Check Fraud is Growing
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We've all heard the talk before. Check usage is waning, check fraud won't be as big a problem in the future. But the numbers just don't back up that theory. In fact, check fraud is increasing despite an overall decrease in the number of checks being written and paid (there were over 30 billion checks written in 2006!). Here are some numbers to back this up. A report to congress on Check 21 found that check fraud increases 5% per year. And the last ABA Deposit Account Fraud Survey found that check fraud reached a new high of $969 million, up 43% from the previous survey. Consider the increase in fraud juxtaposed against data from the Federal Reserve Payments Study on check usage. It's counter intuitive, but cannot be disputed.
And while the ABA check fraud estimate is widely held in high regard, many agree that this is most likely an underestimation of the problem. Industry standards for categorization of check fraud are followed loosely by reporting institutions. What's more, institutions still miss lots of check fraud. Fraud is written off against loan loss reserves, missing the opportunity for accurate classification and loss reporting. Because of this, other industry estimates peg the problem much higher. The Association for Finance Professionals estimates that check fraud costs $15 billion per year.
Anecdotal evidence also suggests check fraud is increasing. Speaking with loss prevention and law enforcement these days, it seems like everyone is seeing more check fraud. Scanning the recent headlines also leads one to believe that check fraud is on the rise. Here are just a few recent headlines:
Check fraud is a perennial challenge for banks and credit unions. It's a problem that just won't go away. Is check fraud on the rise at your bank or credit union? How is your institution dealing with check fraud?