Is EZ Shield Check Fraud Protection Worth It?

I recently reordered checks online. I confess I have no loyalty when it comes to check printers. I just look for cheap checks, and as long as the site is secure, I take whatever deal I can find.

As I completed my order, I was offered EZ Shield fraud protection as an optional add-on for $1.95 per box. The service offered to reimburse me within 72 hours – and up to $25,000 – if my checks were misused by a crook.

$1.95 isn’t a lot of money so I would imagine it is a no-brainer for some customers. But being a cheapskate, I wondered whether I should pay for it. And being a financial writer, I decided to investigate.

While I am very familiar with the rules that protect consumers if their credit or debit cards are used fraudulently, I had no idea what happens when the same thing happens with checks. As it turns out, it wasn’t as easy as I thought to track this information down. I didn’t find the usual government fact sheet explaining my rights. So I dug a little deeper.

First, though, some background: EZ Shield promises to “expedite the payment(s) owed to Customers for the Reimbursable Items on terms for which Customer would later be reimbursed by the financial institution on which the subject checks were drawn.” (In other words, they offer to speed up reimbursement on fraudulent checks financial institutions are likely to reimburse customers for anyway.)

EZ Shield features two levels of services: “Assisted,” where an adviser will walk the consumer through the steps to get reimbursed, or ”Fully Managed,” where the customer signs a limited power of attorney and other documentation including a police report and fraud form. Copies of the canceled checks may be required as well. It covers three types of check fraud:

• Forged signatures,
• Forged endorsements, and
• Altered checks

I tracked down Beau J. Hurtig, an attorney with Fredrikson & Byron, P.A. in Minneapolis who has represented banks in instances involving check fraud. He explained that fraudulent checks are covered by the Uniform Commercial Code Articles 3 and 4, and many of the details focus on establishing liability among the financial institutions involved.

“Typically the real fight in these cases is between the depository bank (where the payee deposited the check) and the drawee bank (the bank of the customer who wrote the check),” said Hurtig. Unless a consumer is somehow negligent – gives checks to someone, or doesn’t check their statements within 60 days of receiving them, for example – they are usually off the hook and it’s the banks that are left to fight over who is stuck with the bad check.

I asked him how long it takes to get reimbursed by a financial institution in check fraud cases. He said in his experience, as long as there is a reasonable case, the bank will make good on the check quickly for two reasons.

The first is financial. If a bank doesn’t reimburse the customer right away and the customer sues, the bank may be liable for consequential damages (late fees for other accounts on which checks bounced, for example). The second reason is practical. Financial institutions are highly regulated, and regulators may not take kindly to a bank that makes a habit out of dragging its feet when customers are victims of fraud.

But one point Beau made was especially salient. His view is that in most cases, big-dollar check fraud is not focused on individual accounts, but on commercial accounts where the payout is so much higher. That doesn’t mean consumers don’t have anything to worry about, but a consumer with a few hundred, or even a few thousand, dollars sitting in his or her account is not nearly as attractive a target as a large company where a check scam could net $10,000 – $250,000 or more.

Victor Searcy, manager of fraud operations at Identity Theft 911, headed fraud and claims investigations at several banks, said his experience was similar. He said the banks he worked at would usually reimburse customers quickly – often within 24 – 48 hours for smaller fraud cases. And he also questioned whether consumers would want to go through the steps needed to take advantage of the EZ Shield service, especially the time and hassle involved in filing a police report that may not even be required by the financial institution.  He did point out that forged endorsements or altered checks can take longer to resolve, and that’s a situation where this service may be useful.

Reading the terms and conditions of the EZ Shield agreement, I came to the conclusion that if I needed to file a claim under this service, I would likely have to jump through the same hoops as I would with my own financial institution, and maybe a few more. Would I really want to bother with that? And if I didn’t have a fraud claim that my bank was likely to reimburse me for, EZ Shield wouldn’t likely do so either.

In the end I decided to save the $1.95 per box and take my chances. If I wanted to gamble, I could (almost) buy two lottery tickets with that money instead. I figure the odds here are in my favor.