Letters From Leton: Twenty-Four Hours

In the early 2000s, 24 was a top-rated TV show.

The protagonist, Jack Bauer, was a federal agent whose job usually came down to saving America and protecting the President from attacks and terrorism attempts often involving high explosives (like an atomic bomb).

To complicate matters, Jack had to do all of this in 24 hours. It was spell bounding and heart racing.

In the banking world, we face the issue of 24 hours as well. It is called the 24-hour rule.

When a check is presented at the teller line, we have 24 hours to decide to pay or return the check.

If we honor and pay the check, we are on the hook for it for 60 days, even if the check is fraudulent, altered or the endorsement was forged. The 60-day period gives the customer time to look at checks which clear their account and let us know if the check is bad.

This 24-hour rule falls under the Uniform Commercial Code and dates back to the olden days when checks were rare, and “bookkeepers” in the bank would look at each check that came in, compare the signature card to the signature on the check and otherwise determine if the check looked legitimate. Human intervention on each and every check limited fraud.

As the years went by, usage of checks multiplied – billions of checks were written each year. While checks usage has dropped in recent years, the number of checks written and processed remains huge.

Crooks know this. They also know that we only have 24 hours to send a check back – and that most customers do not look at checks as soon as they come in. In fact, 50% of customers never look at their statements, and most businesses only look at checks once a month.

This is one of the reasons we highly recommend our customers use alerts and businesses sign up for services such as Positive Pay.

Our risk of loss due to fraudulent checks is the highest daily deposit risk we run. For every $1 lost to electronic fraud involving Debit Cards, ACH, etc., $15 is lost to check fraud. 

Maybe Jack Bauer could come to work for us to help curb the greatest deposit risk we face… checks.

Have a great week.

– Leton

“Letters From Leton” is a blog series comprised of the weekly updates that Leton Harding – President, Chairman, and CEO of Powell Valley National Bank, shares with the Bank’s team members. These newsletters are full of uplifting anecdotes and intriguing insights that are applicable beyond the Bank, so we want to share them with you.