In a shocking turn of events that highlights the vulnerability of small businesses, Loria Stern, the owner of a specialty bakery called Eat Your Flowers, found herself at the center of a scam that cost her $7,500 and left her questioning the security measures provided by her bank. What began as an exciting business opportunity quickly turned into a financial nightmare, exposing flaws in the banking system and the rising threat of check fraud.
Stern’s bakery, known for its unique flower-themed baked goods, received an order for 1,000 cupcakes—a large and lucrative request for a small business. The customer promptly sent a check for $7,500 via priority mail, raising Stern’s hopes. But despite the potential for a big payday, she didn’t let her excitement cloud her judgment. Instead, Stern took the responsible step of consulting her bank to ensure everything was legitimate before moving forward.
“My bank said, ‘You’ll be protected here, especially if you have an invoice, and you know, all the emails going back and forth,'” Stern told ABC 7. Reassured by her bank’s promise of protection, Stern deposited the check and waited for the funds to clear. Once the money was in her account, she began purchasing supplies and preparing the order. However, the situation took a suspicious turn when the customer suddenly requested to cut the order in half and demanded a refund for the unused portion of the payment.
Stern, already deep into the baking process and having spent a significant amount of money on ingredients, refused the request. “I responded and said, ‘No, there’s no way we can do that. We’ve already bought all the ingredients. We’ve already made the batter,'” she recalled. But the next day, to her shock, the entire $7,500 was pulled from her account.
The bank’s promise of protection fell through, leaving Stern in a dire financial situation. The check, which the bank had assured her was valid, turned out to be counterfeit. “[The bank] said, ‘Oh, it’s been cited as a counterfeit check. Essentially, what the scammer did is they stole another company’s checkbook and wrote checks out to different vendors,'” Stern explained. Upon contacting the company whose name was on the check, Stern learned she wasn’t alone—she was the 15th person to report being targeted by the same scam.
This incident not only had a severe financial impact on Stern’s small business but also left her disheartened by the realization that criminals would go to such lengths to defraud small business owners. It’s a story that resonates with many Americans who rely on the supposed security of their banking institutions, only to find out too late that they’re on their own.
Rising Threat of Check Scams and How to Protect Yourself
Stern’s ordeal is part of a troubling trend. Despite the decline in overall check usage, check fraud is on the rise. The U.S. Treasury Department reported nearly 700,000 cases of potential check fraud in 2023 alone. Many customers are unaware that banks are legally required to make funds available within two business days, even though it can take longer for a check to fully clear. This gap gives fraudsters a window to exploit unsuspecting victims, who may find themselves in a situation like Stern’s—believing the funds are secure, only to have them yanked back.
To avoid falling prey to similar scams, there are several precautions individuals and businesses can take. First and foremost, be wary of any transaction involving checks, particularly if it involves a request to return a portion of the funds. The Federal Trade Commission (FTC) warns that scammers often use this tactic to target mystery shoppers, virtual assistants, or even car owners willing to wrap their vehicles in marketing decals.
Instead of depositing a check at your bank, consider cashing it at the issuing bank, where they can verify the account and ensure that the check is genuine. Additionally, for large orders or significant payments, it’s wise to request payment by credit card, which offers more protection, or through secure digital payment platforms that are more difficult to reverse.
Lastly, always be skeptical of unusual requests. In Stern’s case, her business was more known for its cookies than for cupcakes, which initially made her suspicious of the order. Trusting your instincts and being cautious can go a long way in protecting yourself and your business from financial predators.
Stern’s story serves as a stark reminder of the risks small businesses face and the importance of vigilance in an increasingly digital and fraud-ridden world.
