This happened to someone close to me & what I am discovering about it is absolutely outrageous!
I submit: Check Clearing for the 21st Century Act, aka “Check 21”
was passed unanimously by the House of Representatives and the Senate in October 2003. It was signed by President George W. Bush on October 28, 2003 and became effective October 28, 2004.
Here's the deal in a nutshell with information & further reading linked below..
Apparently #Congress had a desire in 2003 to "make it easier for business to accept checks as payment over the telephone". As is normally the case when congress / #government becomes involved with business / banks the "unintended consequences" of this can be very harmful to #consumers financial health while remediation can be extremely difficult.
I realize that "checks" are a somewhat antiquated form of payment these days but why on earth would congress use LAW to SIMPLIFY the act of committing fraud?!
Many Americans "like to think" the government is looking out for us when it comes to cyber crime when in reality #they seem to be making the commision of these crimes EASIER!
As a result of the Check 21 law a person needs ONLY the checking account routing number and account number to create a "demand draft" which can be used to withdraw any amount of funds from the account. NO proof of ID is required! NO PIN is required! No security measure exist at all. This is completely rediculous! Those two numbers are found on the bottom of every check. Every check a person writes passes through God only knows how many hands of how many people who happen to be underwater and under employed!
As a result of this Check 21 Act "law" here is what happened to someone close to me / us..
Someone we know accidently left their checkbook in a cart at a retailer, we all make mistakes on occasion. When, a short time later, they realized they had done this they returned to the store and fortunately were able to retrieve their checkbook and all seemed fine.
All seemed fine UNTIL they discovered that ALL the fiat (ie; FAKE MONEY) in their checking account had been COMPLETELY withdrawn! And not ONLY that but apparently when the bank was asked, BY the perpetrator, for the balance on the account the bank always & automatically INCLUDES the amount of overdraft protection IN the balance! In this case that amounted to an additional $600.00 worth of FAKE FIAT that DIDN'T EVEN EXIST being REMOVED from the account!
To add insult to injury the "victim" of the crime's employer uses direct deposit so the bank grabbed the $600.00 overdraft charge out of their NEXT paycheck!
We called our bank to be able to better understand the situation and were informed that using a demand draft, with its complete lack of security, is one of the top cyber crime / identity theft techniques in use today.
The #bank in question is attempting to discover the IP address of the computer used to create the demand draft but also stating that finding the IP address may be a very difficult task if they can do it at all.
So where does all this leave the "victim" of the crime?
With an EMPTY checking account while an "investigation" is underway that may take up to 45 days and may result in pretty much nothing! In the mean time they are on their own, with NO funds, 4 mouths to feed and bills to pay!
This is a security outrage perpetrated on us by the government itself through LAW!
When this is combined with other congressional actions such as the abolishment of #usury laws in the 1980's (1978, Marquette vs. First of Omaha – Supreme Court allows banks to export the usury laws of their home state nationwide and sets off a competitive wave of deregulation, resulting in the complete elimination of usury rate ceilings in South Dakota and Delaware, among others.), the overhaul of #bankruptcy laws in 2005, the bailing out of the Too Big To Fail (Jail) banks who caused the 2008 crash and God only knows what else one can begin to see a pattern emerge that certainly seems to make congress itself complicit in many of the problems being experienced by Americans today.. God help us all.
Thanks for allowing me to vent.. Below is some additional information
Here's the definition of a demand draft from investopedia.com click here for the source)
Definition of 'Demand Draft'
A method used by individuals to make transfer payments from one bank account to another. Demand drafts are marketed as a relatively secure method for cashing checks. The major difference between demand drafts and normal checks is that demand drafts do not require a signature in order to be cashed.
Also known as "remotely created checks".
Investopedia explains 'Demand Draft'
Demand drafts were originally designed to benefit legitimate telemarketers who needed to withdraw funds from customer checking accounts. However, the lack of a signature required to authorize the transfers have left demand drafts open to fraudulent use. The only information needed to create a demand draft is a bank account number and a bank routing number - this information is found on a standard check.
In 2005, the Federal Reserve proposed new regulations over the fraudulent use of demand drafts. The regulation increases a victim's ability to claim a refund and makes banks more accountable for cashing fraudulent checks.
[Below is an excerpt from an online articles at perimetergrid.com click here for the full article)
Some people — usually those of us who remember the days before debit cards — eschew all these fancy online and electronic forms of payment and instead stick to good old fashioned checks. After all, no one can possibly steal those! They’re paper, and have your signature on them. This is the ultimate in perception differing from reality — it’s hard to imagine a less secure way to make a payment than a paper check.
