Shouldn't We Fix The Check Clearing Loophole That So Many Scammers Abuse?

from the simple-questions dept

Slashdot points us to a recent story about a guy who lost his lawsuit against a bank, over a variation on a classic Nigerian email scam. The scam is one we've discussed many times in the past: somehow the victim gets a big check, which they're expected to deposit in a bank. After the check "clears," the victim/recipient is supposed to transfer a large chunk of that money to the scammer, on the belief that they get to keep whatever is left over. What really happens is a few days after the check "clears," the bank finds out it's fraudulent, and tries to void the transaction. But, by then, the victim has already transferred out a big chunk of money (and the scammer has already taken all that cash out of the bank and disappeared) -- leaving the victim footing the bill, with the bank expecting them to come up with the missing cash. In this case, the scam took on all the familiar facets of this scam:
In March 2009, Brian Peters received an email from someone purporting to be a citizen of Malaysia. The e-mail informed Peters that certain third parties in the United States and Canada owed the purported Malaysian money, but that "they can not transfer the funds to any bank account outside America continent due to their new company policy [sic]." He asked Peters to "assist me in receiving the funds and forward to me." He offered to pay Peters 12 percent of the money. Peters agreed after apparently negotiating an increase of his fee to 15 percent.

Peters deposited the $808,988.90 in checks received from the purported Malaysian at Chino Commercial Bank. After the bank notified Peters that the checks had cleared, Peters wire transferred $468,000 to Hong Kong. Shortly thereafter, the checks were dishonored after the bank detected that they had been altered. Since Peters was personally liable for any overdrafts on the account, which had only a few thousand dollars, the bank sought to attach property owned by Peters to collect on the overdraft. The trial court granted the bankís motion to attach against Peters in the amount of $458,782.60.
This certainly isn't the first such lawsuit. We wrote about a similar case two years ago, which involved some scammers tricking a law firm (who really should have known better). The reason this scam works over and over and over again is pretty simple: most people have no idea that when a check "clears," it's not actually been validated. This is apparently due to various laws that require banks to make money from checks available within a very short period of time. So the way banks deal with this is to just make the money available, and if they later find out that the check was fraudulent, they pull back the money. But, of course, most people don't know this and assume (somewhat reasonably) that if a check "clears" and the money is listed as "available," the bank has made sure the check is legitimate. This is a somewhat unintended consequence of laws to make paying by check work better, but it leads to a huge opening for these types of scams.

So if they need to do that, shouldn't it make sense for banks to at least put forth pretty clear warnings on money that has not really been validated yet? Or to at least proactively warn anyone seeking to withdraw money that hasn't really been validated that if the check fails to validate, they may be liable? It seems like there must be better ways to deal with this kind of scam than to just let the scammers keep taking advantage of this knowledge gap.


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    TPBer (profile), Dec 28th, 2010 @ 4:41am

    This is not new

    It's been like this forever. I can see a person that has never been in biz for themselves might not realize this, but not a legit biz that's been around a while. The only one to blame is this moron in the mirror.

     

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    Richard (profile), Dec 28th, 2010 @ 4:57am

    Re: This is not new

    It's been like this forever. I can see a person that has never been in biz for themselves might not realize this,

    Right - and the vast majority of these victims will be ordinary people who really can't be expected to know better (that's why they were targeted by the scammers).

    The only one to blame is this moron in the mirror.

    I wonder if you'll still say this when your granny is the victim?

     

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    Rose M. Welch (profile), Dec 28th, 2010 @ 5:14am

    Yes, it's old. That's the point.

    These type of scams stick around because they work. People get hit with this all the time. They shouldn't, because banks have an obligation to both protect your money and help you with your financial transactions. They're supposed to be the good kind of middleman, and they need to fix this loophole.

     

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    TPBer (profile), Dec 28th, 2010 @ 5:15am

    Re: Re: This is not new

    The law firm is who I was referring to, go back to your room, or can you not infer this from the biz comment. I know most know nothing about this, did you :)

     

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    AJ, Dec 28th, 2010 @ 5:31am

    Banks are bad guys either way...

    If they hold the money in reserve until the check is verified, then the customer will be pissed. If they don't, and the check turns out to be a fraud, the customer will be pissed that they didn't hold the check.

    They may be able to limit the damage by holding checks over a certain amount before they clear, but I can't think of what else they could do. It does need to be fixed....

     

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    ATJazz (profile), Dec 28th, 2010 @ 5:32am

    Re: Yes, it's old. That's the point.

    IF banks were actually losing money because of this scam, believe me, they WOULD fixit. Clearly, they are not. The have no interest in fixing what, to them, isn't broke.

     

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    Seis Pendejos, Dec 28th, 2010 @ 5:57am

    Re: Yes, it's old. That's the point.

    Dig out your signature card and read the disclosures on the back. Mine say "In receiving items for deposit or collection, we act only as your collecting agent and assume no responsibility beyond the exercise of ordinary care. We are not responsible for default or negligence of our duly selected correspondents, nor for losses in transit, and each correspondent is not liable except for its own negligence Any items accepted for deposit (including items drawn "on us") will be given provisional credit only until collection is final and in U.S. Dollars".

    Banks are in a difficult position of trying to handle customer's money while knowing little, if any, information about the details of the funds being deposited. In this case, the bank acted in good faith that the customer deposited a legitmate check by releasing those funds to the customer. There is a certain responsibility on the person making the deposit to know that the items being deposited are legitimate. It's no different than if you deposit a check from your deadbeat brother in law that bounces except that processing of international items can take longer.

    Banks do not want to take these type of deposits because they have all seen or heard of this kind of thing before. In this case the bank that deposited the check is currently taking a gigantic $450,000 loss for what is likely a very small bank plus the costs of dealing with the bad check.

    Should the bank have questioned and probably refused the deposit? Without knowing all the facts, probably yes though bank tellers should get training about checks like this, but smaller banks get less training than larger ones, plus tellers frequently are younger people without a college education. We do not even know if there was human interaction for the deposit or if it was deposited at an ATM.

    For every check like this that is deposited, there are literally hundreds of thousands which are held and angering the customer who cannot access the funds immediately.

    Ultimately, like putting food into your mouth, there is an expectation that the bank customer should know what is good and what is bad to deposit.

     

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    sivad, Dec 28th, 2010 @ 6:00am

    This isn't something that needs to be "fixed". What needs to be fixed is the mindset of idiots that would fall for this. I mean really, You get an e-mail out of the blue saying that you can make a buttload of cash for doing nothing more than going to the bank?

    And because of these people stupidty, the way banks do buisness has to change?

    Sorry if you're this stupid, you deserve to be robbed.

     

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    Chronno S. Trigger (profile), Dec 28th, 2010 @ 6:19am

    Easy fix

    This is the digital age. I can withdraw money from a First Niagara MAC machine and instantly my Citizens Bank account has the withdraw. Why the hell can't these banks talk to each other and solve this crap instantly?

     

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    Anonymous Coward, Dec 28th, 2010 @ 6:30am

    The scam has little to do with the way the banks work, and everything to do with personal greed. In every case, it is some dipwad thinking he can get mega millions for nothing.

    They earned it.

    Fixing the "loophole" would require that every check people deposit take anywhere from 10-30 days to clear. It actually requires that the check get forwarded to the original bank, which verifies the check, including the signature, funds, and the like. For larger amounts, the bank might even contact their customer and assure that it is in fact a valid check.

    However, if this system was adopted, you could pretty much kiss the check cashing industry goodbye (you know, the corner "insta-check" types of places) because those businesses would end up having to float the 10-30 days of money while they wait for checks to get processed. They would have no simple way of getting paid rapidly. That cost would have to be turned on the consumer, which would likely break the model.

    It would also slow business. Can you imagine the effects on business if every payment took up to 30 extra days to receive?

    The 419 scams are nothing more than social engineering. You cannot fix that loophole, there are always stupid people willing to be separated from their money.

     

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    senshikaze (profile), Dec 28th, 2010 @ 6:32am

    Re:

    I hate doing this, but I have to agree with sivad.
    If it is too good to be true, it probably is.

     

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    Berenerd (profile), Dec 28th, 2010 @ 6:43am

    Re: Banks are bad guys either way...

    It is simple terminology. They simply should not say the check is cleared until it is. They can make money available but they shouldn't say the check is clear until its completely verified.

     

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    Michael Kohne, Dec 28th, 2010 @ 6:45am

    Greedy people...

    One the one hand, while there is something to be said for letting greedy people get what they deserve (and if you fall for the overpayment scam, you're a greedy fool of the highest order), it's quite clear that the current situation is wasting lots of money and lots of police time and effort (if nothing else, they have to take the reports).

