The other day I posted on legal scams. This post is a follow up on that one.
An Illinois attorney who was paid with a bad check is out of luck, according to the courts. Even though he correctly deposited the check, and the amount showed up in his account, it was only provisional.
If a bank is not going to honor (pay) a check, it has a certain amount of time to say so, and you might be on the hook for giving the money back. Imagine that someone gives you a check, you put it in your account, and then you spend it. Two days later, your bank calls to tell you that the check was bad and they want the money back. In this particular case, the scamming “client” sent her attorney a check for $300,000 that supposedly was a settlement check from her ex-husband. The attorney deposited the check in his client trust account and then followed the woman’s instructions to wire about $270,000 to a Japanese bank and keep the remaining $30,000 as his fee.
The “ex-husband’s” bank was still within the time limit for dishonoring, or refusing to pay on the check, which is exactly what happened the next business day when they realized the scam. The attorney’s wire had already gone through, and it was too late to reverse the transfer. The fake client’s scam had worked, and the attorney’s bank sued him.
Illinois has something called the “midnight rule,” which says the bank paying the check has until midnight on the next banking day after the banking day they receive the check to send notice that they are refusing payment. If notice is sent after hours, your bank might not get it, and might not notify you, until the day after that. The court in this case said that Saturdays and Sundays do not count as banking days under the rule. The attorney deposited the fraudulent check on Friday, which made the deadline Monday at midnight. His bank didn’t get the notification until Tuesday, but the court said correct notice was given.
As consumers, we are used to a certain level of fraud protection. If your credit card gets stolen, for example, you often don’t have to pay for fraudulent charges. You would think that if you deposit a check and your bank credits your account, the funds are now yours free and clear. Obviously, that’s not always the case.
If you use online banking, you may be able to tell when a deposit is pending. If not, it’s a good idea to wait a few days, especially if you don’t know or completely trust the person who wrote the check.
Another lesson from this is to be vigilant when something doesn’t seem right (someone approaching you for help with a large and immediate wire transfer, for example). The attorney in this case had never met this “client,” who had approached him over email just a few weeks before.
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