Complaint Review: Wells Fargo Bank - Yorba Linda California

New check fraud ravaging accounts. Counterfeit 'demand drafts' being used to drain balances. This fraud involves the use of "demand drafts" or "remotely created checks," a type of check often used to allow purchases from telemarketers. It requires no handwritten signature endorsement to deposit. Instead, a statement on the check says that the customer authorized the check. Or, the check may have the customer's printed or typed name. A crook easily can create these checks using your account number and information, typically printed on any check you write. Once someone deposits the demand draft, your account is debited. You might not notice it until you get your monthly statement. By that time, it could be too late. Your bank generally is required to return an unauthorized check by midnight of the banking day after the check is presented for payment. Anyone can create a demand draft. "All it takes is a computer, printer and the right software," warns Elliot Burg, Vermont assistant attorney general. With credit cards, you have the right to dispute a fraudulent charge and likely can get it credited. But "with a bank debit from your bank account, you don't have that right," Burg says. Demand drafts are covered by the Uniform Commercial Code and a patchwork quilt of state regulations. You're not supposed to be liable for unauthorized checks against your account. The problem is proving fraud -- especially with no signature -- if your bank doesn't respond or if it doesn't believe you. FDIC insurance coverage is limited to bank failures. The only thing you can do is tell your bank, "I didn't authorize it. It was forged. I never got a phone call. Or, I did get a call from a telemarketer, but I said no. I never gave my account information out," Burg says. Fraudulent demand drafts often are issued in small enough increments to attract little attention, say $200 to $500. Take Burg's current case: There were 1,500 demand-draft debits made from various bank accounts nationwide. Total: $415,000. A Vermont check-processing company alerted authorities upon noticing half of the drafts printed for two Canadian telemarketers were returned due to insufficient funds or closed accounts. That, according to Burg, almost never happens. Gary Fox, president of Bartow County Bank, Cartersville, Ga., says his bank charged off $18,000 due to fraudulent demand drafts. "Someone who had an account at another bank got the account information out of one of my customers." It's unclear how widespread this type of fraud is. Reason: There's no single place to report it -- despite loads of federal and state bank regulators and law enforcement agencies. But it has attracted the attention of the Federal Reserve Board. The Fed, which could act as early as this month, proposes to make the bank that accepts a fraudulent deposit draft for deposit liable for the loss. Demand-draft fraud prompted the FDIC earlier this year to issue a special alert about the online service, "Qchex.com" Qchex, a subsidiary of Neovi Data Corp., San Diego, lets users anywhere print checks or send demand drafts by e-mail to recipients who print them. Victims included Internet merchants, who sometimes got an overpayment with a request to wire-transfer back excess money. "Qchex's management team met with the FDIC, as well as representatives from financial-institution trade associations, to discuss concerns," says FDIC spokesman Frank Gresock. "At these meetings, Qchex management explained plans to improve their means of authenticating users. Qchex told us it has added a new validation system, similar to PayPal's. Although there are other Internet companies, like Qchex, the FDIC says it has received no complaints about them. Some say it's a matter of time. The National Association of Attorneys General wants the Fed to eliminate demand drafts. "I feel (demand-draft fraud is) happening all the time," Burg says. Demand drafts may be useful in some instances, such as avoiding a late mortgage or credit-card payment or sending money to a child at college. They are fast and can be cheaper than other types of transactions, including electronic checks, says Steve Powell, president of Checks Only, Yucaipa, Calif. His Web site, Checksonly.com, offers demand drafts. Powell says he terminated some users' access to his service after a few fraud complaints, and has implemented stronger safety features. He checks account numbers and routing numbers against an updated database. Can you arrange for your bank to prevent demand drafts from accessing your account? That's up to your bank. But a bank's automated system likely can't recognize demand drafts. So about all you can do is: Hang up on telemarketers. Never reveal personal financial information. Frequently review your checking-account statements online. Only do business with banks that give good customer service. Check bank complaints at www.ripoffreport.com. Call your bank immediately and notify law enforcement if you have problems.