    The wide-scale nature of the problem is the result of current check clearing practices, and that if we clean that up, we can reduce the scam volume by a large factor. And the only things we have to do are:

    Allow the banks to hold the funds until the check clears.
    Force the banks to clear checks in a reasonable time frame.

    If you haven't got the money until the bank gets the money, then you'll be less likely to send the 'excess' to the scammer immediately (there will still be someone, of course). And the reason we don't presently do that is that banks can take weeks to clear a check. With modern technology there's really no reason that they shouldn't be able to get a 'it's good' vs. 'it's a forgery' in a much shorter time period.

    While quicker clearing will have other side effects (I imagine it will be easier to pull some other scam), it should reduce this particular scam without too much collateral damage.

    I also believe that anything which forces people to pay more attention to their money is a good thing, and having checks take time to clear helps that.

     

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    Jericho (profile), Dec 28th, 2010 @ 6:53am

    So the way banks deal with this is to just make the money available, and if they later find out that the check was fraudulent, they pull back the money...

    Genius.

     

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    crade (profile), Dec 28th, 2010 @ 6:55am

    Re:

    That is certainly what the criminals like to think anyway.

     

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    Christopher (profile), Dec 28th, 2010 @ 6:59am

    Overwhelmingly missing the point.

    Most respondents are letting the Nigerian scam aspect blind them to the failing of the banks. I could excuse this, except for the calls to Natural Selection in bankrupting greedy people. A) you aren't bankrupting the *right* greedy people here and 2) being mean is weak amplifier for your thinking.

    Take a more legal and probable example from daily life. I have an account in a credit union, and an account in a Big Bank with many many ATMs and branches. I like the credit union but I need ATM access on the go; thus, two banks. And oh by the way, the Big Bank doesn't have the bulk of my funds.

    Recently, I wanted to buy a car. Car buying stories aside, we settled on a cashier's check for the balance. Now, acquiring a cashier's check from the credit union involves traveling out of my way to the one late-night branch at a certain day of the week. Inconvenient. So, I wrote myself a check from the credit union to the Big Bank. And Big Bank has branches all over Manhattan, so this would be easy.

    Except I *knew* "clearing" wasn't really clearing until 1) both banks showed the funds debited and credited and b) Big Bank authorized my cashier's check. And they wanted two forms of ID, a manager, signatures, and a picture of my face. Which is good.

    But what if I didn't know about the clearing delay? I'd be thinking Big Bank has my check and deposited the funds right away. Heck, they even have BIG STICKERS on the ATMs saying funds deposited today before 6PM are available tomorrow.

    Oh, that 4-pt asterisk means something? Tied to the 4-pt text I can barely find on another part of the ATM? This is proper and fair disclosure? No. What taught me was the experience of getting burned once, a long time ago. That shouldn't be necessary. Banks should just say, "Based on this check, you'll get the funds in three days." Or four, or a week. Setting consistent service levels is never a bad thing, ever. Allowing customers to assume risks without fair warning is not.

    Then again, most businesses rely on exactly that. Statistically, it's worth it to them to allow funds to be available because liability is not theirs, and most people don't have the legal help in their back pocket to make it bother a business.

    -C

     

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    Anonymous Coward, Dec 28th, 2010 @ 7:05am

    The true loophole here is how is it possible to wire such a large amount of money to another financial institution and not have that transaction be reversible? Or traceable! How is it remotely possible to receive that much money anonymously when using wire services? Also wouldn't most banks 'blacklist' other banks that accept these types of transactions, given it is harmful to all customers?

     

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    Anonymous Coward, Dec 28th, 2010 @ 7:07am

    Seems that this loophole is equally exploitable by the "patsy" in this case

     

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    Anonymous Coward, Dec 28th, 2010 @ 7:11am

    Under federal regulations, a customer has the right to return almost any fraudulant check or ACH item up to 60 DAYS after they receive the statement on which the charge appears. This protects the customer who told a company to stop taking out monthly payments, or who's kid got a hold of their checkbook. So in theory ANY CHECK you deposit could be returned against your account over 2 months after you have deposited it. This is not a 'loophole' - it was deliberately designed by the government to protect consumers from fraudulant withdrawls. Should we hold all your deposits over 2 months to make sure a check has 'cleared'? At some point, you have to accept personal responsibility for your financial transactions.

     

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    Anonymous Coward, Dec 28th, 2010 @ 7:12am

    What?

    Some people are dumb so banks should stop trusting anyone?

    Banking is built on trust, you cannot just take trust out of the picture. People that are getting scammed should not be setting the bar for the rest of us who saw that coming.

     

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    Anonymous Coward, Dec 28th, 2010 @ 7:20am

    Re:

    The loophole is simple: The scammers are using the difference between how a check is processed and how a wire is processed. Wires are immediate and final. The money is gone, and it ends there. Just like a punch, you cannot take it back.

    The check on the other hand is treated in a different manner. it is effectively a promise to pay, and the receiving bank must take steps with the issuing bank in order to get paid. The check typically goes through a clearing house operation.

    All that the scammers are doing is using people's greed, and differences between two payment systems to make money.

    The problem isn't the banking system. The problem is greed.

     

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    Anonymous Coward, Dec 28th, 2010 @ 7:21am

    shrude

    He's quite the negotiator, he got them to give him 15% of the money not 12%. The man's a thinker.;)

     

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    Anonymous Coward, Dec 28th, 2010 @ 7:22am

    Re: What?

    banking built upon trust?
    You have been absorbing too many megabank commercials.
    Other than small time credit unions, most of the US banking industry has, at least for some time now, been all about bottom-line and profit. Nothing else. If the sub-prime loan & derivative market crisis did not illustrate this for you, I'm not sure anything would.

    I totally agree that our laws should not be based on the "bottom 10%" - it reminds me of the "Here's your sign" jokes.

     

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    digidestined2000, Dec 28th, 2010 @ 7:49am

    Just so you know

    Thanks Seis Pendejos for pointing that out. For those of you that don't have the sig card, ask your bank branch for the account opening disclosures. Specifically, ask for the funds availability disclosure. This is a federally mandated item that all banks must provide to their customers at account opening or upon request.

    To understand the funds availability read the following Wiki. It explains very well the rules banks must follow.
    http://en.wikipedia.org/wiki/Expedited_Funds_Availability_Act

    In the end, remember that it is up to each customer to be aware of what they are depositing. Banks try to help with holds to make sure checks are good. If they can't place a hold within the regulations provided, there is nothing they can do to prevent the fraud.

    IF your are upset with this, look at your government. They are the ones making the regulations that banks must follow. Most of it works, the remainder is up to customer intelligence. Tellers try to help, but can't refuse a deposit unless it is known to be fraud. Banks have their hands tied.

    In this specific case, I do believe that there should have been a hold for the maximum time period allowed to teh bank. If that was followed, the total available right before the expiration of the 10 day hold would have been $5600.00. After the 10th business day had passed, everything was required to be made available, even if the other bank had not confirmed the validity of the check or sent the funds to the bank. If this was followed, then yes, the customer is 100% responsible.

     

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    AMusingFool (profile), Dec 28th, 2010 @ 7:55am

    how do you know?

    So how is a person to find out that the cheque has actually been validated?

     

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    Rose M. Welch (profile), Dec 28th, 2010 @ 7:58am

    Re: Banks are bad guys either way...

    So if they need to do that, shouldn't it make sense for banks to at least put forth pretty clear warnings on money that has not really been validated yet? Or to at least proactively warn anyone seeking to withdraw money that hasn't really been validated that if the check fails to validate, they may be liable?

    A friendly reminder to RTFA. :)

     

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    Chuck Norris' Enemy (deceased) (profile), Dec 28th, 2010 @ 7:59am

    Re: Re: Yes, it's old. That's the point.

    Exactly! In fact, it looks like they are making out better...grabbing this guys assets specifically.

     

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    Rose M. Welch (profile), Dec 28th, 2010 @ 8:00am

    Re:

    This doesn't just affect people falling for idiot scams. This affects businesses and people who accept checks and wisely wait for them to 'clear' before spending the money, only to find out that 'clear' actually means 'That check looked okay to the idiot teller, so we told you it was clear.'.

     

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    DS, Dec 28th, 2010 @ 8:04am

    Re: Re: This is not new

    "I wonder if you'll still say this when your granny is the victim?"

    Yes.

     

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    Rose M. Welch (profile), Dec 28th, 2010 @ 8:04am

    Re: how do you know?

