Loria Stern was initially excited when her small specialty bakery, Eat Your Flowers, received an order for 1,000 cupcakes.
The customer sent a check for $7,500 by priority mail, but Stern was still cautious. She decided to stop by her bank to ask for advice.
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“My bank said, ‘You’ll be protected here, especially if you have an invoice, and you know, all the emails going back and forth,'” Stern told ABC 7. Once the funds cleared, Stern bought the supplies and started baking. But then, the supposed customer said they wanted to cut the order in half and asked for half the money back.
“I responded and said, ‘No, there’s no way we can do that. We’ve already bought all the ingredients. We’ve already made the batter,'” Stern recalled. The next day, $7,500 was pulled from her account.
The bank’s promise of protection fell through
Stern’s story is especially frustrating because, despite her caution in asking her bank for advice, she was misled. The bank assured her that as long as the funds went through the check was good — but it wasn’t.
“[The bank] said, ‘Oh, it’s been cited as a counterfeit check. Essentially, what the scammer did is they stole another company’s checkbook and wrote checks out to different vendors.” Stern told ABC 7. Stern then contacted the company listed on the check, who told her she was the 15th person to call them about the same scam.
In addition to the financial impact, the scam left Stern feeling disheartened that someone would try to scam small businesses.
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How to protect yourself from check scams
Check scams are on the rise, despite an overall decline in check usage. The U.S. Treasury Department reported nearly 700,000 cases of possible check fraud in 2023.
Many customers don’t realize that banks often credit their accounts before the check clears. That is because banks are legally required to make funds available within two business days. But, it can take several business days for banks to realize the check is fake, and they can claw the money back — as Stern learned.
To avoid the stress of similar scams, you can take extra precautions. First, check fraud almost always includes receiving a payment by check and a convincing reason why you need to return some of the funds. Even if the money appears in your account, never refund part of a payment made by check, according to the Federal Trade Commission. The FTC reports that fraudsters use check scams to hire mystery shoppers, virtual assistants or car owners willing to wrap their vehicles in marketing decals.
Instead of taking the check to your bank, cash it at the issuing bank. They can verify the account, ensure that the check is genuine and confirm that there are sufficient funds in the account.
Consider requesting customers pay for large orders with a credit card, which offers more protection, or by cash app, which is more difficult to reverse. Finally, always be skeptical of unusual requests. Stern’s company is better known for its cookies than cupcakes, which is why she was initially skeptical of the order.
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