By now most people have heard of the viral trend that swept across TikTok and X, claiming a Chase bank system-wide glitch that allowed users to exploit ATMs.
The false narrative suggested that depositing fake checks and quickly withdrawing cash would let them pocket a large sum before the check bounced.
Well it wasn’t so much as a “Chase money glitch” as it was “check fraud.” Now numerous Chase customers could end up in ChexSystems, Early Warning Services (EWS) or worse, prison.
Why Chase Allowed Customers To Withdraw Funds
Most banks have a policy known as “provisional credit” that allows temporary access to deposited funds. The amount of provisional credit offered, and how long it lasts, can differ between banks and depends on factors like the check amount, your account history, and the check’s origin.
Banks assume customers are acting in good faith when depositing a check so provisional credit is like a temporary loan from the bank while they make sure the deposited check is valid.
The so-called “glitch” occurred because Chase ATMs’ made the entire deposited check amount of the deposited check available for customers to withdraw. That means if a Chase customer deposited a check in the amount of $30,000, they had complete access to that money immediately.
But it’s important to note that once Chase discovered the glitch, whatever amount remained in the customer’s account was deducted and any money spent or withdrawn from the account are now due.
It’s also important to note that customers with available funds in other Chase accounts including, savings, money market or CDs, can expect that money be deducted and applied to any overdrawn, negative amount as a result of the “money glitch.”
What’s Considered Check Fraud
Paperhanging: This is when someone writes checks, even to themselves, knowing there’s not enough money in their account to cover them, hoping to get away with it before the checks bounce.
Check kiting: A more complex scheme involving multiple accounts and banks, where someone exploits the “float” time between when a check is deposited and when it clears to create an illusion of funds that don’t exist.
Writing bad checks: Intentionally writing a check for more than the account balance.
Forgery: This is when someone signs another person’s name on a check without their permission.
Altered checks: This involves changing the name of the payee, the amount, or other details on a legitimate check.
Counterfeit checks: These are fake checks that look like the real thing but are drawn on non-existent accounts or stolen account information.
Chemical alterations: Using chemicals to erase the ink on a check so new information can be written.
Is Check Fraud Reported to ChexSystems?
It’s highly likely that individuals who participated in the “Chase Money Glitch” will face serious repercussions, including being reported to ChexSystems, a specialty consumer reporting agency that financial institutions use to screen account applicants.
It will be difficult to open a new bank account once you’re reported to ChexSystems for fraud; unless it’s a bank that does not use ChexSystems.
ChexSystems generally retains records for five years from the date of the report, unless the source of the information requests its removal, the ChexSystems record is successfully disputed, or ChexSystems is obligated to remove it under applicable law or policy like when someone files for bankruptcy.
And then there’s EWS.
Is Check Fraud Reported to EWS?
While the specific reporting system used by Chase may vary, customers participating in the “money glitch fraud will definitely end up reported to Early Warning Services (EWS).
Chase, along with 6 other major banks, owns EWS. It’s another specialty consumer reporting agency designed to detect and report fraud within the banking industry.
Their primary goal is to help financial institutions proactively mitigate risks and protect both themselves and their customers.
Telecheck Is Another Consumer Reporting Agency for Banking
TeleCheck is a check acceptance company that helps merchants decide whether to accept a check payment. It analyzes information about previous check transactions to assess the risk of fraud or non-payment.
In all likelihood, individuals passing bad checks in the so-called “glitch” will end up reported to Telecheck.
Check Fraud Can Be Reported to the IRS
Anyone participating in the Chase money glitch could potentially end up reported to the IRS. Here’s why:
- Banks Report Suspicious Activity: Banks are required by law to report suspicious activity to the authorities, including the IRS. If Chase detects unusual activity related to the glitch, they are likely to investigate and report it.
- Tax Implications: Even if the money gained from the glitch is eventually returned, it could still trigger tax implications. The IRS considers any income, even if gained illegally, as taxable.
Is Check Fraud Illegal?
When someone knowingly writes a check for more than the amount they have in their account that is “check fraud.”
It’s considered a deceptive practice to gain something of value (cash, goods, services) by presenting a check they know won’t clear.
It’s illegal and can lead to serious consequences like fines, damage to your credit score if the debt is sent to a collection agency, and even potential prison time – depending on the charges brought forward. Here is what Chase told the New York Post on the matter:
“We are aware of this incident, and it has been addressed.” They also added, “depositing a fraudulent check and withdrawing the funds from your account is fraud, plain and simple.”
How Check Fraud Can Affect Credit Scores
Check fraud can have a serious and lasting impact on your credit scores. Let’s break down how:
Bounced Checks and Overdrafts: When a fraudulent check bounces, it can lead to overdraft fees and negative marks on your ChexSystems report. These negative marks can make it difficult to open new checking or savings accounts in the future.
Collection Accounts: If you’re unable to repay the debt resulting from the fraudulent check, the bank may send the account to collections. This will appear on your credit report and significantly lower your credit score, even if it’s a paid collection account. That’s why anytime you choose to pay a collection agency, attempt to negotiate a pay for deletion.
Late Payments: Unpaid debts associated with check fraud can lead to late payments on other bills or loans. These late payments will also negatively impact your credit score.
Difficulty Getting Loans: With a damaged credit score, it’ll be challenging to get approved for loans or lines of credit in the future. Even if you’re approved, you’ll likely face higher interest rates. A poor credit history due to check fraud can also make it difficult to rent an apartment, get utilities turned on in your name, or even get a job in certain industries that require credit checks.
Bottom Line
Stop taking illegal financial advice from random people on TikTok and other social media platforms. This no doubt will go down in history as one of the worst “plays” someone could run, right along with CPNs (Credit Privacy Numbers) in place of organic credit repair.
Don’t let the temptation of a quick fix lead you astray. Doing things the right way might take a little longer, but the peace of mind that comes from knowing you’re above board is priceless.