    Apparently, the majority of posters think it's okay for your bank to lie and say that the check has cleared, when it has not, so the rest of us are supposed to simply accept that.

     

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    JezuitX, Dec 28th, 2010 @ 8:07am

    Yeah good luck with that

    The problem isn't the banks it's retarded people. There's no such thing as money for nothing, and anyone that thinks some guy is just randomly going to trust you with a few hundred thousand dollars is a moron at best. I can understand falling for actual well thought out scams like real estate scams or even investing scams; this kind of stuff boggles my mind though.

     

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    Rose M. Welch (profile), Dec 28th, 2010 @ 8:11am

    Idiots? Not so much.

    This doesn't just affect people falling for idiot scams. This affects businesses and people who accept checks and wisely wait for them to 'clear' before spending the money, only to find out that 'clear' actually means 'That check looked okay to the idiot teller, so we lied and told you it was clear.'.

    No one is saying that the banks should hold deposits for five days or a week or thirty days, or whatever. As the post said, we want banks to give people an honest disclosure about their money. Like this:

    Teller: "Right now, it looks like the funds are available, and that this check will eventually clear successfully. However, please note that it hasn't actually cleared yet. Would you like me to make those funds available to your account now or when the check actually clears?

    Customer: Now.

    Teller: Please note that you'll be liable for these funds if the check is not cleared. You may also be assessed a fee for each purchase or withdrawal that occurs.

    Customer: Oh... Well, nevermind. Just deposit the money when the check actually clears.

    Teller: Alright, no problem. Check back in x days, and we'll let you know if it's actually cleared the issuing bank.

     

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    Michael, Dec 28th, 2010 @ 8:12am

    Re: Easy fix

    I worked for a consulting company that handled some IT work for international ATM transactions - by MANUALLY moving text files from one FTP site to another.

    The banking industry is horribly hog-tied by regulations and legacy systems. It sounds good to say they should be able to communicate, but half of them are dreaming of the day that they can upgrade their systems to an AS400.

     

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    MD2000, Dec 28th, 2010 @ 8:14am

    Clearing

    The simple fix - without invalidating the entire chequing system - is pretty simple. Most of these frauds involve some form of cashiers cheque or similar "anonymous" cheque. Make these "hold until verified".

    I recall there was a similar case about 2 years ago, where the patsy was someone who got a big cheque for some ebay sale like $2000 for a $500 item, "and send me the excess money". They insisted on asking the bank 3 ways from Sunday "this cheque is good? I definitely have the money?" and the bank personnel said yes. When they tried to renege a few weeks later, they lost the case in court.

    I guess it depends on what words you use to assure the client the cheque is OK.

    I think a bank stupid enough to cash a cheque for $800,000 written by a random stranger, totally out of pattern from the client's usual banking habits, without fully verifying it was correct, deserves to lose their shirt.

    The "trust" that banks work on is based on normal behaviour - GM or McDonalds is not suddenly going to bounce a million-dollar cheque to make $500,000 but Joe Schmoe who just opened an account might. If they have software that can detect that I'm trying to scam their credit card out of $400, why can't the same software detect this sort of fraud?

     

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    Anonymous Coward, Dec 28th, 2010 @ 8:15am

    If a bank held funds until the money was actually validated it would hurt a lot more people than are hurt by scammers. A lot more people would be complaining at that point as well.

    You can't please everyone, unfortunately.

    And to those posting that banks don't care about this, don't be ridiculous. Banks lose money on these schemes all the time. You aren't getting the money back after grandma loses it to a scammer. She can't pay it because she didn't have it to begin with. That's a loss for the bank.

    Banks preach on these types of scams all the time. The problem is people not listening.

     

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    btr1701 (profile), Dec 28th, 2010 @ 8:16am

    Re: Re: Re: Yes, it's old. That's the point.

    > In fact, it looks like they are making out better...
    > grabbing this guys assets specifically.

    How does grabbing his assets equate to them making out better than if they just had the original money itself?

    Now they have to deal with the time and effort and cost of going to court, securing the assets, auctioning them off, and hoping he has enough assets to cover what was owed after all the expenses.

     

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    MD2000, Dec 28th, 2010 @ 8:17am

    Don't Be silly

    Don't be silly. Of course they are already running AS400, just it's in System38 emulation mode.

     

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    Anonymous Coward, Dec 28th, 2010 @ 8:17am

    Double Standard?

    I agree the guy is an incredible moron for believing this scam, but is there a double standard?

    1) Person A sends Person B some check that will bounce.
    2) Person B sends Person A some check that will bounce.
    3) Person A gets the money!
    4) Person B is on the hook?

    I may be a bit off, but how does the scammer withdraw the money before it "clears". It seems to me the bank that allows the scammer to withdraw the money before the second check's funds have completely cleared should also be involved.

     

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    NullOp, Dec 28th, 2010 @ 8:27am

    Xfer

    Sounds like a lot of the story is missing. I've had any number of "lost relatives" try to get me to do things like this. The bank here is obviously at fault and should have to bite-the-bullet on this one. But, as the law is written and enforced to screw the individual the outcome is no surprise!

     

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    Richard (profile), Dec 28th, 2010 @ 8:38am

    Re: Re: Re: This is not new

    This case did not concern a law firm - that was the earlier case.
    can you not infer this from the biz comment.
    The current story concerns a small(ish construction company - so it is still a business.

    You didn't specify so I assumed you were talking about the current story.

    In any case these scams could be perpetrated against anyone - and the scammers are unlikely to target people who will see through the scam.
    This judgment is flawed because it lifts responsibility from the banks (who have the resources and the ability to block these scams) and places it on the general public - many of whom (statistically) can't be expected to realise that if something seems too good to be true it probably is.

     

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    Richard (profile), Dec 28th, 2010 @ 8:43am

    Re:

    Sorry if you're this stupid, you deserve to be robbed.

    And there are enough stupid people in the world for the criminals to prosper and become powerful - until wiser heads realise that it isn't in the public interest to allow even the stupid to be conned.

     

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    Richard (profile), Dec 28th, 2010 @ 8:46am

    Re:

    You cannot fix that loophole, there are always stupid people willing to be separated from their money.

    We have to try and minimise this because it is bad for everyone if criminals become rich - not just for their immediate victims.
    These scams fund all kinds of bad stuff and everyone is the loser.

     

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  43.  
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    Chronno S. Trigger (profile), Dec 28th, 2010 @ 8:46am

    Re: Double Standard?

    They both are on the hook. Person A for sending the first first bad check and withdrawing the end money and running. Person B for writing the second bad check and effectively withdrawing the money.

    The only reason that person B is highlighted in the story is because he's the one they could find, person A is gone.

     

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  44.  
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    Ian (profile), Dec 28th, 2010 @ 8:47am

    Make Sure People Know

    shouldn't it make sense for banks to at least put forth pretty clear warnings on money that has not really been validated yet? Or to at least proactively warn anyone seeking to withdraw money that hasn't really been validated that if the check fails to validate, they may be liable?
    I think the main point is that only a minimal amount of effort is required to remind people that just because a check has cleared, it doesn't mean the funds are guaranteed. Maybe require that all depositors be issued a warning if they make a deposit above a certain amount (say $10,000).

     

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  45.  
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    Anonymous Coward, Dec 28th, 2010 @ 8:47am

    Re: Re: how do you know?

    Another fine example of what is in a home school curriculum, I guess!

    The bank's "clear" is only that it clears the basics. If you read the terms on your banking agreement, you will see that there is plenty of time between "clear" and "confirmed". This is doubly so for checks that come from outside of the country, that can take 30-60 days to truly be 100% certainly confirmed as paid.

    The issue isn't anything the bank is doing, it is people who are greedy enough to think that random people around the world are going to email them and offer them millions of dollars to cash a check for them. It isn't a poor banking system, it is stupid people. You can't cure stupid.

     

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  46.  
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    alternatives(), Dec 28th, 2010 @ 8:51am

    Bank errorin your favor - do not collect 40,000

    Took a cashiers check for $4k+change into the bank - the cashier mis-wrote it up 3 times. At time 3 for $40K he didn't show it to me and just processed it.

    After 30 days I took out the $40K.

    After 90 days, the bank called and asked about the extra money.

    Not 100% sure how long they do get to "pull back money" - but they did make demands after 90 days.

     

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  47.  
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    Anonymous Coward, Dec 28th, 2010 @ 8:59am

    "Shouldn't We Fix The Check Clearing Loophole That So Many Scammers Abuse?"

    The banks are too busy blocking wikileaks to try and block illegal scams.

