When I was in my late twenties working as an engineer, there was an older engineer co-worker of mine named John who gave me a great deal of advice based on the things that he had learned and the mistakes that he had made in his own life.

If not for an ugly divorce when John was in his mid-forties, where he voluntarily gave his wife their family home, but unknowingly and involuntarily became liable for a huge credit card debt that his ex-wife quickly ran up, John would have been retired.

John and I talked about investments, and in particular investments that could be hidden and not be found.  I bought some books about “Asset Protection” that explained how and why you should take steps to safeguard your wealth.

I became more and more mindful of how not to be stolen from.  Whenever they came up, I would just about always read newspaper articles or internet news stories about the ways in which people were stolen from.  As I got older, I read more and more stories about all the ways in which people’s savings accounts and checking accounts were wiped out by fraud and theft.

To me, one of the ways to ensure that all of one’s money was never completely taken, was to have multiple accounts, at multiple banks.  For example, it might be possible for someone to intercept a check order or a bank account statement in the mail and proceed to be successful with some type of fraud at that bank, but it would be less likely for them to simultaneously defraud a completely different second bank, and a completely different third bank where you also had accounts.  It would actually increase the perpetrator’s chances of getting caught to attempt similar frauds on three different banks at the same time.

I am giving this background information to encourage people to have more than one bank account, so that they will never be completely broke as a result of theft, or even a bank error.

I thought that I had enough bank accounts to be somewhat protected from bank fraud, but not after a recent incident with Dakota Community Bank.  I live in a high-crime area in downtown Dickinson, North Dakota.  Sometimes, I leave my check books in a briefcase, locked inside my vehicle, because this allows me to sit in my vehicle and write checks to pay bills when I have downtime at I work.

In the twenty-five years of me keeping my checkbooks inside my briefcase, locked inside my vehicle, I was never too scared of having my checks stolen.  When I was in high school, I took a very good business-law class, and it was very thoroughly gone over, that banks are liable for stolen and forged checks, if you report the fraudulent check immediately upon discovery, and within a certain amount of days after receiving your banking statement.

Most banks even include instructions on their bank statements that read something like, “If you discover an error on your bank statement, please report the discrepancy immediately in order to not be liable for misappropriated funds.”  The “misappropriated funds” would be a bank error, or theft.

But this is Dickinson, North Dakota, which operates like a third-world country, a banana republic, or a company mining camp, so you don’t know if the people here are going to understand, apply, and follow U.S. law, or do whatever they want.  So I asked a Dakota Community Bank representative if their bank is liable for stolen and forged checks, and she replied, “No”.

I explained my understanding of the law to this Dakota Community Bank representative, and she still said that Dakota Community Bank is not liable for the reimbursement of funds for stolen and forged checks.  This upset me and worried me.

I looked up the law in the United States, and U.S. banks are governed by the “Office Of The Comptroller Of The Currency”, a branch of the U.S. Department Of The Treasury.  The area of law concerning banks’ liability for forged checks is covered by Uniform Commercial Code Article 3, Negotiable Instruments, and Article 4, Bank Deposits and Collections.  Here is the main point of law regarding forged checks:

UCC Section 3-406 Customer Duty of Care

Pursuant to UCC Section 4-401, a bank may only process and deduct from a customer’s account checks that are “properly payable.” A check containing a forged drawer’s signature is not, of course, “properly payable” and cannot be charged to the customer’s account. However, under UCC Section 3-406 a bank paying a forged check drawn on a customer’s account may be able to escape liability for returning the funds if it can demonstrate that the customer failed to exercise ordinary care and thereby contributed to the forgery or alteration of the instrument.

(If the reader wants to learn more about bank liability for forged checks, I recommend visiting the National Check Fraud Center website ckfraud.org   Also, do not take a lawyer’s opinion on this subject unless they are reading and citing the actual Uniform Commercial Code.)

I do not know if the owners of Dakota Community Bank have communicated false information to all of their bank managers and employees that the bank is not liable for stolen and forged checks, or if the bank managers came up with the idea to tell the bank employees that the bank is not liable for stolen and forged checks, but this is not true, this is not what the law states.  Do they not know the law?  Or, are they trying to get out of reimbursing bank customers for their losses?  Either way, this is very typical for Dickinson, North Dakota.

Because of this experience with Dakota Community Bank, I began planning to open an account with another bank in Dickinson.  I thought that I would try opening an account with U.S. Bank in Dickinson, because I have seen U.S. Bank locations in most of the cities and states that I have lived in.

I called ahead to the U.S. Bank in Dickinson to ask questions and make an appointment to open a checking account.  I said that I preferred to deal with someone who had been at the bank for a long time, or an older person.  I was told that everyone at this branch had been there for at least six years.

The bank representative at U.S. Bank in Dickinson that I dealt with, was pleasant, professional, and knowledgeable.  Even though the process of opening the checking account with U.S. Bank was very thorough, it went smoothly and quickly, with no errors.

After everything necessary was completed, I asked the U.S. Bank representative what her understanding of the law regarding the bank’s liability for stolen and forged checks was.  She explained the U.S. Bank policy and process.  If an account holder discovers that they have a fraudulent check drawn on their account, the bank requests that the account holder file a Police report, so that the Police can conduct a criminal investigation for check fraud.  The bank will reimburse the account holder for the amount of the fraudulent check, and conduct their own investigation.  If the bank’s investigation determines that the account holder had no involvement in the theft or forgery of the fraudulent check, the matter is closed.

I felt much more confident and at ease with the U.S. Bank in Dickinson after the bank representative showed me that they were competent, professional, and knowledgeable about banking, and that I could depend on them.