Defrauded? Banks May Not Give Your Money Back

In Nov. 2021, John William Pollard, a retiree who lives in Philadelphia, wrote a $84.83 check to Verizon to pay a phone bill. It was stolen in the mail. The amount was changed to $45,678.12, made out to a person named Olivia Wallace, and cashed, according to a legal complaint made on behalf of Pollard and his wife Patrice. 

The Pollards had just deposited a large sum into their Wells Fargo bank account, with which the check was written. So they didn’t immediately realize the money was missing from their account. It wasn’t until Verizon notified the couple that it hadn’t received the phone payment that the Pollards say they noticed the fraud and reported it to Wells Fargo, in early 2022. 

More than two years later, the Pollards still haven’t gotten any of the stolen money back from the bank. 

Wells Fargo says it has no obligation to return the money. It alleges in a letter to the Pollards that they did not report the stolen check until more than two months after it was deposited. The bank says it informs its customers that they “must file a timely claim for any suspected fraudulent transactions on their account,” within 30 days of a fraud or forgery event. Courts have determined that banks can shorten the amount of time customers have to report check fraud to as little as two weeks.

The case, which is currently pending in U.S. District Court in Pennsylvania, highlights a legal loophole that consumer lawyers say leaves banking customers vulnerable to check and wire-transfer fraud. Consumers are protected from fraud in many electronic transactions by the Electronic Funds Transfer Act (EFTA), which gives people 60 days from when they received their statement to report unauthorized transactions. But checks and wire transfers fall outside the EFTA, and are instead covered by the Uniform Commercial Code (UCC), a set of laws governing U.S. commercial transactions. 

The UCC says that consumers have a year to report check fraud. But it also allows such terms to be changed “by agreement,” which essentially means that banks can shorten the grace period as they see fit. They do that by informing customers that the terms of their banking agreement are changing, and give customers the option of closing their account if they don’t agree to the new terms. Many customers do so without even reading the terms of the changes. (Who has the time to read 40 pages of a bank-deposit user agreement?) But with a simple click, customers can gut their own protections against fraudulent transactions. (Wells Fargo says that the 30-day reporting timeline in its deposit-account agreement hasn’t changed in more than 30 years.) 

Some bank-account agreements shorten the grace period for reporting fraudulent transactions to 14 days from when your bank statement was transmitted. All the UCC says is that changes to the user agreement shouldn’t be “unreasonable,” and courts have determined that 14 days is reasonable, says Carla Sanchez-Adams, a senior attorney at the National Consumer Law Center. 

As a result, customers can find themselves out of luck when they report that money was fraudulently taken from their account. Many people do not closely monitor the transactions in their online banking accounts, or look at the checks they’ve written. “Unfortunately people aren’t checking their accounts as often as they should,” says Sanchez-Adams, “so they don’t find out about it until after the time period in the account agreement.”

Read More: Banks Aren't Doing Enough to Protect Consumers From Scams.

Changes to bank deposit account agreements are common—many banks have used them to restrict customers’ ability to settle disputes in court, instead mandating arbitration. (Three-quarters of banks use account agreements to mandate arbitration, one Pew analysis found.)

Banks’ decision to shorten the grace period comes as the incidence of check fraud grows in the U.S. In Feb. 2023, the Financial Crimes Enforcement Network (FinCEN) issued an alert to national financial institutions to alert them to a rise in check fraud. In 2022, financial institutions filed 680,000 Suspicious Activity Reports to FinCEN to report potential check fraud, nearly double the previous year.

The Pollards say that Wells Fargo should have caught the fraudulent check in the first place and notified them. They say they had never written a check for any amount close to $45,000, and so the bank should have flagged the transaction. 

The Pollards allege that Wells Fargo initially told them they would get their money back. But in August 2023, the bank told the couple that they hadn’t notified the bank of the fraud within 30 days of their Jan. 2022 account statement, and therefore had forfeited any claim for the return of their cash. “If the customer does not report any issues within that time, the bank account statement is deemed to be correct, and the customer approves all the transactions,” the bank’s senior counsel wrote in a letter.

In a statement provided to TIME, Wells Fargo says that it understands the frustration that victims feel after a fraud incident, and that it tries to raise awareness around fraud and scams. However, the bank says, “we inform all our customers that they must file a timely claim for any suspected fraudulent transactions on their account,” and that the banking industry follows an established process for helping customers reclaim funds.

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Larry Smith, a consumer lawyer based in Illinois, says customers don’t even need to have bank checks to be vulnerable to check fraud. Smith says his client, Rogelio Arroyo, had an account with Fifth Third Bank that did not include personal checks. But in December 2021, a scammer somehow got Arroyo’s account number, made up fake checks, and stole $14,000 from Arroyo’s account, Smith says. The forgeries were very crude: in one case, the check number differed on the same piece of paper. Yet Arroyo hasn’t recovered a cent from Fifth Third, according to a pending legal complaint made in Illinois, where Arroyo lives. (He was traveling out of the country when the alleged fraud occurred.)

“It’s becoming a greater fallacy that you’re protected by putting your money in a bank,” Smith says.

Fifth Third said in a statement to TIME that it is “committed to helping customers who have experienced fraud” but that its account rules require customers to notify the bank of issues or disputes in a timely manner. The bank told Arroyo that it would not conduct any investigation because he did not dispute the fraudulent transactions within 30 days, according to the complaint. (The bank says it does not comment on active litigation.)

Consumer advocates are pushing for more protections over check fraud, including changing what is covered under the EFTA. In Jan. 2024, New York Attorney General Letitia James sued Citibank, alleging that it has failed to protect users from scams, costing New Yorkers millions of dollars. The complaint argues that wire transfers should be covered under the EFTA.

Citi did not return a request for comment. Citi told Reuters that the lawsuit would “abruptly and dramatically upset how banks have organized their policies and practices for decades.” If James wins, the case would be a “game changer” for customer safety, says Smith.

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In the meantime, consumer advocates are pushing for the EFTA to include wire transfers and checks. But it’s not clear consumers would necessarily benefit from a change, because the laws are so complex that few people know their rights when they’re battling banks. “It’s extremely complicated for an unsophisticated consumer to know what protects me, and what law applies,” says Sanchez-Adams.  

It’s something that anybody who has battled with a bank knows well. Patrice Pollard has sent notarized statements back and forth to Wells Fargo and dealt with countless customer representatives; she keeps every piece of paper in case she needs it. “They really get you thinking you are crazy,” she says. Her husband opened the bank account in 1999, at a different bank, which then merged into Wells Fargo. Despite the ongoing lawsuit, they still have their retirement funds and other money at the bank. When their case is resolved, Pollard says, the couple will pull out every dime and put it somewhere else. 

“Some friends have suggested a credit union,” she says. “But there’s always the old shoe or sock.”