     

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  48.  
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    candide08 (profile), Dec 28th, 2010 @ 9:03am

    What the H does "cleared" mean?

    I was under the impression that CLEARED meant that the transfer had been acknowledged and completed by both ends.

    If a bank can back out of a "cleared" transaction then we have nothing.

    Maybe the bank should take longer, double check everything, etc. but when funds are cleared it should mean something.

     

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  49.  
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    Anonymous Coward, Dec 28th, 2010 @ 9:05am

    Re: Re: What?

    So, you do not trust that your bank will not steal your money? You must keep you cash under your mattress then.

    Do I want my bank to hold every check I ever deposit for 11 business days or more? Absolutely not.

    Every single time there is a lawsuit techdirt wants to change laws to prevent that lawsuit. Dumb.

     

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  50.  
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    Anonymous Coward, Dec 28th, 2010 @ 9:07am

     

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  51.  
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    Jay (profile), Dec 28th, 2010 @ 9:08am

    A few points

    I'm going to intervene here. First, yes, this scam can work because there are a number of people who bring in weird checks from everywhere. Just like the TSA, you can't catch every fraudulent check.

    Having been a bank teller, I can assure you, no matter how good you are, no matter how much you look, you can't catch every one.

    The specific laws I believe are in the Community Reinvestment Act along with the Federal Reserve Act. While that money is allowed to be available, you can have a hold placed on it. Then, there's rules on whether the check is from the same state or not! And with all of these holds, you have to remember that approximately 15-20 days after you've started, that money is released.

    The problem again comes when, as others have mentioned, the back office can catch up with you.

    We won't get into other problems such as fraudulent money, ACH laws, and all other sorts of fraudulent activity.

    The point is, no matter how much you warn someone, it may not be enough.

    I've had at least one person get mad at ME for my warning to him. He'd received a check for a large amount (over $2K) where the check had been deposited. Then, I tell him how a scam operated. He proceeded to take the money out of his account and Western Union the money in another area.

    A few hours later, he comes back because the WU folks told him about the same scam. I do further research into the check and find out that it was a bad one. Yes the money was processed, but the check was going to come back negative. All the while, it's my "fault" because I told him that hey, it takes a little bit of time to check these things and you may want to wait.

    I would seriously consider the banking side before faulting them for the effectiveness of this scam.

     

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  52.  
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    crade (profile), Dec 28th, 2010 @ 9:23am

    Re: Re: Easy fix

    They aren't hogtied, they just choose to use those regulations and legacy systems. There certainly isn't anything forcing them to. It sounds like a good excuse, but it isn't.

     

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  53.  
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    Mike Masnick (profile), Dec 28th, 2010 @ 9:47am

    Re:

    Should we hold all your deposits over 2 months to make sure a check has 'cleared'? At some point, you have to accept personal responsibility for your financial transactions.

    I didn't say it should be held, did I? I said: "houldn't it make sense for banks to at least put forth pretty clear warnings on money that has not really been validated yet? Or to at least proactively warn anyone seeking to withdraw money that hasn't really been validated that if the check fails to validate, they may be liable?"

    Why is it that people complain about suggestions I didn't make?

     

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  54.  
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    oldskoolgunner (profile), Dec 28th, 2010 @ 9:49am

    what loophole ?

    alrite time for my 1st post

    No bank just clears the cheque as soon it is deposited , there are types of clearance

    1st .normal domestic clearance 2/3 days, depending on bank, branch but max 3 days.[is governed by the country banking laws]

    2. bank might purchase the cheque on a few conditions, [1] the previous track record of the customer. [2] local manager calls the other bank to verify if the cheque is legit . [3] if you know the branch manager well enough for him to ask for urgent clearance [ happens in very rare cases in small towns, but does happen. this case most likely belongs to the 1 or 3rd category , in no way the bank is responsible for this.

    3] urgent clearance or high value clearance , this applies to cheques above a certain amount which have to deposited before a certain time in the morning and is only applicable to local intra city banks , in that case the cheque is send via hand to the issuing branch or bank for immediate clearance , totally safe , rules change from country to country .

    there is no loophole to fixed . also you people are debating this from the American banking laws which are very different from the one in question. each country has it's own rules regarding clearances of cheques.

     

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  55.  
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    Rose M. Welch (profile), Dec 28th, 2010 @ 9:58am

    Re: Re: Re: how do you know?

    Oh, comment stalker, you validate my comments. Thanks! :)

    The bank's "clear" is only that it clears the basics.

    No mention of 'basics' appear in my banking agreement.

    If you read the terms on your banking agreement, you will see that there is plenty of time between "clear" and "confirmed".

    No, my banking agreement says that it can take awhile to clear, and specifically uses that term. So when I go to the bank and deposit a check, and then call and ask if the check has cleared, I want to know if done what my banking agreement talks about. When they answer 'Yes, it's cleared.' but it hasn't actually cleared, there's a problem.

    The issue isn't anything the bank is doing, it is people who are greedy enough to think that random people around the world are going to email them and offer them millions of dollars to cash a check for them.

    This doesn't just affect people falling for idiot scams. This affects businesses and people who accept checks and wisely wait for them to 'clear' before spending the money, only to find out that 'clear' actually means 'That check looked okay to the idiot teller, so we told you it was clear.'.

    You can't cure stupid.

    No, but you can help mitigate it. See my comment below.

     

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  56.  
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    Anonymous Coward, Dec 28th, 2010 @ 9:59am

    Re: This is not new

    sign the check with "without recourse"

     

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  57.  
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    Gabriel Tane (profile), Dec 28th, 2010 @ 10:24am

    Re: Re: Re: What?

    "So, you do not trust that your bank will not steal your money? You must keep you cash under your mattress then."
    No, I trust my bank to do everything in its power to get fees and charges out of me. If I had the ability to link my mattress to the internet and make payments that way, I would. In the meantime, I exchange the need for paranoid diligence for the convenience of electronic money.


    "Do I want my bank to hold every check I ever deposit for 11 business days or more? Absolutely not."
    Why would they have to hold it for 11 days if they would just electonically verify the check in the first place? I can deposit money into my bank via digital image of my check (without even mailing the original in!), so why canít they electronically request verification from that checkís issuer?



    "Every single time there is a lawsuit techdirt wants to change laws to prevent that lawsuit. Dumb."
    Don't read here too often, do you?
    First, Mike didn't say 'change the law'. He suggested banks give warning over what the "cleared check" really means and that spending that money may have risk. If my bank says "oh that money is there" and then later they really check into it, where is my fault for thinking it was OK?

    Second, if there is a law or procedure that is being taken advantage of by criminals, why would you not want to adjust it to make it harder to exploit? As long as it doesn't hamper legitimate business or infringe upon rights, what's the problem?

     

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  58.  
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    Anonymous Coward, Dec 28th, 2010 @ 10:24am

    Re: Re:

    I didn't say it should be held, did I? I said: "houldn't it make sense for banks to at least put forth pretty clear warnings on money that has not really been validated yet? Or to at least proactively warn anyone seeking to withdraw money that hasn't really been validated that if the check fails to validate, they may be liable?"

    Why is it that people complain about suggestions I didn't make?


    To clarify, my comment was more of a rhetorical question than a complaint. I was just pointing out how far we would have to go to truely guarantee funds from checks or ACH items.
    I work in bookkeeping at a small local bank. Checks simply aren't 'validated'. You deposit a check at your bank & they credit your account. The check image is sent to the Fed, who then passes it along to the bank that it is written on. Then that bank either returns the check (NSF, Closed Account, Forgery, etc.) or it doesn't. The bank you deposited the check at doesn't get any type of "OK" from the bank the check was drawn on. Maybe it should, but that would make a complicated system even more so.
    As far as warnings about funds and availability - they are given to customers when they open accounts & posted in the lobby of every branch. And if an ATM takes deposits, they are posted there too. In the end, the only real solution (besides an overhaul of the current system) would be to teach a proper finance class in the schools (most do not even teach kids to balance a checkbook). If we are going to live in a capitalist society, then we should teach our children how that system works before they go out into the world.

     

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  59.  
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    dollas, Dec 28th, 2010 @ 10:26am

    Bad math?

    This guy negotiated 15%? Is my math wrong? How is $468,000 15% of $809,000? Was he trying to scam the scammer?

    Regardless, the bank is a service provider. Why should they take the hit for this guy's stupidity and greed?

