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Say that someone gets ahold of my checking information and writes a fraudulent check from my account. Then they cash it at a check cashing store.

I notice a week or so later, call my bank, and report the check as fraudulent - so the bank attempts to reverse the money transfer due to the check.

If the check were deposited at another bank, my understanding is that it would be easy for my bank to reverse the charge as fraudulent. However, someone told me that if the check is cashed at a check cashing place, due to a specific law, it could be nearly impossible for my bank to retrieve the amount of the fraudulent check to put back in my account.

Is there any truth to this, or would it be just as easy for my bank to recover the money from a check cashing place as it would be to recover it from another bank?

(I know this question might sound suspect, but I am asking because someone told me that check cashing places adhere to different laws from banks, which I don't necessarily believe but also can't seem to find any information on on the internet.)

  • Check cashing places DEFINITELY adhere to different laws, but I think that's primarily related to lending. There are banking laws that trigger when a loan is above something like $2,500, which is why the check cashing places will only lend up to that amount. I doubt there's a different fraud recovery mechanism in place though, so I'm skeptical with you on that one. – quid Jan 12 at 2:27
  • Lending limits and the maximum interest rates they charge for lending are set by the state. – mhoran_psprep Jan 12 at 10:38
  • Worst case scenario is the scammer takes the check to your bank and cashes it there. No way to reverse that transaction. But it is higher risk for the scammer. – The Photon Jan 13 at 15:48
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With buying the (false) check, the cash-service buys also the risk that comes with it.

For you, there is no difference. The check is fraud, you get your money back, and the cash-service is out of the amount. It is that business' problem to find the guy that gave them the bad check and get the money back from him.

[Because of that, they are probably better than your bank at identifying fraud checks right away... more people had that idea already]

  • And this also accounts for the high fees such stores charge for check cashing – Ben Voigt Jan 12 at 23:18
  • So if someone does the scam where they send a check that massively overpays for something, and then ask for a refund of the overpayment, and the person who receives the check cashes at a check-cashing place, it's the check-cashing place, not the person who received the check, that is out the money? – Acccumulation Jan 12 at 23:33
  • at first, yes. But consider when someone cashes a check, they want to see ID, they have video tapes, and amount limits. They'll get the guy, and sue his butt off. Do you think they are stupid? – Aganju Jan 13 at 0:26
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The check cashing service still has to have a connection to the banking system. They need to be able to get the money from the check writers bank account. It should not matter if the fraudulent check is cashed at a bank, a convince store that offers the service or check cashing service; your bank should be able to reverse the transaction if you meet the timing requirements.

In many cases these places that accept third-party checks and cash them are relying on a vendor to provide the ID verification services. This vendor also charges the store a service fee which they either charge the person cashing the check, or they factor it into their other business costs.

The lending side of the check cashing business that allows post-dated checks, provide payday loans, or car title loans are regulated by the state. The state sets a maximum interest rate. The state may also limit their locations, to avoid being predatory.

The state also has regulations on these check cashing functions. The regulate how they have to document each transaction, and they may limit the maximum fee that can be charged. These business have to be registered with the state.

That means that if there is a fraudulent transaction, you should be able to get it reversed.

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    While everything this answer says is correct, it entirely misses the point. None of the anti-fraud or documentation measures (or lack thereof) conducted by the entity cashing the check have any effect on the contract between accountholder and depository. The bank can only honor withdrawal instructions issued by the accountholder, someone the accountholder has given permission to, or court orders. What evidence the retail check cashing storefront collected may affect the determination of valid vs unauthorized, but it doesn't change the treatment of unauthorized transactions. – Ben Voigt Jan 12 at 17:48
  • That is, the bank must reverse an unauthorized transaction. Difficulty in reclaiming the funds is their problem, not the account holder's. (The bank will make it the retail check cashing store's problem) – Ben Voigt Jan 12 at 17:49

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