The rise of electronic payments has made transactions quicker and more convenient for businesses and consumers alike. One of the most popular forms of digital payment is the electronic check (eCheck). While they can be a safe, fast, and reliable option, eCheck scams are on the rise, leaving businesses and individuals vulnerable to fraud. Knowing what these scams are and how to deal with them will make using eChecks less risky.
Why Should You Be Concerned About eChecks?
While eChecks are generally secure, they come with some risks. The main danger is that eChecks can be manipulated before they clear. Fraudsters can exploit the processing delay to steal money or create fake transactions.
1. Processing Delays and Lack of Immediate Verification
Unlike credit card payments, eChecks take time to process. The ACH network checks if the funds are available, but this can take a few days. During this time, the funds might appear in the recipient’s account, but the check isn’t fully cleared yet. Scammers can use this delay to request a refund or withdraw money before the check clears.
2. eCheck Scams
Scammers often target businesses, charities, and individuals by sending large payments via eCheck and then requesting a refund before the check clears. Since eChecks can’t be refunded instantly like credit card payments, the recipient may issue a refund through a paper check or wire transfer. When the eCheck bounces, the recipient ends up losing both the payment and the refund.
Common eCheck Scams to Watch Out For
eChecks are convenient, but they also open the door to potential scams if you’re not careful. Scammers often target businesses and nonprofits because they know that eChecks can take time to clear, which allows them to trick you. Here are some common eCheck scams to watch out for:
1. Fake or Stolen Account Information
Scammers can steal bank account details or create fake eChecks to make fraudulent payments. Since eChecks take time to clear, the scam may not be detected right away, allowing the fraudster to take advantage of the situation.
2. The Overpayment Scam
In this scam, the fraudster sends an eCheck for more money than is owed and then asks for a refund of the extra amount. Once the refund is sent, the original eCheck bounces, leaving the business with no money and a loss.
3. Refund Requests Before the Check Clears
Some scammers send an eCheck and then quickly request a refund before it has fully cleared. Businesses may send the refund, only to find out later that the eCheck was invalid, leaving them out of pocket.
4. Nonprofit Donation Fraud
Nonprofits are common targets for eCheck scams. Scammers may donate large sums via eCheck and then request a refund after the funds appear to clear. Since eChecks take longer to clear, nonprofits may send the refund before realizing the check has bounced.
5. Unsolicited eCheck Payments
In this scam, fraudsters send an unexpected eCheck for a product or service and then ask for a refund, claiming it was sent by mistake. If the refund is sent before the eCheck clears, the business loses money when the check bounces.
6. Account Hacking or Phishing
Scammers often use phishing emails to steal account details, which they then use to create fraudulent eChecks. This is particularly dangerous because the scammer can keep using the stolen account information to make more fraudulent payments.
How to Avoid eCheck Scams
You don’t have to let eCheck scams catch you off guard. There are a few simple steps you can take to protect yourself and your business from fraud:
1. Wait for the eCheck to Clear
The most important rule is to wait until the eCheck clears. Unlike credit card payments, eChecks can take a few days to process. Make sure the check has fully cleared before taking any action, like sending a refund or shipping a product. If there’s an issue, the bank will notify you within five days.
2. Verify Suspicious Transactions
If you receive an eCheck that’s for a large amount or seems suspicious, verify the transaction before doing anything. You can contact your payment processor or the ACH network to confirm whether the payment is legitimate. This extra step can save you from falling for fraud.
3. Use Positive Pay or ACH Blocking
Consider using Positive Pay or ACH blocking. Positive Pay allows your bank to compare eChecks against an authorized list, preventing unauthorized checks from being processed. ACH blocking can help limit unauthorized transactions from your account.
4. Set Up Secure Payment Systems
Work with a trusted payment processor that uses encryption and authentication tools to protect your transactions. A secure system will make it harder for fraudsters to take advantage of your business.
5. Monitor Payments in Real-Time
Keep track of incoming eChecks with real-time monitoring. Fraud often relies on taking advantage of delays in the processing time, so it’s important to stay on top of all eCheck transactions as they happen.
6. Educate Your Team
Make sure everyone involved in processing payments understands the risks of eCheck fraud and knows how to spot red flags. A well-informed team can prevent a lot of issues before they happen.
What to Do If You’re Scammed
Even with all the right precautions, sometimes fraud can still happen. If you find that you’ve been scammed, don’t panic! Here’s what you can do:
1. Report the Scam Right Away
Contact your bank and the ACH network as soon as you realize you’ve been scammed. The sooner you report the fraud, the more likely it is that you can stop any further payments or recover lost funds.
2. Contact Your Payment Processor
If you’re using a payment processor, let them know about the scam. They may have additional tools to help you recover the money or prevent more fraud from happening. They can also help you verify whether the transaction was legitimate.
3. File a Fraud Report
You should also report the scam to the Federal Trade Commission (FTC) or the Internet Crime Complaint Center (IC3). These agencies collect fraud data and may help with investigations or provide guidance on how to recover your funds.
4. Warn Your Customers or Donors
If the scam affected your customers or donors, be sure to let them know what happened. Be transparent about the issue and tell them the steps you’re taking to fix it. This builds trust and shows that you’re handling the situation.
Take Charge of eCheck Safety
eChecks can be a convenient and secure payment method, but they also come with risks. The main danger lies in the delay between when the eCheck is issued and when it clears, giving scammers a chance to exploit the system. They may use this time to withdraw funds or request refunds before the check clears. While eChecks are legitimate, businesses need to be aware of these potential risks and take steps to stay vigilant.