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OUTWITTING BAD-CHECK PASSERS

SUMMARY

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 honor.

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 checks.

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 closed.

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.

TYPES OF CHECKS

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 traveler'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 handprinted, 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 examples.

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 marked.

A Traveler's Check is a check sold with a preprinted amount

(usually in round figures) to travelers who do not want to carry

large amounts of cash. The traveler 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.

LOOK FOR KEY ITEMS

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:

Nonlocal Banks. Use extra care in examining a check that is

drawn on a nonlocal 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 amount.

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 you.

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

personalized 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.

REQUIRE IDENTIFICATION

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 identification.

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' organization in some

communities issues lists of stolen shopping plates to which you

should always refer when identifying the check passer.

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

saleschecks) 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 Organization Cards

- Bank Books

- Work Permits

- Insurance Cards

- Learner's Permits

- Letters

- Birth Certificates

- Library Cards

- Initialed 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.

COMPARE SIGNATURES

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.

REFUSING A CHECK

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 neighborhood etc. If you do, you may

be in violation of a State or Federal law on discrimination.

WHAT CAN YOU RECOVER?

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

redepositing 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 honor 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

misdemeanor. It is an exchange - the checks for goods. A

misdemeanor 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

offense.

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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