First of all, there’s the ease of committing fraud with checks. A thief with a stolen check (or deposit slip) has all they need to take money from your account — the routing number and account number (found at the bottom of the check in MICR letters.) Note that the thief doesn’t need any kind of ID… or a PIN… or a physical card… or a CCv2 code… or even to know your name. No, the numbers will do. What can they do with a stolen check?
There are three basic things:
Order up a whole book of checks with your information and account numbers on them. No ID is required to order checkbooks online. They can then spend these checks anywhere, and the bank will process them — you probably won’t find out until your account is empty and you start getting NSF notices.
Remove the amount and recipient from the check and write it out to themselves instead. This is a bigger problem for institutional checks, which are often printed on a laser printer. It’s really easy to remove laser-printed text from an offset-printed check — just lay some Scotch tape over the laser text, rub it hard with your fingernail, and peel the text off. Then you can print out a new amount and recipient with your own laser printer, and it looks just like the real thing. Chemical agents (“check washing”) can do this with ball-point pen ink, too, though it’s not so easy.
Issue a demand draft (“paperless check.”) This is what happens when you pay by phone with your checking account number, or use an automated bill pay service, or send money via PayPal. Using your routing number and account number, money is simply removed from your account and put into someone else’s. No authorization or authentication is used, your name is not even required. Yes, really. Anyone can do this from any account to any other account. For a while, you used to be able to do this from a web site.
Second, there’s the difficulty in getting your money back or even stopping the fraud! With a credit card (and to a lesser extent, a debit card), it’s pretty simple — you call the bank, say you did not authorize a charge, and the credit card company removes the charge. It is then up to them to prove you did make the charge, such as by getting a signed receipt from the merchant and matching your signature. So long as you report the fraud within 30 days, you are not liable — the worst the card company can do to you is to cancel your card (but you still don’t have to pay for the charge you didn’t make.) In theory, you’re liable for up to $50, but almost no card issuers really charge this since it’s terrible customer service (“Sorry you were stolen from! Give us $50!”)
With checks, the money is already gone. If you report a check as fraudulent, there is no federal law saying the bank is liable — it’s up to the bank’s own policies and in some cases a hodgepodge of state laws whether they have to help you at all. The bank may get back to you in 60 to 90 days (during which you don’t have the money, even if it was the entire contents of your checking account.) You have to report the fraud on a paper letter, with a notarized signature, usually by certified mail. What’s more, you have to prove that the checks were not authorized — the burden of proof is on you, not the bank or merchant — and you have to do it to each party from which you’re trying to reclaim money. If a thief wrote bad checks in 20 different jurisdictions, you may be dealing with this for years.
Worse yet, you can’t stop the fraud from taking place. The thief can keep writing checks on your account even after you’ve started reporting them as fraud, and even after you’ve closed the account. Every time the thief writes a bad check on a closed account (the classic practice known as “paperhanging”, a favorite of Frank Abagnale during his criminal youth), your bank will reopen the account and send you an NSF notice. You have to dispute all of these, too. And finally, your account (and possibly your name) will go into ChexSystems (the equivalent of the credit bureaus used to check people’s checking account history) as fraudulent, which will make it difficult or impossible to get new checking accounts for many years. On the bright side, it will make it harder for the thief to open accounts in your name, but that’s little consolation since he can keep using the closed one he already has.
From a security perspective, checking accounts are horrid. They come from a day when authentication and authorization were unheard-of, and security came mainly from the idea that no one would figure out how to subvert the system.
What can you do to protect yourself?
Don’t use checks. If any method of payment is offered aside from checks, use that.
Don’t use demand drafts, either — they’re checks. Don’t pay by phone using a checking account number — use a credit/debit card.
If you must write paper checks, use them only to pay bills, dealing with relatively trusted merchants. It doesn’t make you totally safe, of course, but it helps some. Use gel ink to write checks (it’s harder to wash), or a dot-matrix printer to print them (the impact-printed ink is nigh-impossible to remove.) According to Abagnale’s The Art of the Steal, this makes check-washing nearly impossible (though ordering up new checks in your name still works.) Incidentally, The Art of the Steal is a fantastic (and very short) book, and I highly recommend it to anyone interested in security — it gives a great view into the security mindset, looking at all parts of a system and seeing how it can be subverted.
Don’t store any more money in your checking account than you have to. You’ll still have to fight every fraudulent transaction to stop the bank trying to collect it from you, but at least you’ll still have your money while you’re doing it.
The sooner we move on from this antiquated and unsafe payment system, the better.