     

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  60.  
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    Frank (profile), Dec 28th, 2010 @ 10:29am

    current Regs are the issue

    Banks would love to plug this loophole ....... the issue is that current regulations do not provide them with a method to do so while complying with applicable law. Under current regs banks must make funds available more quickly (with some acceptions) than the windows allotted for items to be returned to them. Shortening the windows for returned items or increasing hold times on deposits would effectively plug the loophole - but in each case their may be a group negatively impacted (ie: small banks and CU's might not be able to meet the tighter timelines or consumers + businesses would have to deal with longer hold times on deposits).

     

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  61.  
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    Gabriel Tane (profile), Dec 28th, 2010 @ 10:30am

    Re: Re: Re: how do you know?

    Rose already hit most of what I was going to say, but I did want to get this:

    "Another fine example of what is in a home school curriculum, I guess! "
    Granted, my high school education was a while ago and my BA in Business Management only had 2 classes of Accounting, but I don't remember any part of any educational curriculum that explains the intricacies of banking you're talking about. Your points would be better received if you weren't taking such petty little snipes at people.

     

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  62.  
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    monkyyy, Dec 28th, 2010 @ 10:36am

    wait so the scam works by giving people a bad check and expecting them to send them money back? how often do the idiots not send money back? and not get into any problems

     

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  63.  
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    Anonymous Coward, Dec 28th, 2010 @ 10:39am

    Re: Re: Re: Re: What?

    "Second, if there is a law or procedure that is being taken advantage of by criminals, why would you not want to adjust it to make it harder to exploit? As long as it doesn't hamper legitimate business or infringe upon rights, what's the problem?"

    The problem here is PEOPLE not laws or procedures. I say we outlaw people. Maybe we should institute eugenics for those that get scammed. When you are a dumbass it is not the bank's fault or the banks responsibility. I do not want to be penalized because you are a dumbass.

     

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  64.  
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    Gabriel Tane (profile), Dec 28th, 2010 @ 10:44am

    Re: A few points

    The point here is that it is the banking side we're considering. Why does it take that long to validate the check? Why are we told it's cleared when it's not? These are the 'loopholes' that are being exploited. So why not change those?

     

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  65.  
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    Rose M. Welch (profile), Dec 28th, 2010 @ 10:49am

    Re: Re: Re: Re: how do you know?

    Some info, just for the record:

    1. I wasn't homeschooled, but I homeschool my three brilliant kiddos, which my stalker loves to mention as he's stalking me around Techdirt.

    2. My children are 4, 7, and 9. Banking practices aren't likely to make an entrance in our curriculum any time soon.

    3. As Gabriel pointed out, banking practices aren't a standard part of a public or private school education, so it's silly to mention it in reference to homeschooling.

    4. Most importantly, I don't have to be current on every subject that I'll eventually teach my children. It's more than enough to brush up on each subject and lesson before the start of the year and unit. In short, I can make a mistake now and still manage to not teach that mistake next month.

     

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  66.  
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    Gabriel Tane (profile), Dec 28th, 2010 @ 10:50am

    Re: Re: Re: Re: Re: What?

    "When you are a dumbass it is not the bank's fault or the banks responsibility. I do not want to be penalized because you are a dumbass."
    Believe me, no one hates being penalized for not being part of the lowest common denominator more than I do. But again, it's a system that's being exploited. Why not fix that? And I did say "as long as it doesn't hamper legitimate business or infringe upon rights..."

    And why should it be my fault if my bank says "the funds are there" when they're not?

     

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  67.  
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    Gabriel Tane (profile), Dec 28th, 2010 @ 10:53am

    Re: Re: Re:

    As I just posted in another one below, why is it my fault when my bank says "the money is there" if it's not? If, let's say, Wachoiva takes it on faith that the check is good and grants me that money, that's their decision. If the money shows in my account, I would assume that means Wachovia verified it, got the money, and put it in my account.

    Yes, people should be diligent, and too-good-to-be-true usually is... but obviously, there are people who take the banks' word that the money is good.

     

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  68.  
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    Rose M. Welch (profile), Dec 28th, 2010 @ 10:53am

    Re: current Regs are the issue

    ...the issue is that current regulations do not provide them with a method to do so while complying with applicable law.

    Really? Regulations prohibit banks from giving their customers full disclosure when they deposit checks, and explaining that the terms 'available' and 'cleared' don't actually mean 'available' and 'cleared'?

     

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  69.  
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    Almost Anonymous (profile), Dec 28th, 2010 @ 11:06am

    Re: Re: Re: Re: how do you know?

    """When they answer 'Yes, it's cleared.' but it hasn't actually cleared, there's a problem."""

    Ahh, but did you ask if the check CLEARED cleared? Therein lies your mistake!

     

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  70.  
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    Anonymous Coward, Dec 28th, 2010 @ 11:24am

    Re: Re:

    Why is a wire transfer final?

     

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  71.  
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    Anonymous Coward, Dec 28th, 2010 @ 11:26am

    Re: Re: Re: Re: Re: Re: What?

    "And why should it be my fault if my bank says "the funds are there" when they're not?"

    Because you KNOW that is the way the system works. Because you KNOW that you are responsible for the funds. Your bank discloses all of this to you - if you don't read the disclosures its not my fault or the bank's fault.
    http://en.wikipedia.org/wiki/Expedited_Funds_Availability_Act

     

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  72.  
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    Anonymous Coward, Dec 28th, 2010 @ 11:28am

    Re: Re: Re:

    It is because of the way the money is treated. The bank immediately removed the funds from your account and then the funds are credited at the other end only when they are received. The cash has moved, not a piece of paper that suggests someone agrees to give you cash.

    Checks are funded on the back side, wires and funded up front. The difference in timing is what makes this sort of scam work.

     

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  73.  
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    Anonymous Coward, Dec 28th, 2010 @ 11:30am

    Re: Re: Re: Re: Re: how do you know?

    Gee, oddly, when I was in school, part of of social studied class included civic lessons, that included basic concepts like how to write a check, and how the money goes from your bank to someone else's bank as a result.

    It was very basic, but it was there.

    Oh yeah, they also taught english, which allowed us to read contracts if we so desire. Was that optional in your school too?

     

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  74.  
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    Anonymous Coward, Dec 28th, 2010 @ 11:32am

    Re: Re: current Regs are the issue

    They already gave you those on your account agreement. Try reading it.

     

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  75.  
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    Anonymous Coward, Dec 28th, 2010 @ 11:33am

    Re: Re: Re: What?

    "Do I want my bank to hold every check I ever deposit for 11 business days or more? Absolutely not."

    I think this hits on a major problem. It should simply not take this long with the technology we have available to us today. Really, it should be near instantaneous. A person submits a check. The teller inputs the info into the system. The system contacts the bank on the check to verify that the funds exist. The contacted bank performs a query and returns an answer. All while the customer is waiting.

    If banks were simply required to communicate with other banks and at least use systems from this decade, clearing checks wouldn't be such a problem.

     

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  76.  
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    Rose M. Welch (profile), Dec 28th, 2010 @ 11:34am

    Re: Re: Re: current Regs are the issue

    I did. According to my agreement, 'cleared' means 'cleared the issuing bank account', not 'looks okay to the teller'. I haven't fallen for any scams, but I did have a scummy ex that I had to contend with.

     

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  77.  
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    Jay (profile), Dec 28th, 2010 @ 11:37am

    Re: Re: current Regs are the issue

    That's not it at all.

    ALL banks disclose that information by law (I want to say it's the Privacy Act, but I forget parts of the law.)

    By the Community Reinvestment Act regulations, it's disclosed and on display in a public area where customers can question these laws. There are also numbers to call to check up on a check to see if it's been cleared and what not.

    But think about it like this. The funds are available in 10-15 days. It does not mean that the funds have been cleared through another bank where the account number could have been stolen, closed, etc.

    That is the main problem and loophole that can't really be closed unless you call on every last check.

     

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  78.  
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    Rose M. Welch (profile), Dec 28th, 2010 @ 11:38am

    Re: Re: Re: Re: Re: Re: how do you know?

    Gee, oddly, when I was in school, part of of social studied class included civic lessons, that included basic concepts like how to write a check, and how the money goes from your bank to someone else's bank as a result.

    Neither my state's standards nor the nationally recognized Common Core Standards include check writing as part of their curriculum, much less as part of a civics course. (Maybe you mean Home Ec.?)

    Oh yeah, they also taught english, which allowed us to read contracts if we so desire. Was that optional in your school too?

    And despite your best troll efforts, no one's English class includes contract law, although my high school did offer Street Law, which helped us understand contracts, like the part where my account agreement defines the term 'cleared', said definition being ignored by the tellers that are telling people that their checks have 'cleared' when they have not, in fact, cleared.

