Cashier’s Check Fraud Often Masked by “Too Good To Be True” Offers Online

Online auction sites are a popular way to buy and sell collectibles, jewelry, and even cars. However, the relative anonymity of the Internet means auction transactions are not always safe. A new kind of fraud, cashier's check or "advance fee" fraud, has become more common in keeping with the growing number of online auction and classified ad sites.   

Here’s how it typically works. The typical fraud scenario is somewhat confusing, which is probably one of the reasons they succeed as often as they do. In many cases, large ticket items are the fraud artist’s best vehicle to scam the item’s seller. Let's say you start an online auction for your car and you’re asking $3,000 for immediate purchase.  A foreign “buyer” bids on the car at full asking price. When payment is arranged, the buyer says there is someone in the United States who owes him money.  The person owing your buyer offers to send you a cashier's check for $5,000 and asks that you wire back the difference to the buyer. You agree because they offer you a small commission for brokering the deal and because cashier's checks are often mistakenly thought to be as good as cash.  You receive the cashier's check, deposit it, and wire the leftover sum to the buyer. And you ship the item you think you have been paid for. Several days later your bank informs you that the cashier's check was fraudulent and as the depositing party, you’re responsible for the funds drawn against it (consumers and businesses are legally responsible for the checks they deposit). Unfortunately, you've lost nearly $2,000 of your own money and your merchandise to a scam that really was “too good to be true”.  

There are certainly variations on this scheme.  A seller could just as easily attempt to scam you as a buyer, and not all scammers are from outside the U.S. No legitimate company will offer to pay you by arranging to send a check and asking you to wire some portion back. If that's the pitch, it's a scam. 

Online auction fraud represents the largest number of complaints to the FTC's Consumer Sentinel database.  But don't give up your passion for online auctioning yet. If you safeguard your identity, take your time transferring funds, and keep alert for possible scams, your risk of becoming a victim will be going, going, gone… 

The American Bankers Association offers the following tips to protect consumers from cashier's check and "advance fee" fraud schemes:

• Use extreme caution when dealing with foreign buyers and sellers. 
• Beware the buyer or seller that asks you to send money quickly. Banks can take 10 days or more to determine that a cashier's check is counterfeit. 
• Do not ship the goods or spend any of funds made available by the check until you have verified the item has fully cleared the system. State this policy openly when posting online
• Insist on a cashier's check drawn on a local bank, or a bank that has a local branch. 
• Insist on a cashier's check for the exact amount due.
• Check the FDIC’s Institution Directory (www2.fdic.gov/idasp/index.asp) to make sure the issuing bank is legitimate.
• Become familiar with the buyer and seller protections offered by each auction or classifieds site you visit online. Don't assume the rules are standard for all sites.
• Find out as much as you can about the other party. Be wary of those who try to lure you away from the original site with promises of a better deal.
• Save all transaction information. 
• Protect your privacy! Never provide your Social Security number, driver's license number, credit card number or bank account information.
• Never agree to travel to meet your buyer or seller.