Put A Finger On Check Cashing Fraud

After talking with Jaime Lopez, vice president of Lopez Supermarkets (Brownsville, TX), one gets the impression this guy should write a best-selling novel. Over the years, the 12-location, family owned grocery chain has been in business, Lopez has gotten to know his customers well. In fact, it's not unusual that when he walks from one end of the store to the other, he will see the neighbor boy, an elderly woman who attends his church, a relative, and a longtime friend.

Stuck With $12,000 In Bad Checks
But, while Jaime knows many of the patrons who frequent his family's establishments, it's impossible to know everyone. Like, for instance, the group of kids from a local college, who two years ago copied checks from several payroll companies and cashed the checks at Lopez' store. "The kids used a scanner and laser printer to copy the checks, and then they came to our store to cash them," recalls Lopez. "Before long, they had made off with $12,000 and we had to foot the bill." Shortly after the infamous college caper, the students were caught, but the money had already been spent. The only restitution the thieves could afford to pay was $20 per month.

"It used to take about a week after a check was cashed at our store for a bad check notification to get back to us," says Lopez. "The old system enabled dishonest people to copy their income tax return checks, for instance, cash them at two different locations, and then skip town." Additionally, Lopez Supermarkets are located near the Mexican border, and it is very difficult to catch someone who cashes a bad check and heads across the border. "Many of our patrons aren't American citizens," says Lopez. "They are Mexican citizens with green cards who work across the border."

Capture Fingerprints, Thwart Thieves
Offering a check cashing service to its customers was something Lopez Supermarkets had done since its inception. The income from the check cashing service fees was something the grocer didn't want to give up just because of a small percentage of dishonest people. But, initially there didn't seem like there were many options. To manually call a bank and do a background check on every customer who wanted to cash a check wasn't practical. On the other hand, fraudulent checks were costing the grocer more than $10,000 per year.

One day, while searching for answers to his dilemma, Lopez noticed an ad for a biometric check cashing device. He decided to check into it and arranged to meet with the vendor. After seeing a demonstration of the BioPay (Herndon, VA) Paycheck Secure, Lopez knew it was just what his stores needed.

In June 2002, Lopez Supermarkets rolled out the Paycheck Secure solutions at six store locations. "Initially, our customers' reactions weren't positive," recalls Lopez. "We had to explain to them this wasn't some 'Big Brother' thing we were going to share with the government, but rather it was a way for us to protect our customers and ourselves from fraud." As part of the rollout process, Lopez hired several temporary workers to help customers understand the new system and get enrolled.

Biometrics (And Education) Pay Off
After educating patrons on the new system, the grocer was able to convert most of its check cashing patrons to the new system. "The initial sign-up process takes about three minutes," says Lopez. "We capture the customer's name, address, fingerprint, and digital image. After that, customers are entered into our system and each time thereafter they can cash a payroll or income tax return check by placing a finger on the biometric reader."

The biometric reader is connected to BioPay's nationwide database via a DSL (digital subscriber line) connection. Within seconds of reading a user's fingerprint, the system will alert the store if the person has bounced checks at any BioPay affiliated store throughout the United States. Because the system uses fingerprint reading, it cannot be fooled by forgery. Additionally, the scanner features a magnetic ink reader, which can detect checks that have been copied and printed on a laser printer. "Since we've installed our new system, it is virtually impossible for scam artists to cash checks at our stores," says Lopez. Moreover, with the new solution in place, Lopez' best-selling novel can now have a happy ending.