     

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  79.  
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    Anonymous Coward, Dec 28th, 2010 @ 11:40am

    Re: Re: Re: Re: Re: Re: how do you know?

    I'm not sure how long ago you went to school, but no such course was ever taught where I went to school. I don't know of any of my peers who have either. Most kids growing up don't really understand how checks work, seeing as most never use them. Honestly, I only use them to pay the rent since my landlord is an old lady who doesn't know any better. If it weren't for that, I would have never touched a check, much less know how the banking system deals with them.

     

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  80.  
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    Jay (profile), Dec 28th, 2010 @ 11:49am

    Re: Re: A few points

    FDIC insurance somewhat prevents this. Then there's 60 years of lore to try to figure out.

     

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  81.  
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    Gabriel Tane (profile), Dec 28th, 2010 @ 11:58am

    Re: Re: Re: A few points

    Please show where the FDIC prevents the introduction of a system that would electronically validate a check? Last I checked (no pun intended), one could not rely on the "it'll take a few days for my check to clear, so I'll float it" method for paying bills anymore because the check I write hits my bank pretty darned quick.

    So again, why can we not have a system that verifies the checks quick enough that a 'hold until verified' isn't so long a time that it slows business down too much?

     

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  82.  
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    Jay (profile), Dec 28th, 2010 @ 12:43pm

    Re: Re: Re: Re: A few points

    ""it'll take a few days for my check to clear, so I'll float it" "

    That is actually kiting, which does occur, but nowadays less often. With the other methods of scheming, this isn't all that efficient. Though there ARE some effective methods to preventing this, this is mainly a short term gain that is easier with the scams that abound.

    "Please show where the FDIC prevents the introduction of a system that would electronically validate a check?"

    Link

    First, I'm going to merely discuss the FDIC insured banks since the non FDIC compliant banks are a different system unto themselves.

    I would look into these Acts specifically:
    Economic Growth and Regulatory Paperwork Reduction Act of 1996

    International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001

    My main point is that in order to be FDIC insured, you have to play by the rules of the government. Where is the incentive to create the system when you're mainly looking to keep the status quo?

     

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  83.  
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    Jay (profile), Dec 28th, 2010 @ 1:03pm

    Re: Re: Re: Re: Re: A few points

    And in the mean time, I've been looking more into Reg CC licensing since it has been a while since I was a teller.

    Expedited Funds Act

    The point remains there's a LOT of regulation and it can make the loopholes pretty damn hard to close.

     

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  84.  
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    Anonymous Coward, Dec 28th, 2010 @ 1:11pm

    Re: Re: Re: Re: What?

    You are not a CS major, are you? It would be nice if every bank in the world had the latest and greatest computer systems. And it would be great if all transactions happened in realtime. But, the world does not work that way (yet)...

    http://en.wikipedia.org/wiki/Batch_processing

     

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  85.  
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    Anonymous Coward, Dec 28th, 2010 @ 1:16pm

    Maybe the bank was in on the scam? Wouldn't surprise me if true.

     

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  86.  
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    Gabriel Tane (profile), Dec 28th, 2010 @ 1:43pm

    Re: Re: Re: Re: Re: Re: Re: What?

    As Rose pointed out, the bank disclosures describe "cleared". And if that description and the fact that the teller says "cleared" leads me to believe that it's good, then why should I believe otherwise?

    Before this article, I did not know there was a difference between "cleared" and "mostly cleared". So no, I don't "KNOW that is the way the system works."

     

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  87.  
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    Gabriel Tane (profile), Dec 28th, 2010 @ 1:49pm

    Re: Re: Re: Re: Re: A few points

    I'm going to be lazy and assume that the FDIC says what you say it does. I don't have any reason to doubt it.

    But you do answer my question with the point that the FDIC's bureaucracy inhibits improvements. I didn't think about the "play by our rules to get our protection" angle of this whole thing. You're right.

    But I still don't buy that there's no way to put in place a system to verify checks faster than our current way. And if the status quo the banks are trying to protect is the environment where their customers are being taken advantage of by exploitation of the banks' own systems... I refer back to my initial post about 'paranoid diligence'
    http://www.techdirt.com/articles/20101226/23370012415/shouldnt-we-fix-check-clearing-loophole-that-s o-many-scammers-abuse.shtml#c788

     

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  88.  
    icon
    nasch (profile), Dec 28th, 2010 @ 2:51pm

    Re: Banks are bad guys either way...

    IMO, loosen the requirement to make money available to some time frame that allows banks to actually verify funds, then place liability on the banks for any money withdrawn that was marked as cleared. Then you'll know if the bank says you have money, you have it. If it takes too long to clear checks, well then that's just a disadvantage of using checks. It's better than pretending checks have cleared when they haven't.

     

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  89.  
    icon
    nasch (profile), Dec 28th, 2010 @ 2:54pm

    Re: Re: Re: Easy fix

    Do you know what regulations are? If they're used by choice, then they're not regulations.

     

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  90.  
    icon
    nasch (profile), Dec 28th, 2010 @ 3:01pm

    Re: Re: Re: What?

    So, you do not trust that your bank will not steal your money?

    I think we can all see now that most banks will take whatever money they can. If they thought they could just grab money out of your account and get away with it, I'm sure they would do it. The thought would probably horrify the nice teller at your local branch, but they're not the ones making the decisions.

     

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  91.  
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    nasch (profile), Dec 28th, 2010 @ 3:05pm

    Re: Idiots? Not so much.

    Brilliant, I love it.

     

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  92.  
    identicon
    Anonymous Coward, Dec 28th, 2010 @ 3:06pm

    Re: Re: Re: Re: Re: Re: Re: Re: What?

    Rose's bank represents all banks?

    And, its not clear to you that a large foreign check might not 'clear' overnight?

    So, I should suffer because you are clueless?

     

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  93.  
    icon
    nasch (profile), Dec 28th, 2010 @ 3:06pm

    Re: Clearing

    If they have software that can detect that I'm trying to scam their credit card out of $400, why can't the same software detect this sort of fraud?

    Because the bank is liable for one, and you are liable for the other.

     

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  94.  
    identicon
    Anonymous Coward, Dec 28th, 2010 @ 3:11pm

    Re: Re: Re: Re: What?

    Its a conspiracy, the banks are out to get you. Better move all of your money to your mattress now!

    I cannot believe that you seriously believe that the goal of any bank (or any legitimate business) is to steal from customers.

     

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  95.  
    identicon
    Anonymous Coward, Dec 28th, 2010 @ 3:21pm

    Re: Re: Re: Re: Re: Re: Re: Re: What?

    My bank makes this quite clear:

    "What are cleared transactions?

    Transactions are given a "Cleared" status when they have been posted to your account. "Cleared", or posted transactions, are not always final because there may be certain circumstances when such transactions may be reversed."

     

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  96.  
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    Rose M. Welch (profile), Dec 28th, 2010 @ 3:43pm

    Re: Re: Re: Re: Easy fix

    +1

     

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  97.  
    icon
    ltlw0lf (profile), Dec 28th, 2010 @ 4:17pm

    Re: Re:

    only to find out that 'clear' actually means 'That check looked okay to the idiot teller, so we told you it was clear.'

    Why checks haven't gone away is what puzzles me most...but I guess the banks would hear far more grief if they stopped issuing them.

    I have, in the past, been involved as a treasurer for an organization, and I never want the job ever again. Talk about denizens for fraud and villainy (and I am talking about the banks here.) We had a non-profit account at a bank, and would collect dues and deposit them in this account.

    We'd have a person who would routinely write bad checks (checks that they knew they had no money in their account to cover.) Instead of going after the person kiting checks, they would reverse the deposit and charge us twenty dollars a pop for the bad check (even though it was no fault of our own.) We notified the authorities each time, and after the third time, we stopped collecting checks from this person and removed them from the organization. As far as I know, nothing was ever done by the authorities or the bank to punish the individual kiting checks.

    The system only works if you trust everyone, and now-a-days, you can't trust everyone.

     

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  98.  
    identicon
    Anonymous Coward, Dec 28th, 2010 @ 4:29pm

    Re: Re: Re: Re: Re: What?

    Actually I am, and I know for a fact that for the majority of companies, having outdated hardware is caused by one thing: greed and incompetence. The higher-ups would rather buy new houses than invest in their own company, and can't see past the "If it works why would we need to upgrade it" mentality. Thus, the IT departments have no money to plan meaningful upgrades. And like I said, something from even this DECADE would probably work wonders, but most big banks are running on systems far older than that. That type of thinking is just unreasonable. They just don't want to spend money. Period. That's the only problem here, albeit a rather large problem.

