Check Security Online Special

Perhaps the biggest problem for companies dealing with fraudulent checks and “holder in due course” occurs when collection agencies get involved. Some agencies make a living buying disputed checks and then sueing the company for payment. These companies or individuals have the time and resources to do this because that is their primary business.

Example 3

A business mails many checks in a given week. One of these checks becomes lost in the mail. The designated recipient complains the check never arrived, so the company puts a “Stop Payment” on the original check and reissues it. The reissued check is cashed without problem. A few days later the original check appears at a check cashing location. The business’s bank refuses to pay. Everything seems fine. Then, a few months later, the check cashing store threatens to sue if it does not receive payment. Under “holder in due course” the store sells the check to a collection agency and the legal battle begins.

How It Happened

“The scary part about that ... in most of those cases, there is tremendous collusion between check cashers and the criminal,” Abagnale said. He claimed that criminals will often make deals with the check cashers, admitting the check to be fraudulent but agreeing to give the check casher a percentage if it clears. “It’s hard to prove,” Abagnale said.

Prevention Measures

Very large checks should be sent by certified mail or an established delivery service (e.g., UPS, Fed-Ex).

Further, Abagnale recommended the following statement be printed on every check (preferably above the signature line) to avoid trouble with “holder in due course” claims: “This check expires and is void XX days after the issue date.” He suggested 30.

He also said it is important to remember that “Stop Payment” orders are only good for six months. Once the “Stop Payment” has been issued, it should be renewed at least three times.