Although it may seem obvious that if someone steals one of your checks, forges your signature and manages to thereby steal money from your checking account that you would not be held responsible for that loss, however, that is not always the case as Maili McHenry recently learned. Ms. McHenry’s checkbook was stolen from the glove compartment of her unlocked car by a thief who wrote a $500 check that was cashed despite the forged signature of Ms. McHenry. A few days later, while routinely checking her account balance online, Ms. McHenry noticed the $500 charge to her checking account and contacted her bank. At first, Ms McHenry was told by a representative of U.S. Bank that the funds would be restored to her account because the signature was an obvious forgery. Later, however, she received a letter from her bank informing her that the bank was denying her fraud claim, not because they failed to believe that the $500 check was a forgery, but because, as U.S. Bank said in its letter to Ms. McHenry, “Customer stated car was left unlocked…. This lack of ordinary care is negligence that contributed to the alteration/forgery of the item.”
Under the terms of the Uniform Commercial Code section 3-406(a), which has been adopted by all of the states into their laws, a customer whose negligence substantially contributes to the check forgery’s success, is responsible for the loss that occurs. In this case, the bank believed that Ms. McHenry’s own negligence or failure to exercise ordinary care by locking her car led to the forgery and the subsequent fraudulent cashing of the check. Although following a public uproar the bank reversed its position and reimbursed Ms. McHenry for her loss, the bank did indicate that it did so as a courtesy to her and not as a change in their policy.
So what does this mean to you and me? According to the law, if a person’s failure to exercise ordinary care substantially contributes to a check forgery, that person is negligent and the bank does not have to reimburse him or her for the amount taken from his or her account due to the forged check. One would think that particularly when signatures on a check don’t even approximate the account holder’s signature, that the bank would be clearly responsible for reimbursing the victim for funds improperly paid from his or her account. However, that is not true in all cases. The law does not precisely define what it means to “exercise ordinary care” in regard to your checking account, however, common sense should tell you that leaving a checkbook in an unlocked car is not a particularly wise course of action. In fact, since it is so easy to break into a car, you probably shouldn’t even leave a checkbook in a locked car.