Low Tech Soars
Despite all the talk about electronic banking one low tech device is increasingly popular: the checkbook. And as check writing has boomed, so has check fraud. Check fraud (which was estimated to be more than $10 billion, paid by Businesses, Consumers, Banks and Check Guarantee companies) cost banks $815 million in 1993, up 43% from 1991, according to the most recent survey by the American Bankers Association (ABA).
The ABA further noted in the study that the number of check fraud cases more than doubled between 1991 and 1993, from 550,000 cases to 1.3 million. Clearly, it's a big problem for the banking industry.
Checks remain the most popular method of payment for all consumer purchases over $25.00 that aren't groceries, the ABA says. Most fraudulent checks are written for less than $1,000.00 and don't stir much curiosity at the bank. And given that U.S. banks will process about 67 Billion checks this year, up from 46 billion 10 years ago, the ABA says spotting a fraudulent one is like looking for a proverbial needle in a haystack.
The number of checks are up and the growth is significant, with transactions growing 45.6% from 1980 to 1995.
While the number of checks is significant, the dollar value of growth is even greater, growing 57.5% from 1980's $26.8 trillion to more than $42.2 trillion this year.
A difference of opinion:
Security experts blame banks for the problem. Attempts to remain "Customer friendly" create a fertile climate for fraud, they say.
Check Facts:
* Check use is booming, and so are crimes involving checks. * Banks are looking for ways to combat check fraud. * Consumers and Merchants are paying more for bounced checks.
It would seem to make sense to require two forms of identification from anyone opening a new account. But such measures would leave customers feeling insulted and inconvenienced. "Within the friendliest environment is where the criminal element exists," says Robert Rasor, a Secret Service spokesman. "The bad guys play on the fact that the bank is trying to be customer-oriented," says Rasor.
Consumer Advocates, however, see it another way, believing banks are taking advantage of an opportunity to make money, and perhaps reverse Reg. Q. Some consumer advocates complain banks use fraud as an excuse to charge high fees for return check fees. Janice Shields, a researcher at the Center for Study of Responsive law, says revenue from bounced check fees in 1993 was more than five times the losses due to check fraud that year, while banks boar less than 8.5% of the check problem.
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