Credit Union Legal News
Credit Union Check Cashing Scam
By
Feb 29, 2004, 11:00

COUNTERFEIT CHECK
CASHING SCAM THREATENS
CREDIT UNIONS

National Credit Union Administration [NCUA] officials warn credit unions to be on the lookout for counterfeit check cashing scams. Two cases recently turned up at southern California credit unions.

Todays sophisticated desktop publishing makes it easy to produce virtually undetectable fraudulent checks with which to bilk unsuspecting businesses and financial institutions, NCUA officials said. However, the law gives financial institutions “reasonable time” to check the authenticity of a check if they have “reasonable cause” to doubt its collectibility.

In one California case, checks from a legitimate business were copied and made payable to various persons, ranging in dollar amounts from $4,000 to $90,000. Those checks were received by credit union members and deposited at the credit union; no holds were placed on those deposits and losses were caused. Other credit unions placing holds on similar checks did not suffer losses.

Credit unions have a “reasonable” time to determine the authenticity of a check and when it is confirmed, they must then comply with the holding requirements of Regulation CC. The credit union should also check their state’s requirements, NCUA officials warned.

The NCUA supervises and insures more than 7,700 federal credit unions and insures more than 4,600 state-chartered credit unions. Nationwide, the agency insures over $250 billion deposited by more than 64 million credit union members.