Outwitting Bad-Check Passers

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Outwitting Bad Check Passers



Time was when a man's word was as good as his bond. But nowadays, even
the signatures of many persons are worthless - especially to retailers who
are stuck with bad checks.

This Aid offers suggestions that should be helpful in keeping bad
checks out of the cash registers of small stores. For example, the key items
on a check should be examined closely because they can tip off the
owner-manager to a worthless check. Your procedures should also include a
dollar limit on the size of checks you will accept and the type of
identification necessary to back up the signature or endorsement. In
addition, it is profitable to review with employees the checks which the bank
refuses to honour.

A neatly dressed stranger pays for her groceries with a payroll check
issued by a company in a nearby city. In the next few hours, she does the
same thing in several other food stores.

In another community, a middle-aged man pays for a pair of shoes with a
Government check. He moves to other stores and cashes several more Government

In a third city, a well-dressed woman pays for an expensive dress with
a blank check. "I need a little pocket cash," she says. "May I
make the check for $20 more?" The salesclerk agrees, never suspecting
that the customer does not have an account in any bank.

Tomorrow, these three con artists will work in other communities.

The specialist in payroll checks will fill out blank ones which she has
stolen. The passer of Government checks is also a thief. He steals Social
Security checks, tax re-fund checks, and so on from individual mail boxes.
"Blank check" Bessie will hit her victim after the banks have

These three, and others who pass worthless checks, are clever. They live
by their wits and are often glib talkers. But they are not so clever that you
can't outwit them.


Winning the battle of wits against bad-check passers is largely a
matter of knowledge and vigilance. You have to know what you're up against,
pass the information on to your employees, and be constantly on guard when
accepting checks.

You are apt to get seven different kinds of checks: personal,
two-party, payroll, Government, blank, counter, and traveller's. And some
customers may offer money orders.

A Personal Check is written and signed by the individual offering it.
The individual makes it out to you or your firm.

A Two-Party Check is issued by one person, the maker, to a second
person who endorses it so that it may be cashed by a third person. This type
of check is susceptible to fraud because, for one thing, the maker can stop
payment at the bank.

A Payroll Check is issued to an employee for wages or salary earned.
Usually the name of the employer is printed on it, and it has a number and is
signed. In most instances "payroll" is also printed on the check.
The employee's name is printed by a check writing machine or typed. In
metropolitan areas, you should not cash a payroll check that is hand printed,
rubber stamped or typewritten as a payroll check, even if it appears to be
issued by a local business and drawn on a local bank. It may be a different
story in a small community where you know the company officials and the
employee personally.

A Government Check can be issued by the Federal Government, a State, a
county ,or a local government. Such checks cover salaries, tax refunds,
pensions, welfare allotments, and veterans benefits, to mention a few

You should be particularly cautious with government checks. Often they
are stolen and the endorsement has been forged.

In some areas, such thievery is so great that some banks refuse to cash
Social Security, welfare, relief, or income tax checks, unless the customer
has an account with the bank. You should follow this procedure also. In
short, know your endorser.

A Blank Check, sometimes known as a universal check, is no longer
acceptable to most banks due to the Federal Reserve Board regulations that
prohibit standard processing without the encoded characters. This universal
check may be used, but it requires a special collection process by the bank
and incurs a special cost.

A Counter Check is still used by a few banks and is issued to
depositors when they are withdrawing funds from their accounts. It is not
good anywhere else. Sometimes a store has its own counter checks for the
convenience of its customers. A counter check is not negotiable and is so

A Traveller's Check is a check sold with a pre printed amount (usually
in round figures) to travellers who do not want to carry large amounts of
cash. The traveller signs the checks at the time of purchase and should
counter-sign the check only in the presence of the person who cashes them.

In addition, a Money Order can be passed as a check. However, a money
order is usually sent in the mail. Most stores should not accept money orders
in face-to-face transactions.

Some small stores sell money orders. If yours does, never accept a
personal check in payment for money orders. If the purchaser has a valid
checking account, why does he or she need a money order? The check is
possibly no good.


A check carries several key items such as name and location of bank,
date, amount (in figures and spelled out), and signature. Close examination
of such key items can sometimes tip you off to a worthless check. Before
accepting a check, look for:

Non local Banks. Use extra care in examining a check that is drawn on a
non local bank and require positive identification. List the customer's local
and out-of-town address and phone number on the back of the check.

Date. Examine the date for accuracy of day, month, and year. Do not
accept the check if it's not dated, if it's post-dated, or if it's more than
30 days old.

