauthorized signature or alteration and after the customer had been afforded a reasonable period of time, not exceeding 30 days, in which to examine the item or statement of account and notify the bank.
* (e) If subsection (d) applies and the customer proves that the bank failed to exercise ordinary care in paying the item and that the failure substantially contributed to loss, the loss is allocated between the customer precluded and the bank asserting the preclusion according to the extent to which the failure of the customer to comply with subsection (c) and the failure of the bank to exercise ordinary care contributed to the loss. If the customer proves that the bank did not pay the item in good faith, the preclusion under subsection (d) does not apply.
* (f) Without regard to care or lack of care of either the customer or the bank, a customer who does not within one year after the statement or items are made available to the customer (subsection (a)) discover and report the customer's unauthorized signature on or any alteration on the item is precluded from asserting against the bank the unauthorized signature or alteration. If there is a preclusion under this subsection, the payor bank may not recover for breach of warranty under Section 4-208 with respect to the unauthorized signature or alteration to which the preclusion applies.

posted by dhartung at 11:23 AM on December 20, 2005

I did some searching on Google and couldn't find anything specific, but it appears that the bank may be responsible for any illegal activity (this also may fall under FDIC protection). I think you need to get a police report filed to make this happen.

This link says "Generally the bank is responsible for losses due to forged and other fraudulent checks, but don’t take a chance. If you do not report a lost, stolen and/or misused check in a timely manner, you may be held responsible."
posted by rolypolyman at 11:28 AM on December 20, 2005

While not directly responding to your questions, I think it's worth noting that a next step is to simply ask the bank to refund the money, either in a face-to-face meeting or by letter. In particular, if they refuse to refund it, request that they put their reasoning IN WRITING. If they say they are "reviewing" the matter, ask them to give you a specific date by which they will respond. And if they aren't reasonable, write a letter to someone up the chain a bit, saying that you couldn't get them to respond and/or give you a date by which they would respond.

Until the bank takes a position, you (or your parents) don't have to prepare elaborate arguments and get into quasi-legal discussions. There is probably a good chance that the bank in fact will refund the money without making a fuss about it, so it seems to make sense to give them a chance.
posted by WestCoaster at 12:05 PM on December 20, 2005

Odds are that your bank has a procedure for reporting a forgery, which is what this is. They will do an investigation about whether or not the check was forged and whether or not they were liable (as in, did the teller do what s/he was supposed to do w/ regard to cashing the check), and will then render a decision. In the case of a forgery where the funds were deposited or cashed from a bank that is NOT the bank upon which it was drawn, whether or not you get your money back sometimes is determined by the other's bank's response to your bank's request. In this case, it sounds like the bank cashed a forged check that was drawn on the bank (it's called "on-us"), in which case they just have to decide whether or not they will be refunding the money. Your parents should go in, speak with the appropriate party, and fill out any forms that the bank uses for this. Then, they will have to wait for the bank to sort it out (I would say no more than a max of 10 business days). I would think that if they are customers in good standing (and who have been there for a long time) the bank will refund the money. That said, they (or anyone else) doesn't need to put checks in the mailbox. Take them to the post office or to a locked letter box, but don't leave checks in your personal, openable by anyone at all, mailbox.
posted by Medieval Maven at 12:17 PM on December 20, 2005

The relevant federal statute is UCC 4-406:

The Uniform Commercial Code isn't federal. Or a statute. It is a uniform act that may be enacted into law by more than one state, and can vary from state to state. If you want to cite this section, you need to look up what it corresponds to in your own state laws.
posted by grouse at 12:23 PM on December 20, 2005

your parents' bank was really irresponsible. every time i've cashed a check at a bank i didn't hold an account with, i had to provide two forms of ID and have my thumbprint taken for their records, even for small checks. it's definitely not your parents' fault. people mail checks for utilities and all kinds of things every day all over the world. the reason banks check ID and keep records is to protect themselves from this sort of thing.
posted by booknerd at 12:34 PM on December 20, 2005

Don't worry, the bank will make good on this for your parents, but do not delay in reporting it.
posted by caddis at 1:53 PM on December 20, 2005

I have to take the dire route of not agreeing with caddis, here. They *should* make good on your parents' check, but the bank is more than likely going to attempt to find a way to act in their own interests.

I had a check for $500.00 that was made out to me stolen from inside my car a few years back (thankfully, nothing else was taken!). The culprit forged my signature and a sign-off to himself, took the check to the bank where he had an account and cashed the check in full view of the bank's security cameras.

The bank reported the "alleged" forgery, the local police were notified, an affadavit filed, a detective was assigned to the case and samples of my real signature were taken.

I don't know where, legally speaking, things fell down -- the detective told me they had the guy on video -- but nothing ever came of all this.

Apparently you have to really convince the bank that a forgery took place. Unless there is a conviction, the stance of most banks will be "no forgery, no compensation" or so I was informed.
posted by kaseijin at 2:39 PM on December 20, 2005

I've always felt dumb for having my checks returned at a $2.00 charge per month. Yet, if I ever find myself the victim of such a crime, I will have in my possession the actual check to demonstrate tampering and the bank's blunder. Would the photo "image" that the bank otherwise offers for free provide any evidence of tampering?
posted by namret at 9:23 PM on December 20, 2005

IAAL. Grouse - the UCC was written as recommended legislation. It was adopted by the National Conference of Commissioners on Uniform State Laws as a Uniform Act. However, a Uniform Act is only a recommendation.

In the case of the UCC, the Uniform Act version has been adopted unchanged by almost all state legislatures and is part of each state's laws. However, the Uniform Act version has a fair number of optional clauses, and some states have made additional changes. Thus you have to check the particular state's UCC to find out whether 4-406 is in the form dhartung quoted.

I agree that elquien should first go to the bank and ask them to make good. As a general rule, the person who dealt with the thief usually has to bear the loss. Any carelesness involves the loss of $25, not $1,000. That's the bank's fault, for accepting a fradulently altered check.

If the bank stonewalls, the second place to go is a consumer ombudsman, with escalations to any local crusading TV news station and then small claims court. Going to a lawyer will certainly cost more than the $1,000 at stake.
posted by KRS at 2:47 PM on December 21, 2005

KRS: uh, isn't that just a repeat of what I said? You are teaching the educated here.
posted by grouse at 9:28 AM on December 22, 2005

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