Dear Dr. Don,
I received a check from my new tenant and deposited it into my checking account. The check cleared.
I then wrote my own check to return some of the cash to my new tenant, because the tenant's original check was written for more than what she owed me. Besides, she said she urgently needed money to pay her airfare.
Turns out, the whole thing was a scheme. My new tenant had stopped payment on the original check, even though it cleared my bank three days ago. Meanwhile, my bank debited my account for the amount of the refund check I wrote to my tenant. Now, I have a negative bank balance and the bank says it is not liable.
What is the meaning of "funds available"? How many days can a "stop payment" be placed on a check after the check has cleared? By the way, the check amount was $3,550. Please advise me what to do.
-- Matthew Morass
I'm sorry you fell victim to this type of check fraud. It's a common fraud that plays out in different ways. But typically, for one reason or another, you accept a check for an amount greater than what you're owed and are asked to pay back the difference.
It won't fix your problem, but for other Bankrate readers, the National Consumers League's "Tips for Recognizing and Avoiding Fake Check Scams" describes some different ways this scam plays out.
Your bank has very strict rules it must follow concerning when deposited funds must become available to you in the account. The Federal Reserve Board's publication "Compliance with Regulation CC" is targeted to bankers, but still provides a good overview of these rules.
Just because the funds are available doesn't mean they've cleared the payer's bank. If the check hasn't cleared the payer's bank, the payer still has the ability to place a "stop payment" on the check.
The scam artist is taking advantage of the "float" in the check-clearing system. Float is the time between the check being presented for payment and the check being cleared at the payer's bank. The funds can be made available to you, but may not have actually cleared the payer's bank.
The liability faced in writing checks against funds available in your account that haven't cleared the payer's bank is yours and not the bank's. It's a hard lesson, but by sharing it with Bankrate readers, others can learn from your experience.
Note: I'd like to thank Harriet Clark, a private banker at First National Bank of Chester County, Pa., for her help and insights in framing this reply.
Want to see the big (financial) picture? Get Bankrate's major financial stories of the week delivered to your inbox every Friday.
Ask the adviserTo ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "Financing a home," "Saving & Investing" or "Money." Read more Dr. Don columns for additional personal finance advice.
Create a news alert for "checking"