31 January 2010
I guess I’ll just stop payment on the other checks and mail out another check, or should I handle it differently?
A. Be careful, this is a common scam being played out on landlords. Stop payment instructions to your bank are only valid for six months. Unless you renew the stop payment order every six months, the Payee can freely cash the checks.
That means that in six months and a day, your former resident can cash both of those “lost” checks that you placed a stop payment order on and your bank will blindly honor them. Stale dated you say? With the changes in bank check processing automation, banks rarely enforce the six-month stale dated rule, and routinely process checks, regardless of the date issued.
Instruct your former tenant to send you written confirmation that he has never received the two lost checks, and that in the event they turn up, he will immediately write void on the checks and return them to you, without attempting to negotiate them. You may want to arrange a face-to-face meeting to swap the confirmation with a replacement check so that there will be no further “lost checks.”
A good business practice would be to establish a disbursement checking account that is separate and distinct from your primary, general or operating accounts. Many banks offer “positive pay” services that allow you to specifically clear a check before it hits your account.
In the event you suspect that your disbursement account may be a target for fraudulent debits, you can simply close the account without affecting your general or your operating accounts. The scary little secret is that the banking system, and the methods that are currently used to electronically clear checks, is ripe for fraud and abuse. Watch your accounts closely for any sign of fraudulent activity and notify your bank immediately.