Check Fraud Is a Growing Problem for America's Banks

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Aug 06, 2024, 11:57 ET

Bankers seek regulatory changes to reduce check forgery

ARLINGTON, Va., Aug. 6, 2024 /PRNewswire/ -- Despite the decline in check volume, 90% of U.S. banks surveyed said check fraud is ballooning, according to a new survey released today by fintech IntraFi.

The survey, which included responses from 471 banks, found that more than a quarter of banks experienced a 50% or higher increase in check fraud over the past three years. Another 19% said check fraud was up 30-49%, while an additional 28% said it rose by 10-29%.

"Those are staggering numbers that show check fraud is rampant and surging," said Mark Jacobsen, IntraFi's CEO and cofounder. "Community banks are being hit particularly hard, and they are looking to policymakers to step in."

Indeed, community banks appear increasingly frustrated by repayment delays on bad checks from the institutions that cashed them. Ninety percent of respondents said such delays are either a regular occurrence or occur occasionally. The largest bottleneck in the repayment process is at institutions with more than $700 billion of assets, according to 59% of respondents.

When asked what changes they would like to see from regulators, 62% said they support shifting liability for check fraud to the "bank of first deposit," the institution that first cashes the bad check. Nearly half of bankers want law enforcement to better target check fraud, while 14% support more funding to expand the U.S. Postal Service police force.

Outside analysts agree the issue needs to be addressed.

"In the last couple years, you cannot believe all the emails and calls I get concerning check forgery," Frank Abagnale Jr., founder of Abagnale and Associates, and the inspiration for the book and film "Catch Me If You Can," said on a recent episode of IntraFi's Banking with Interest podcast. "It's a huge problem."

The IntraFi survey also found that bankers continue to be pessimistic about the economy. Thirty-four percent cited worsening economic conditions at their institution over the past year, while 38% said they expect conditions to worsen over the next 12 months.

Elevated funding costs and fierce competition for deposits may be fueling that pessimism. Eighty-three percent of bankers surveyed said the price of funds had risen over the past year, with 59% citing a more competitive environment for deposits.

Bankers were split when it comes to loan demand, with 39% saying it had risen over the past year while the same percentage said it had fallen. Looking to the future, 42% expect loan demand to rise while 35% expect it to stay the same.

IntraFi's Q2 2024 Bank Executive Business Outlook Survey garnered responses from CEOs, presidents, CFOs, and COOs at 471 unique banks across the country. Download the full report.

About IntraFi
A trusted partner chosen by more than 3,000 financial services companies, we define success not by the volume of transactions we enable, but by the quality of relationships we form. Our network, established over 20 years ago, connects institutions of all sizes to help participants build stronger relationships with their customers, fund more loans, seamlessly manage their liquidity needs, and earn fee income. The network brings scale, giving each participant access to tens of billions of dollars in funding, the highest per-depositor and per-bank capacity, and the peace of mind of being able to make large-dollar placements.

SOURCE IntraFi