September 02, 2011


BBB Cautions Against Overpaid Checks

In recent weeks, the Oklahoma City Better Business Bureau has seen a spike in consumer inquiries concerning out-of-state checks being offered for everything from down payments on sweepstakes winnings to buying puppies. What does the sender hope to gain in sending these overpayments? Here with the answer is the BBB’s Bob Manista.

Why would someone send a check for two or three times the asking price for an item?

If these checks are being sent to pay for goods, they are routinely double or triple the cost of the items being purchased with the understanding that the seller will refund the difference. For years, the BBB has been monitoring the practice and wants consumers and business owners to be extremely cautious whenever an unknown party expects any part of a check to be returned. The scam is simple: The check you’ve received is no good, but since it’s from an out-of-state entity, your bank may place what’s called a “memo deposit” for the amount of the check into your account while the bank waits for it to clear. If you send the con man the money he’s asked for, you’ll find that you’re out not only the payment you sent, but the amount of the check.

We wouldn’t have the amount of the check showing as a balance in our bank until it clears, though, so how are people confused by that?

Depending on your bank and exactly where the bogus check was drawn, the policy might be to place what’s called a “memo deposit” on your account. The BBB has discouraged banks from doing this because we’ve seen a lot of abuse revolving around the practice. Once the bad check has made it through the cashing process up to a certain point, some banks assume it will make it the rest of the way and be approved – and most times, it is. It’s only during the very late phases of the game that the bank (and you) will find out that it’s a bogus check. It can take as long as fourteen days for the bad check to be discovered, and in the meantime, if you’ve sent your repayment or refund check, the con man has skipped out with your money. The BBB advises that consumers be especially careful if the request for a rebate of the check is to be paid via a wire service like Western Union or Moneygram – those wire payments are virtually untraceable.

Sometimes, the check shows up as part of a sweepstakes offer. How does that scam work?

Con men know that organizations like the BBB have educated consumers to be on the lookout for prize giveaways that demand up front money to receive a cash payout. It’s against the law for any prize giveaway to collect funds in exchange for the prize, no matter what the con man says the advance payment is supposed to do. Despite what the con man says, you’re not paying taxes, destination fees, or putting a personal attorney on payroll by returning some portion of the money. In fact, the practice of cashing the con man’s check and returning part of it could be viewed as a form of money laundering, and law enforcement would take a dim view of that. Since they know the public is more aware of the rules, con men have stolen or produced bad checks to mail out to their targets, explaining that the fees need to come out of that money. People fall for this new version of the ploy, thinking that they’ve already covered the money and are at no risk. Again, the banks may place that memo deposit into the person’s account making it look like the money is there when it really isn’t, and they’re in for a rude awakening when the bank learns that the check is no good. The check is worthless, but common folks won’t find that out until they’ve wired most of the value of the check to the con man. Again, by the time the “winner” finds out the check is bad, the con man already has the money.