Consumer recovers thousands lost when cheques are stolen from his home and forged

Posted Friday September 20, 2019

Category: Cheques

Key learnings

  • Consumers with chequing accounts are responsible for properly securing their cheques, chequebooks and other bank documentation, particularly if others may have access to their home.
  • Consumers are responsible for regularly verifying their account statements and notifying their bank immediately when they become aware of any unauthorized activity in their account.
  • Banks must comply with the Bills of Exchange Act when assisting customers with cheque problems.

In early 2017, Mr. W returned from his yearly vacation. He was always diligent about checking his account activity. When he went online to review his vacation spending, he noticed three transactions for around $4,000 for cheques that he had not written. He was confused because he always stored his chequebook in a safe space, and he did not carry his chequebook with him. Mr. W was certain that he had not lost or misplaced his cheques.

Consumer uncovers a forgery

Mr. W went online to review an electronic copy of the cheques. When he did, he realized that the cheques had been forged. He got his chequebook out and noticed that three cheques were missing. Mr. W quickly notified the bank about the missing and fraudulent cheques.

Mr. W contacted the painting company he had hired to paint his condominium while he was away. He told the manager of the painting company what had happened. The manager agreed that it appeared likely that the cheques had been stolen by one of the company’s employees and offered to help Mr. W. Mr. W immediately filed a report with the police. At that point, it had been twelve days since the fraudulent transactions had occurred, but only about three days since he discovered the fraud.

Mr. W also provided his bank with a copy of his police complaint with the incident number. Although he spent considerable time and effort in discussions with the bank about the investigation, he was unable to get a clear response on the outcome of his case. Instead, he felt that he received contradictory and confusing explanations from various bank staff about the status of his complaint.

Bank declines reimbursement due to delay in notification

After their internal investigation, the bank told Mr. W that, according to the Canadian Payment Association (CPA) rules, he should have notified the bank within seven days of the cheques being deposited. They said that Mr. W did not notify them in time to recover the money paid on the forged cheques, so they could not help or reimburse him.

Mr. W was unsatisfied with the bank’s response. He felt that he had done everything correctly and that he had notified the bank as quickly as he was able to. He brought his complaint to OBSI.

What did OBSI do?

We investigated Mr. W’s complaint and confirmed that he had properly secured his cheques and chequebook in his home. We reviewed the applicable rules and laws and disagreed with the bank’s reasons for not reimbursing Mr. W.

Although the CPA rules establish the system for payments between financial institutions, when a consumer complains about a fraudulent cheque, the Bills of Exchange Act (BEA) provisions must also be considered.

Most notably, section 48 of the BEA establishes the rights and obligations that apply to recovery of funds paid on a forged cheque. We requested that the bank re-evaluate Mr. W’s complaint in light of the BEA provisions. We also asked that the bank consider that Mr. W had been diligent in protecting himself and had advised them of the forgery as soon as he noticed the fraudulent charges on his account.

Our recommendation

We were able to facilitate a settlement between the bank and Mr. W. After reviewing his complaint with this additional information, the bank reconsidered its position and offered to reimburse Mr. W $4,000, the full amount he had lost.

 

© 2017 Ombudsman for Banking Services and Investments (OBSI), 20 Queen Street West, Suite 2400, P.O. Box 8, Toronto ON M5H 3R3

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