Business & Tech

SEAN P. MURPHY | THE FINE PRINT

A counterfeit check causes a real headache

Lew Cutler.
David L Ryan/Globe Staff
Lew Cutler.

On a late Friday afternoon in November, Lew Cutler did something everyone should do regularly: He took a few minutes to go online and review recent checking account transactions.

What Cutler found stunned him. The balance on his Citizens Bank account was inexplicably close to zero.

The reason: Citizens had debited $8,832.42 from his account for a check he didn’t write.

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Cutler pulled up an image of the check, which was made out to someone named Sharisse E. Florial with the word “timeshare” on the memo line. Cutler knew no such person and has never had a timeshare.

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He immediately realized someone had forged his signature on a counterfeit check. But why had Citizens accepted and paid it? The signature looked nothing like his, the street address was wrong, and the Citizens Bank logo was missing.

“To anyone paying any attention at all, it looked bogus,” Cutler said. “That’s why I was so upset with Citizens.”

A counterfeit check may seem old-fashioned in today’s world of cyber crimes, but one estimate I found online put the annual cost of such scams in the billions of dollars. Remember, a scam artist needs only one purloined check, blank or canceled, to fabricate another.

So who takes the loss on a counterfeit check? The first bank that accepted the check from the scam artist or the one that ultimately paid it — Citizens, in this case?

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Or the accountholder?

Here’s a little primer on checks and banks: A check is a written order to your bank to pay a certain sum of money to the person or business named on it by debiting your account. But the check remains a worthless piece of paper until it is “negotiated” by the named “payee,” in this case, Sharisse Florial.

Florial presented the check at a bank other than Citizens somewhere outside of Massachusetts. She wanted that bank — known as a “depository” bank — to deposit the $8,832.42 into her account, or give her cash.

That bank would then have presented the check to the “drawer” bank — meaning the bank the account is drawn on — in this case Citizens, which took money out of Cutler’s account to pay the depository bank. (Often, a “clearinghouse” facilitates these voluminous transactions between depository and drawer banks).

The guiding legal principle in forgery cases is that the party that was in the best position to have prevented the loss is most responsible and therefore takes the hit.

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Drawer banks are “responsible for knowing their customer’s signature,” according to the federal Office of the Comptroller of the Currency, which regulates the banking industry (and is funded by it through assessments). But the depository bank may be liable if it didn’t adequately scrutinize the check it accepted.

So who takes the loss on a counterfeit check? The first bank that accepted it or the one that ultimately paid it?

But surely, the consumer has no responsibility, while banks fight among themselves over who’s most at fault, right?

It depends.

“If your actions — the way the check or checkbook was handled, issued, completed, or made payable — contributed to the making of the forgery, you may be at least partially liable,” the comptroller’s website says.

So don’t go leaving your checkbook lying around in a public place where a criminal might have access to it.

It is also the consumer’s responsibility to bring any irregularities to the bank’s attention promptly in the case of a suspected forgery.

Cutler, 66, a gift store manager, did all the right things. Within minutes of discovering the counterfeit check he went to the Citizens branch in Arlington Center, where he explained to a manager that he needed the money returned to his account immediately. Cutler had been saving all year for a down payment on a new car and wanted to take advantage of zero percent financing as dealerships reduced their year-end inventories.

The bank manager said the bank would have to investigate. In most cases, it would take two weeks to be straightened out, he said.

Two weeks became two months, and still Cutler was out nearly $9,000.

So, earlier this month, Cutler filed an online complaint with the federal Consumer Finance Protection Bureau, which notified Citizens, which called Cutler. At this point, it had been more than six weeks since Cutler brought the matter to Citizens’ attention.

“They said they had to do their due diligence,” Cutler said. “How much due diligence does it take?”

Another week passed. I got involved, and on the next business day, Cutler got a second call from the bank. This time, he was told his account would be credited $8,832.42 the next day. And it was.

“The person who called didn’t bother to say, ‘Sorry for the inconvenience,’ ” Cutler said.

In my first go-round with the Citizens PR staff, I got a statement saying the bank “regrets that due to a variety of factors the resolution fell outside” the two-week time frame originally promised Cutler.

I asked what exactly were the factors that dragged out the process. The bank sidestepped that one. I asked why it didn’t detect the check as bogus, based on the fake signature. (Remember, banks have a signature card for every customer.) The bank sidestepped that one, too.

I asked whether the bank would be willing to give Cutler a zero-interest auto loan to make up for the one he lost out on due to the bank’s glacial pace of investigation.

Yup, Citizens sidestepped that one, too.

Sean P. Murphy can be reached at smurphy@globe.com. Follow him on Twitter @spmurphyboston.