    But what's really needed it simple communication between banks. Obviously they already send the physical checks, so what's so hard about making that data available to be queried electronically first to expedite the process?

     

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  99.  
    identicon
    Anonymous Coward, Dec 28th, 2010 @ 6:19pm

    Re: Re: Re: Re: Re: Re: What?

    Not sure what to tell you other than you are wrong.

     

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  100.  
    identicon
    victor, Dec 28th, 2010 @ 10:07pm

    Re: Idiots? Not so much.

    I am shocked that this is going on in the US. In the philippines, you have 2 balances in the account.

    When you deposit a check, the CURRENT balance is updated, but the funds are not AVAILABLE until it is cleared. The AVAILABLE balance is updated when the check clears. Local checks take 3 to 7 days, International takes 30 to 45 days to clear.

    If you need the money quickly, you can go to the check cashing places, but they charge a fee, usually 15%. But they absorb the risk if the check doesn't clear. (They'll try to look for you if they can find you)

    Tell me why this doesn't work better?

     

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  101.  
    icon
    nasch (profile), Dec 28th, 2010 @ 10:23pm

    Re: Re: Re: Re: Re: What?

    The goal of any bank is to make as much money as possible. The ethics of people running most large corporations, such as banks, is virtually nonexistent. The conclusion is simple!

     

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  102.  
    icon
    Jay (profile), Dec 29th, 2010 @ 1:04am

    Re: Re: Re: Re: Re: Re: A few points

    I think there is one area to look into.

    Float

    Banks make money from the hold. Not a lot of middle managers understand this. So yes, there's a LOT of areas that need fixing.

     

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  103.  
    icon
    Lachlan Hunt (profile), Dec 29th, 2010 @ 4:46am

    The simple solution. STOP using cheques! They are seriously outdated technology that the rest of the world outside the USA has largely abandoned in favour of much more secure electronic transfers.

     

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  104.  
    icon
    Rose M. Welch (profile), Dec 29th, 2010 @ 5:07am

    Re: Re: Idiots? Not so much.

    I can't, because I haven't held a check in my hand in quite some time...

     

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  105.  
    icon
    Gabriel Tane (profile), Dec 29th, 2010 @ 5:44am

    Re: Re: Re: Re: Re: Re: Re: Re: Re: What?

    I'm still at a loss as to how you're suffering from what we're saying. And no one said "cleared overnight". We're saying that if the teller says "oh, that's cleared", and it's not, then it's misleading. Funny how you haven't addressed that part even though we've said it repeatedly.

     

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  106.  
    icon
    Gabriel Tane (profile), Dec 29th, 2010 @ 5:53am

    Re: Re: Re: Re: Re: Re: Re: Re: Re: What?

    I'm glad you have that info at your fingertips. Most people don't. I just searched all over my bank's website, and even their glossary of financial terms don't explain what "cleared" entails as it's not even in their glossary.

    Next, I searched my website to find the checking account agreement. Couldn't find it there. I know I have a copy at home, but most people don't have that after 10+ years of banking at the same bank.

    So our original assertion stands: when your only source of information is the word of an employee at the bank who tells you the money is available, and you act upon that information, why is it the individual's fault when the information given to them is wrong?

     

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  107.  
    icon
    Gabriel Tane (profile), Dec 29th, 2010 @ 6:02am

    Re:

    But think of the children!

    Seriously, as one of the countries still holding on to the imperial measurement system, are you terribly surprised we have checks? I have a checkbook for one reason: cutting money to my parents when I owe them because I don't carry cash and I can't electronically pay them (my dad refuses to set up PayPal.)

     

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  108.  
    identicon
    Anonymous Coward, Dec 29th, 2010 @ 7:53am

    Re: Re: Re: Re: Re: Re: What?

    Profit and stealing are not the same thing, you need to understand the difference.

     

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  109.  
    identicon
    Anonymous Coward, Dec 29th, 2010 @ 8:07am

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: What?

    Sounds like you need to get a new bank or you need to ask a human at your bank where you can find the info you are looking for. It took me two minutes on my bank's web site to find that info. My bank uses the term 'funds availability' more than they use the term 'cleared' - funds availability seems more accurate.

    If you deposit a large check into your account, especially a large foreign check, then you should know that it will take some time for that transaction to complete. When you make that deposit you are responsible for those funds, its your problem if that check is bad. If the bank does you a favor and makes the funds available before the check has been processed by the check writers bank then your bank is doing you a favor, they are basically giving you a loan until that check gets funded. You bank does you that favor because they trust you, again banking is built on trust. Just because your bank did you a favor does not mean that you are no longer responsible for the check. Its your account, its your deposit, you think its your money - the bank is just handling the transaction and the accounting - the responsibility is yours and yours alone, the bank bears no burden if the check is bad.

    I disagree that the 'information given to them is wrong' as you put it. The information given was not properly understood, misunderstanding and wrong are not the same thing. I suppose if you fall for one of these scams then it would be easy for you to misunderstand how banking works too. Like I said, the problem is with people not with the bank. We need to educate people not change banking. No amount of changes to banking will fix the issues surrounding successful social engineering.

     

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  110.  
    icon
    nasch (profile), Dec 29th, 2010 @ 8:43am

    Re: Re: Re: Re: Re: Re: Re: What?

    Profit is revenue in excess of costs. Some profit is legal, and some is illegal. Some profitable crimes are discovered and prosecuted, and others are not.

     

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  111.  
    identicon
    Anonymous Coward, Dec 29th, 2010 @ 9:11am

    Re: Re: Re: Re: Re: Re: Re: Re: What?

    You are free to distrust banking and keep your cash under your mattress. No one is stopping you. The reality is that banks are legitimate businesses, nothing illegal is going on relating to checking and savings accounts or the processing of checks. You might want to check into your paranoia - seriously.

     

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  112.  
    icon
    Gabriel Tane (profile), Dec 29th, 2010 @ 9:12am

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: What?

    "Sounds like you need to get a new bank or you need to ask a human at your bank where you can find the info you are looking for."
    Sounds to me like you're advocating talking to a bank rep about it... which is exactly what we were talking about. Asking the bank and taking thier word for it. Most people wouldn't call to ask for a document then read it for information they're not even sure of the location of. They'd just ask the bank "hey, what's my funds availability?" And that's not stupid or lazy, it's deferring to the experts.

    I'm not arguing the responsibility of the funds... ultimately it is yours. But if the bank says "yes the money is there" when it's not, that's thier mistake, not yours.



    "I disagree that the 'information given to them is wrong' as you put it. The information given was not properly understood, misunderstanding and wrong are not the same thing."
    The hypothetical conversation Rose posted was pretty straight-forward.
    No one is saying that the banks should hold deposits for five days or a week or thirty days, or whatever. As the post said, we want banks to give people an honest disclosure about their money. Like this:

    Teller: "Right now, it looks like the funds are available, and that this check will eventually clear successfully. However, please note that it hasn't actually cleared yet. Would you like me to make those funds available to your account now or when the check actually clears?

    Customer: Now.

    Teller: Please note that you'll be liable for these funds if the check is not cleared. You may also be assessed a fee for each purchase or withdrawal that occurs.

    Customer: Oh... Well, nevermind. Just deposit the money when the check actually clears.

    Teller: Alright, no problem. Check back in x days, and we'll let you know if it's actually cleared the issuing bank.
    So, if instead, the conversation ended at the teller saying "yes, the money is in your account" with no disclaimer that the money might not really be there, then that's dishonest at worst, sloppy at best.



    "Like I said, the problem is with people not with the bank. We need to educate people not change banking. No amount of changes to banking will fix the issues surrounding successful social engineering."
    So when we say that a bank should discuss the in's and out's of the transaction when asked "hey is my money there", to the end results of the customer having a better understanding on how their account works, how is that NOT educational? Should the government be pressured into introducing legislation that would require that kind of discussion? No. Not at all. But if legislation exists thatís keeping banks from taking that action, or preventing banks who want to change their practices to protect their customers from fraudulent checks, why should you or anyone else say ďno, the customer is stupid, donít change anythingĒ?

    We've heard from others in this post that there are FDIC regulations which may keep banks from changing their funds availability policy. If the banks want to change their processes and can't, then how is that customer stupidity? Sounds to me like you're so angry at dumb (and I can't blame you) that you're unwilling to look at alternatives.

     

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  113.  
    icon
    nasch (profile), Dec 29th, 2010 @ 10:00am

    Re: Re: Re: Re: Re: Re: Re: Re: Re: What?