Location. Look first to be sure that the check shows the name, branch,
town and State where the bank is located.

Amount. Be sure that the numerical amount agrees with the written

Legibility. Do not accept a check that is not written legibly. It
should be written and signed in ink and must not have any erasures or
written-over amounts.

Payee. When you take a personal check on your selling floor, have the
customer make it payable to your firm. Special care should be used in taking
a two-party check.

Amount of Purchase. Personal checks should be for the exact amount of
the purchase. The customer should receive no change.

Checks Over Your Limit. Set a limit on the amount - depending on the
amount of your average sale -you will accept on a check. When a customer
wants to go beyond that limit, your salesclerk should refer the customer to

Low Sequence Numbers. Be more cautious with low sequence numbers.
Experience indicates that there seems to be a higher number of these checks
that are returned. Most banks who issue personalised checks begin the numbering
system with 101 and numbering sequence when a customer reorders new checks.

$$$ Amount of Check. Most bad-check passers pass checks in the $25 to
$35 range on the assumption that the retailer will be more cautious when
accepting a larger check.

Types of Merchandise Purchased. Be watchful of the types of merchandise
purchased. Random sizes, selections, lack of concern about prices by
customers, should indicate to you that a little more caution should be
exercised when a check is offered as payment.


Once you are satisfied that the check is okay, the question is,
"Is the person holding the check the right person?" Requiring
identification helps you to answer the question.

But keep in mind that no identification is foolproof. A crook is a
crook no matter what type of identification you ask to see. If the person
wants to forge identification, he or she can.

Some stores demand at least two pieces of identification. It is
important to get enough identification so the person presenting the check can
be identified and located if and when the check turns out to be worthless.

The following types of identification should be useful in determining
the type to use in your store.

Current Automobile Operators License. If licenses in your State do not
carry a photograph of the customer, you may want to ask for a second

Automobile Registration Card. Be sure the name of the State agrees with
the location of the Bank. If it doesn't, the customer should be able to
explain why they don't agree. Also make sure that the signatures on the
registration and check agree.

Shopping Plates. If they bear a signature or laminated photograph,
shopping plates or other credit cards can be used as identification. The
retail merchants' organisation in some communities issues lists of stolen
shopping plates to which you should always refer when identifying the check

Government Passes can also be used for identification in cashing
checks. Picture passes should carry the name of the employing department and
a serial number. Building passes should also carry a signature.

Identification Cards, such as those issued by the armed services,
police departments, and companies, should carry a photo, a description, and a
signature. Police cards should also carry a badge number.

Several types of cards and documents are not good identification. Some
of them (for example, club cards) are easily forged, and others (for example,
customer's duplicate sales checks) were never intended for identification. Unless
they are presented with a current automobile operator's license, do not
accept the following:

- Social Security Cards
- Business Cards
- Club or Organisation Cards
- Bank Books
- Work Permits
- Insurance Cards
- Learner's Permits
- Letters
- Birth Certificates
- Library Cards
- Initialled Jewelry
- Unsigned Credit Cards
- Voter's Registration Cards
- Customer's Duplicate Cards

Some large stores photograph each person who cashes a check along with
the identification. This procedure is a deterrent because bad-check passers
don't want to be photographed.

Some stores, when in doubt about a check, will verify an address and
telephone number in the local telephone directory or with the information
operator. Someone intending to pass a bad check will not necessarily be at
the address shown on the check. If the address and telephone number cannot be
verified, the check should be considered a potentially bad check.


Regardless of the type of identification you require, it is essential
that you and your employees compare the signature on the check with the one
on the identification.

You should also compare the person standing before you with the
photograph and or description on the identification.

You should set a policy for cashing checks, write it down, and instruct
your employees in its use. Your policy might require your approval before a
salesclerk can cash a check. When all checks are handled alike, customers
have no cause to feel that they are being treated unfairly.

Your procedure might include the use of a rubber stamp. Many stores
stamp the lower reverse side of a check and write in the appropriate
information. Here is a sample of such a stamp:

Salesperson - Name and No. _________________________

Auth. Signature ___________________________________

Customer's Address ________________________________

Home Phone ___________ Business Phone ____________

Ident. No. 1 ______________________________________

Ident. No. 2 ______________________________________

Dept. No. ______________ Amount of Sale ____________

Take      Send     
COD     Will Call

Your policy might also include verifying a check through the bank that
issued the check. Some banks will do this only if you are a depositor in the
bank. It might be helpful to establish business accounts in several banks,
particularly where many of your customers have accounts.

