bank statement.
GET GOOD BACKUP: POSITIVE PAY
There is a product out in the marketplace, and already about 60 percent of the nation's major banks offer it. It's called positive pay. I feel that positive pay is the greatest concept available to deal with the problem of forgery or fraud. In most cases, the bank provides it for a minimal fee. If it doesn't, look on it as an insurance premium to guard against losses from fraud.
The product is really quite simple. Say I'm a company and I write fifty checks a day. I could write five a day or five thousand a day, it doesn't matter. At the end of each day, I download a list to the bank over my modem of all the checks I wrote that day and sent out in the mail. The list, called an issue file, simply runs through each check number and the amount of the check. The bank doesn't want to know who I wrote the check to.
The file goes down to the bank and is stored in a program called positive pay. The checks go out in the mail and, lo and behold, a forged check shows up. I wrote a check to a guy for $250 and he color-copied fifty of them. I don't care. I'm on positive pay. I wrote a guy a check for $200 and he altered it to $2,000. I don't care. I'm on positive pay. The point is, when the forger goes to cash that check, it will go to the first bank of deposit, and then it will come to your bank. But because that check doesn't match a check on your list, it will be rejected. No match, no pay. If you didn't write it, the bank isn't going to pay it. The computer will say, I have one refund check for $250, but I don't have fifty, so I'll pay one and return forty-nine. I have one check for $200, but I've searched the file and I don't have one for $2,000, so it returns the check unpaid.
Now there are some small businesses that love the idea of positive pay, but they don't have a computer. I ask them, Do you have a fax machine? Yeah, they have that. Well, your bank can put you on reverse positive pay. At eight-thirty in the morning, your bank will fax you a list of all the checks written by you that came into the bank last night to be paid today. You'll have until two-thirty that afternoon to look over that list. If everything looks fine, you don't have to do anything, just throw the list away. But if you find a discrepancy, you call the bank and tell them to fax you that check. If you look at it and it's not your check, you tell the bank not to pay it.
This product literally does away with the threat of forged checks, altered checks, stolen checks, and counterfeit checks. And positive pay is also on the bank's teller line. So if I had taken your checks and they were drawn on, say, the Chase Bank, I would obviously go to a Chase branch to try to cash it. But when I go up to a teller at a Chase Bank and present a check, the teller would pull it up on the screen and say, "Sir, this check was never issued as of noon today. The company never wrote this check, so what is this?" So you're stopped cold right at the teller.
One of the most common questions I get about positive pay is, what if I send Frank Abagnale a check for five thousand dollars but a postal employee steals the check and Frank Abagnale never gets it? The employee types above my name, Bill Clark, and goes and cashes the check. The check number is the same and the amount of the check is unchanged. How will positive pay catch that?
It won't, but it's not meant to. That's because that is an altered payee, and under banking law, altered payee checks are the liability of the first bank of deposit, not your liability or your bank's liability.
Like any technology, positive pay is not foolproof. I recommend companies use both positive pay and a very secure check to close the loop, lock the lock, and throw away the key.
WAITING FOR THE PAPERLESS TOILET
A lot of companies and consumers figure, why worry too much about checks? With computers and debit cards, they won't be