Brown, Cortez Masto, Warren Sound Alarm on Check Washing Fraud
WASHINGTON, D.C. — Today, Sen. Sherrod Brown (D-OH), Chair of the Senate Committee on Banking, Housing, and Urban Affairs, along with Committee members Senators Catherine Cortez Masto (D-NV) and Elizabeth Warren (D-MA), sent a letter to the American Bankers Association (ABA) expressing concerns regarding increasing check fraud scams, which cost consumers over $800 million last year.
“Check washing has become an elaborate and organized method of successfully scamming consumers and banks,” wrote the Senators. “In light of the many concerns raised by consumers, we are concerned by banks’ inability to effectively identify washed and other types of fraudulently-altered checks, timely process claims, and reimburse those that have lost thousands of dollars. Consumers should not be left waiting for their accounts to be made whole again. It is the responsibility of banks to properly address these concerns and to reimburse consumers in a timely manner.”
Brown has long fought to protect consumers from financial fraud. In July, Brown held a hearing on fraud and scams in the cryptocurrency market. And in September, Brown sent a letter to Meta following reports of a significant number of crypto scams on social media platforms.
A copy of the letter is available here and below:
We write to express our concerns regarding the devasting effects that “check washing” scams are having on working families across the nation.
Check washing occurs when an individual steals a check, usually from the mail system, and washes it in household chemicals to remove the ink. Thieves will then change the payee name and the dollar amount, followed by fraudulently depositing the check, leaving consumers scammed out of potentially thousands of dollars.
Check washing has become an elaborate and organized method of successfully scamming consumers and banks. In 2022, banks saw an 84% increase in check fraud, costing consumers an estimated $815 million. The increase in check fraud has left many Americans in difficult situations where thousands of dollars are stolen from them. Making matters worse, banks are delaying the process of resolving their fraud claims by weeks and even months.
According to reports, banks fail to properly identify fraudulently-altered checks and when they do – they ultimately fail to timely reimburse victims. Reports suggest that primarily larger banks shift liability to other banks that deposit washed and other fraudulent checks, thereby entering a drawn-out process of resolving issues of liability and reimbursement. Delays in resolving claims of fraud further exacerbates the stress that American families are under – whether it’s their inability to cover bills, rent, groceries, or being left in the dark as to when they will be reimbursed. Such circumstances harm consumers and their trust in our financial institutions to hold and secure their funds.
In light of the many concerns raised by consumers, we are concerned by banks inability to effectively identify washed and other types of fraudulently-altered checks, timely process claims, and reimburse those that have lost thousands of dollars. Consumers should not be left waiting for their accounts to be made whole again. It is the responsibility of banks to properly address these concerns and to reimburse consumers in a timely manner. To that end, we urge you to expeditiously come up with a plan to assist your members in addressing this problem by reducing check fraud and resolving fraud claims. Please provide us with a briefing on how you plan to address this issue with your members, by March 17, 2023.
Thank you for your prompt attention to this important issue.
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