You may want to verify a check through a check verification service.
Should you contract with such a service or if you receive lists of bad-check
passers, ask the service to show you proof from the Federal Trade Commission
that their service is in compliance with the Fair Credit Reporting Act.

Employee apathy toward accepting checks is a big reason why stores get
stuck with bad checks. The bigger the store, the more difficult it is to keep
employees interested in catching bad checks. One effective way is to show
employees your bad checks.


Review your policy and procedure on check cashing frequently with your
employees. Remind them of what to look for to spot bad checks.

You are not obligated to take anyone's check. Even when a stranger
presents satisfactory identification, you do not have to accept the check.

In most cases, you accept a check when the customer has met your
identification requirements. You want to make the sale. But never accept a
check if the person presenting it appears to be intoxicated.

Never take a check if the customer acts suspiciously. For example, the
customer may try to rush you or your employees while you are checking identification.

Never take a check that is dated in advance.

Never discriminate when refusing a check. Don't tell a customer that
you can't accept a check because he or she is a college student or lives in a
bad neighbourhood etc. If you do, you may be in violation of a State or
Federal law on discrimination.


Whether or not you recover any money lost on a bad check depends on the
person who gave it to you. He or she may be one of your best customers who
inadvertently gave you a check when the funds in his or her bank account were
insufficient. On the other end of the scale, he or she may be a forger. Once
you are stuck with a bad check, here are some of the situations you face.

Insufficient Funds. Most checks returned because of insufficient funds
clear the second time you deposit them. Notify the customer that his or her
account is overdrawn and that you are re depositing the check. But if the
check is returned a second time, in the localities, it is the retailer's
collection problem and you must try to get the maker to honour the check by
paying immediately.

You should check the practices of your bank. In some areas, for
example, after a second return for insufficient funds, the bank will not let
you re-deposit the check. It is your collection problem. Some stores
prosecute if the customer does not redeem such a check within a week of the
second return. Stores with a reputation for being easy-going about
insufficient funds checks usually get plenty of them.

The procedure for prosecution depends on the State. In one
jurisdiction, for example, a merchant must send the check writer a certified
or registered notice of an intention to prosecute. The bad-check writer then
has five days from date of receipt of that notice to comply before the
merchant can prosecute. In another jurisdiction, the maker has five days
after the date of notice to make the check good. In a third, a resident has
ten days to make good on the check.

No Account. Usually you've lost when the bank returns a check marked
"no account." Such a check is evidence of a swindle or a fraud
unless there has been an extraordinary error. In rare instances, a customer
may issue a check on the wrong bank or on a discontinued account. You should
quickly determine what the circumstances are. If the person is known in the
community, proceed with your collection efforts. If you find yourself
"stuck" with the check, call your police department.

Closed Account. A check marked "closed account" is a warning
of extreme carelessness or fraud. Accounts are closed by both individuals and
by banks. The latter may close an account because of too many overdrafts. An
individual may open a new account by removing funds from an old account. In
such case, the individual may forget that he or she has issued a check that
is still outstanding against the old account.

If you don't get your money back within a reasonable time, you should
consider prosecuting the check writer.

Forgery. Forged checks are worthless - a total loss to you.

Watch out for smudged checks, misspelled words, poor spacing of letters
or numbers indicating that changes may have been made. Payroll checks with
the company's name and address typed in could be fraudulent. Most payroll
checks are printed.

When you suspect forgery, call the police. Thus, you can help yourself
and others against further forgery. Refer a U.S. Government check to the
field office of the U.S. Secret Service.

Check with your lawyer about court collection practices in your area.
In the Washington. D.C. area, for example, merchants cannot collect through
the courts on bad checks used to pay on an open account. The reason is: The
merchant still has the account and no injury was suffered through the
issuance of the check. The account may be collectable through the usual civil
procedures used for collection purposes.

Any alteration, illegal signature(s) of the maker of the check, a
forgery of the endorsement, an erasure or an obliteration on a genuine check
is a crime.

A bad check issued to pay for merchandise is not a theft but a
misdemeanour. It is an exchange - the checks for goods. A misdemeanour
carries a lighter penalty than a theft since a check may be collectable
through civil procedures. Criminal action may be taken through signing a
formal charge with the police.

A forged check transported in interstate commerce is a Federal offence.

Get Evidence. You cannot prosecute bad-check passers without good
evidence. The person who cashed the bad check should be positively identified
and connected with the receiving of money for it.

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