There's no doubt about it,
computer technology makes life easier for con artists and identity thieves. Last month, with great fanfare, the U.S. Federal Reserve rolled out its redesigned $20 bill, citing, among other reasons for the new currency, the fact that criminals can scan the old bills and print counterfeit ones using low-cost computers and color laser printers.
While the government slowly tackles the piracy of our currency, there's another form of monetary transaction that is equally vulnerable: the personal check. It too is about to change because of the capabilities of computers, though I wish the event had received as much publicity as the new $20 bills.
I'm talking about the rise of what's called electronic check conversion
or electronic check acceptance (ECA). If you haven't yet experienced it, you most likely will this holiday season.
What will happen is that when you write a check for a retail purchase, the sales associate will hand it back to you and ask you to sign an additional slip of paper. That signature authorizes an electronic fund transfer, which allows the store to deduct the amount of your transaction directly from your bank account.
That last part is what worried me; couldn't con artists use laser printers to forge checks?
When I first encountered this request, I thought it sounded ridiculous. If I wanted to debit my checking account immediately, I'd pay with my ATM card rather than write out a check. I also noticed that the sales associates didn't look at my ID anymore, as they did when I paid with a paper check; they just scanned the check itself.
That last part is what worried me; couldn't con artists use laser printers to forge checks with other people's account numbers on them and thus drain those accounts dry? Thankfully, it turns out the process is more secure than I thought.
Jeff Fowler, a spokesperson for TeleCheck, a division of First Data Corporation, told me there's always some reluctance and confusion whenever a new form of payment emerges. "But with acceptance, confidence goes way up," he said.
According to Fowler, unlike an ATM/debit card, where you punch in your PIN and the money is immediately transferred from your checking account to the merchant, electronic check acceptance is an offline transaction that takes two to three days to process through your bank--about the same amount of time as a paper check. Fowler said that neither the merchant nor TeleCheck gains any more access to your checking account through the process than if you'd paid by paper check.
Bush signs the law
To expedite the transition to electronic checking nationwide, President Bush last week signed a new law that frees banks from the burden of transporting paper checks from location to location. Instead, electronic images of checks now carry the same legal status as paper checks. So say good-bye to those envelopes of canceled checks from your bank every month; they all will be digital.
As for the creation of fake checks, which are as easy to generate today as fake currency, Fowler assured me that there are several security mechanisms in place.
First, the scanned check is stamped "void" so that it cannot be reused later.
Second, should a sales associate void a transaction paid for with a check, then try to ring it up again later so that he or she can pocket either the money or store merchandise, TeleCheck would detect the double transaction and alert the merchant about the suspicious activity. Your checking account could be double billed, but "that could happen right now with a credit transaction," said Fowler.
And third, as with your credit card, sudden increases in check frequency and amounts withdrawn from a single account will also trigger a red flag.
Fowler reminded me that the paper check is very attractive to identity thieves.
If you ever discover a double-check transaction on a bank statement, you still have your returned check and the store receipt. The store also retains your signed receipt. So you could always contact your bank and/or the merchant to set the matter straight. As added protection, the TeleCheck scanner captures an electronic image of your check that is not stored with the merchant, but held by TeleCheck's parent company, First Data Corporation. In the event of a challenge, First Data can provide a copy of the check.
Safer than paper checks
Finally, Fowler reminded me that the paper check is very attractive to identity thieves: Usually a sales associate hands it to a manager who gives it to the person reconciling the store's transactions who then takes it to the bank, where even more people handle it. At any point, your address, phone number, driver's license number, bank routing number, checking account number, and signature are exposed to several individuals. "Really, ECA is much safer," Fowler assured me, "since you keep the original check for your records."
This eased my anxiety a bit, even if I did have to call TeleCheck to get the information. The Federal Reserve has a whole page
devoted to electronic check conversions on its Web site, but how many of us think to consult the Federal Reserve before choosing a payment method? It would have been helpful to have a media education campaign to inform people about this new check technology, just as there has been for the new $20 bills. After all, it is our money.
What do you think of electronic checks? Do you trust them? Do you think they're secure? Tell me about it--TalkBack to me!