NCPA - Daily Policy Digest - Check Fraud is Up -- With Firms and Consumers Paying the Price

Policy Issues

NCPA Publications

Both Sides

Editorial Opinions

Audio/Visual

NATIONAL CENTER FOR POLICY ANALYSIS
/ / / /

Check Fraud is Up -- With Firms and Consumers Paying the Price

Daily Policy Digest

Regulation Issues

Monday, August 13, 2001

Banking experts report that check fraud is much easier than it used to be, in part because of the ease of printing checks by computer. The result is a dramatic rise in unscrupulous use of bank checks.

Bank customers write some 65 billion checks a year.

Illegal activity, including fake checks, counterfeiting and check kiting -- but not checks that bounce for lack of funds -- grew 25 percent in 2000.

Fraudulent checks are expected to cost the economy $10 billion this year -- but banks will only bear about one-tenth of the losses, and customers will be stuck with the rest.

That's because the Uniform Commercial Codes -- which set out how much responsibility banks have to their depositors -- relieved banks of full responsibility for payouts on fraudulent checks when the codes were revised in 1990.

Litigation is often a bank customer's only recourse when his bank fails to catch a fraudulent check drawn against his account. But relief may be on the way. A committee has been established to review the Uniform Commercial Codes. But a date to start its meetings hasn't been announced.

Source: Heather Timmons, "Good Times for Bad Paper," Business Week, August 13, 2001.

For more on Financial Institutions
http://www.ncpa.org/pd/regulat/reg-5.html

Dallas: 12770 Coit Rd., Suite 800 - Dallas, TX 75251-1339 - 972/386-6272 - Fax 972/386-0924
Washington: 601 Pennsylvania Ave. NW, Suite 900 South Building - Washington, DC 20004 - 202/220-3082 - Fax 202/220-3096
Copyright © 2001 National Center for Policy Analysis - All rights reserved.