If you are an online seller, beware. The US eCheck system is wrought with fraud, and as a ten year merchant veteran in the world of online payments, my strong advice to online sellers is to blanket reject all eCheck payments that originate in the US, to save yourself a lot of grief and irritation.
Fraudsters in the US thrive on sending eCheck payments for goods and services, for the simple reason that eChecks are the easiest way to thieve goods and services from unsuspecting merchants.
Payment by eCheck can be facilitated by the major US online payment sites like PayPal, ebay, via banks and other payment websites. If you receive an eCheck from someone with bad intent here is how the fraud scheme plays out.
It typically takes a few days for the funds from the eCheck to “clear” .. but the “word” clear is complete misnomer. Unsuspecting merchants will ship goods when they receive notification that the eCheck has cleared thinking life is good, and the money is now safely in their account.
If for example, you received the eCheck payment via PayPal and you have shipped the goods, the fraudster will simply tell his/her bank he did not authorize the payment, and bingo, the payment will be clawed back out of your account and reversed to the fraudsters’s account, and you will be out the goods you’ve now sent to the fraudster.
In the ten years I have had a PayPal account, never once have I been covered for my loss by PayPal. PayPal’s so-called insurance has never protected me against my loss. And the fraudster can simply close and open and close and open bank accounts as required to continue defrauding unsuspecting merchants.
The US eCheck system is rigged against the merchant, because it is so insanely protectionist of the consumer. So if a consumer who sends the eCheck payments tells his bank he did not authorize the payment, the merchant has zero say in the matter and the funds are immediately yanked back from the merchant. If the merchant has an army of lawyers that want to take the matter to court, then that might be an option for some, but this is certainly not a viable option for small business owners like myself.
But there is a very simply way merchants can protect themselves. You simply have to refuse all US-based eChecks as a matter of policy. If you receive an eCheck via PayPal, simply refund the payment in full back to the payment sender. As a preventative measure against receiving US-based eCheck payments, you can block all payment senders from sending you eChecks via PayPal on the payment settings page, show in the screenshot above.
Merchants that use other online payment systems should make sure there is a means to block US-based eChecks. And the frustrating thing is that the fraudster has up to 90 days to reverse the eCheck payment … with impunity.
Unless the customer or person sending you the eCheck is someone you know and trust, the best policy is to reject all US-based eChecks. Or accept them at your own peril.