Home > Identity Theft > Can Your Own ‘Negligence’ Leave You Liable for Fraud?

Comments 0 Comments

The old checkbook is becoming a bit of a historical artifact, as far as financial products go. They’re still a favorite tool for fraudsters, and as one woman found out the hard way, they don’t have the same consumer protections as credit cards and debit cards.

NBC Los Angeles reported the story: Someone got into Maili McHenry’s unlocked car a few months ago and stole her checkbook from her locked glove compartment, so when she noticed a $500 check clear her account days later, she called her bank.

“I called my bank right away and they told me, ‘Oh, this isn’t going to be a problem. It’s clearly not your signature,'” McHenry told NBC.

Later, the bank denied her fraud claim, saying her negligence led to the theft. After reporters at NBC asked the bank to review the claim again, McHenry got her money back.

This story has a happy ending for the consumer, but it’s also a cautionary tale: Banks can deny check fraud claims because of negligence. Banks would have to prove negligence on a case-by-case basis, said Nessa Feddis, senior vice president and deputy chief counsel for Consumer Protection and Payments Center for Regulatory Compliance Government Relations Regulatory & Trust Affairs at the American Bankers Association.

“Usually banks will not impose liability unless there really was some significant negligence or if it had been occurring over a long period of time,” Feddis said. She gave an example: If your roommate takes your checkbook and repeatedly writes fraudulent checks, but you don’t report it for few months, you may be considered negligent.

Typically, banks will pay for fraudulent checks, but Feddis said consumers shouldn’t count on it. She said it’s important to guard your checkbooks and immediately report it if checks are missing.

This is a little bit different than how credit card and debit card fraud protections work, because these products are regulated by different laws. Some card networks and issuers have zero-liability policies, but there’s a chance you could be liable for fraud. If your credit card is stolen, you’re liable for only up to $50 if the physical card is used and $0 for phone or Internet charges (where the card is not present). Debit card fraud, on the other hand, must be reported within two business days to keep the fraud liability to $50. After that, it goes up to $500, and you could be liable for all fraudulent purchases if the spree goes on unreported for long enough.

Feddis’s advice applies across all financial products: Keep track of your cards and checks, monitor your accounts and act as soon as you notice something suspicious.

More Money-Saving Reads:

Image: Monkey Business

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team