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Lost checkbook a surprisingly big deal

By Claes Bell, CFA · Bankrate.com
Thursday, April 12, 2012
Posted: 3 pm ET

Most of the time, losing your debit card is actually not all that bad. Sure, it's a hassle, but there are laws specifically protecting you from liability for fraudulent purchases, as long as you contact the bank within 48 hours to let them know what happened. After your report it lost and the bank sends you a new card, you never really have to worry about it again.

Well, not so with checks. Since blogging yesterday about the check blown 170 miles by a tornado, I've spent a little time looking into consumer protection laws surrounding checks. It turns out, there's not much there.

For instance, say you reported a lost checkbook to your bank and ordered a stop payment on all those checks in case some not-very-honest person tried to use it to make fraudulent purchases or write themselves a check to "cash." You go ahead and pay your $30 stop-payment fee and consider those lost checks taken care of.

Actually, no. According to the Uniform Commercial Code, the 1950s-era set of business laws passed in all 50 states, that bank only has to honor your stop-payment order for six months. After that, customers have to renew the order, likely paying another stop-payment fee.

At most banks, the only way out of this cycle is closing your account and opening a new one, which requires all kinds of fun chores, e.g., rejiggering all your automatic bill payments, filing new direct-deposit paperwork at work and making sure everyone you wrote legitimate checks to gets paid.

Well, that was pretty horrible, you say to yourself, but at least it's all taken care of. Not so fast! You'll also need to file a police report for the lost checkbook, because there's a whole separate category of folks you may to have to deal with: any merchants a criminal has ripped off using your bad checks.

Sure, some merchants may take your word for it when you say your checkbook was lost, but others will require you to file an Affidavit of Forgery, swearing it wasn't you who made those payments. More aggressive merchants may come after you for the money anyway, and you could be forced to hire a lawyer to get them off your back.

In summary, as much of a hassle as losing a credit or debit card can be, it appears to be small potatoes compared to the cascade of bad juju that can come from a lost checkbook; so much so that I'd even consider not taking along a checkbook with you on your daily travels if you can avoid it. If you're a fan of writing checks, you may want to check your bank's deposit agreement and disclosures to see how they handle lost checks. They may have longer-lasting or permanent stop-payment orders available and more robust protections for consumers than required by law.

What do you think? Are paper checks worth the risk? Has anyone out there every experienced this?

Follow me on Twitter: @ClaesBell.

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