Unsolicited Checks

Don’t Cash That Check!

It’s always nice to get a check in the mail, especially when you aren’t expecting it.  But be careful before you cash something like this!  It could be a scam that will end up costing you much more than the check you took to the bank.

The check you received may have amounted to only a few dollars and appeared to be a rebate on some item, or perhaps a refund for overpayment of an account.  Well, did you know that, by signing that check, you are actually signing a legally binding contract?  You may have unwittingly authorized a switch in your long-distance telephone service provider; or you could find yourself owing on a high-interest loan or on a program membership you never requested.  Cancellation of these memberships can be very difficult.  They usually have a very short cancellation rights period, and your monthly fee could be much more than the small amount that you cashed or deposited.

Here is an actual quote that appeared above the endorsement line on the back of a check, demonstrating the typical tactics:

“SIMPLY ENDORSE AND CASH OR DEPOSIT THIS CHECK AT ANY BANK TO AUTOMATICALLY ENROLL IN XXXXXX starting with thirty days free.  Unless you call to cancel during this trial, XXXXXX will notify XXXXXXX, the issuer of your XXXXXX credit card, to bill the $9.99 monthly membership fee, or then-current fee, to your credit card each month, without your having to do anything further.  You can cancel at any time after the trial period for a full refund of your current month’s paid membership fee.  The $2.50 check is yours to keep.”

In December 2006, Trilegiant Corporation and Chase Bank settled a multi-state action in which it was alleged that Trilegiant solicited consumers with offers of "free" trial membership programs without adequately informing consumers they would be automatically charged for these services if they did not affirmatively cancel within a specified period of time.  The solicitations were directed at Chase Bank customers and often included the receipt of an unsolicited check for between $2 and $10 which many consumers mistook for rebates or rewards.  When cashed, however, the checks created an ongoing payment agreement for the membership program after the free trial offer ended.  Even though the consumers had not provided any credit card account information when cashing the checks, Trilegiant, through an agreement with Chase, automatically billed the consumers’ credit cards.  Many consumers did not even discover that they had “purchased memberships” until the charges appeared on a monthly credit card statement.  The settlement required the companies to modify business practices and pay $14.5 million, representing $8.325 million in restitution to consumers and $6.175 million to the states for their costs and fees.

Bottom line, be cautious.  Whenever you receive any kind of check in the mail, be sure that you read all of the information accompanying it.  The check will generally come with a letter that describes all of the terms, and it may itself contain a similar statement on its reverse side.  Remember, if you were to sign a check when all the terms have been disclosed, even in fine print, the law assumes you acted in full knowledge.