    I trust banking because of 1. FDIC and 2. I think the bankers are afraid of going to jail. I have all my money in a major bank and do not feel any fear about it. You really think it's paranoia to believe that many if not most large corporations have little or no qualms about acting unethically for profit? Seems like just realism to me.

     

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  114.  
    icon
    Christopher (profile), Dec 29th, 2010 @ 10:20am

    Better yet, if the check is from outside of the United States or going to someone outside of the United States or whatever country you live in? Investigate thoroughly before putting the money into the account in question

     

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  115.  
    identicon
    hmm, Dec 29th, 2010 @ 12:44pm

    simple answer

    Several Banks introduce a system to instantly verify and fully validate payments both ways on a cheque, and verify if forgery etc. Cheques begin to instantly clear from one of these banks to another.

    If the bank where the cheque was ISSUED doesn't support this system, tough, you gotta wait the full 30 days...

    Within a short period every single bank would upgrade their systems or be left in the dust.........

     

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  116.  
    identicon
    Anonymous Coward, Dec 29th, 2010 @ 12:52pm

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: What?

    You just switched from illegal to unethical. Which do you mean?

    Yes, I believe that it is paranoia to believe that many if not most large corporations have little or no qualms about acting illegally for profit.

    Corporations are run by people. Do you think that most people have no qualms about acting unethically/illegally for profit?

     

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  117.  
    icon
    nasch (profile), Dec 29th, 2010 @ 3:09pm

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: What?

    You just switched from illegal to unethical. Which do you mean?

    I didn't switch, I'm just talking about both.

    Yes, I believe that it is paranoia to believe that many if not most large corporations have little or no qualms about acting illegally for profit.

    How about unethically? Do you think most big companies would refrain from screwing someone over if the only reason not to do so is because it would be unethical?

    Corporations are run by people. Do you think that most people have no qualms about acting unethically/illegally for profit?

    I think the type of people who rise to the top of large corporations generally have no qualms about acting unethically for profit. Their reluctance to act illegally IMO stems from fear of legal repurcussions, and not from ethical objections.

     

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  118.  
    identicon
    Anonymous Coward, Dec 29th, 2010 @ 3:46pm

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: What?

    Certain ethical issues are also legal issues. If people the run large corporations are afraid of legal repercussions then they would also choose to avoid situations and are unethical and also illegal. Where do you draw the line exactly?

    I think the execs at large corporations have qualms about acting unethically, yes. I don't think anyone is looking for ways to rip you off - that is an irrational fear that you seem to have.

     

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  119.  
    icon
    nasch (profile), Dec 29th, 2010 @ 4:15pm

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: What?

    I don't think anyone is looking for ways to rip you off

    This made me laugh out loud. I wonder if maybe you haven't been paying attention the past couple of years.

     

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  120.  
    identicon
    Anonymous Coward, Dec 30th, 2010 @ 8:42am

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: What?

    Paying attention to what exactly?

    There is a difference between saying, 'How can we extract more money from nasch? Let's just remove some money directly from his checking account!' And saying 'I can increase my bonus this quarter by showing sales on the books that won't really happen until next quarter.' No one is trying to steal from you directly. I get the impression that you are more upset by the way corporations protect their interests by stacking incentives against you, which is not unethical or illegal.

     

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  121.  
    icon
    Frank (profile), Jan 1st, 2011 @ 6:18am

    Re: Re: current Regs are the issue

    That is certainly not what i said above ...... banks do provide full disclosure ....... what i was describing was this:

    read Reg CC section on funds availability:

    http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=f71a7c1a2eb297503a09ec b82b4a3909&rgn=div8&view=text&node=12:3.0.1.1.10.2.8.3&idno=12


    then read the following sections of Reg CC related to timelines and responsabilities for returning checks:

    http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=f71a7c1a2eb297503a09ecb82b4a 3909&rgn=div8&view=text&node=12:3.0.1.1.10.3.8.1&idno=12

    http://ecfr.gpoaccess.go v/cgi/t/text/text-idx?c=ecfr&sid=f71a7c1a2eb297503a09ecb82b4a3909&rgn=div8&view=text& ;node=12:3.0.1.1.10.3.8.2&idno=12

    http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&si d=f71a7c1a2eb297503a09ecb82b4a3909&rgn=div8&view=text&node=12:3.0.1.1.10.3.8.3&idno= 12



    Match up the timelines associated with mandated funds availabilty schedule with the timelines provided by the reg for returning items and you see the issue very clearly.

    Could a system be built to clear and validate checks faster? Yes - doesnt sound so difficult ....... but if Reg CC doesn't change it wouldnt close the loophole ......

     

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  122.  
    icon
    ViperPete (profile), Jan 5th, 2011 @ 6:31am

    Re:

    It's not really an idiocy factor, it is all a greed factor.

    All scams, whether they be Nigerian 401 scam, pyramid schemes or even the classic 3-card monty, all rely on the mark being greedy and wanting to get something by putting out little to no effort. The only real stupidity is when their greed overwhelms their common sense allowing them to trust someone claiming to be able to provide something for nothing, specifically the question: "If their method works so well, why are the telling ME about it?"

    For example: the infomercials trying to sell you methods to make money buying/selling real estate or trade stocks (I've considered writing/selling a book that tells you how to get rich by writing/selling a book that tells you how to get rich a humorous concept.)

    In real life, if you try to approach business owners in many niches (that you do not know personally) they are usually very reluctant to provide useful information on how to start and succeed at a similar business yourself (training their competition.)

     

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  123.  
    identicon
    TINA, May 24th, 2012 @ 9:41pm

    I WAS SCAMMED

    I WAS SCAMMED AND I USE TO TALK JUST LIKE SOME OF THESE PEOPLE. SAYING "IF YOU GOT SCAMMED YOUR JUST STUPID!" THE REALITY IS THAT YOU CAN BE TRICKED BY ANYONE AND AT THE RIGHT TIME YOU CAN FALL INTO THE TRAP IF YOU ARE NOT CAREFUL. THESE DAYS JOBS ARE HARD TO FIND AND GOOD PEOPLE ARE FAR AND FEW. PEOPLE NEED TO BE CONTINUALLY TOLD ABOUT ALL SCAMS HAPPENING IN THEIR AREA IN WHICH THEY LIVE. THE LOOPHOLE THE BANK HAS IS BIAS SOME CHECKS THEY SCREEN HARD AND WONT CLEAR FOR DAYS THEN SOME CLEAR RIGHT AWAY. WHEN I WAS SCAMMED THE CHECK CLEARED RIGHT AWAY AND I WITHDRAW AND GAVE THE MONEY AWAY. I LATER FOUND OUT THE CHECK WAS BAD. I HAD ALL OF THE SCAMMERS IDENTIFIED AND ONE ARRESTED BUT I STILL CAN'T GET MY NAME CLEARED. I WORRY IF I CAN GET A GOD JOB WITHOUT BEING JUDGE FOR SOMETHING I DID NOT MEAN TO DO WHEN COMPANIES LOOK AT MY CREDIT ON A ROUTINE SOFT INQUIRY. ITS HARD TO GET UP IN THE MORNING AND I HATE MYSELF SOME DAYS. I GUESS THIS IS WHAT THE WORLD IS ABOUT STEALING AND NOT CARING FOR OTHER PEOPLE. I WANT MY LIFE BACK AND MY NAME TO BE CLEARED FROM CHEXSYSTEMS BECAUSE I CANT TAKE THE STRESS ANYMORE AND IT IS ABOUT TO KILL ME.

     

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  124.  
    identicon
    Anonymous Coward, Aug 18th, 2012 @ 7:31am

    Re: Greedy people...omeome

    Someone wrote me a bad chk and the. Bank cleared it with in 24 hours then at one am there was supposedly a glitch but isn't there supposed to be a three day hold on checks the. Bank. Messed up by the time I relized the sitwas bad it was too late. And now I have to close out my account because of the neglect to train people properly I started paying the money back two days later they tell me to tell the police but what do you tell them

     

    reply to this | link to this | view in thread ]

  125.  
    identicon
    Anonymous Coward, Aug 18th, 2012 @ 7:54am

    Re: Greedy people...omeome

    Someone wrote me a bad chk and the. Bank cleared it with in 24 hours then at one am there was supposedly a glitch but isn't there supposed to be a three day hold on checks the. Bank. Messed up by the time I relized the sitwas bad it was too late. And now I have to close out my account because of the neglect to train people properly I started the money was there well over two weeks then the chk came back bad and ' owe the bank 1700 dollars paying the money back two days later they tell me to tell the police but what do you tell them

     

    reply to this | link to this | view in thread ]


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