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It is normal and customary practice at most escrow branches to make a photocopy of the earnest money check at the bottom of the system–issued receipt and provide a copy of it to the listing agent, selling agent, mortgage broker and lender.

In one escrow branch they did just that, only to find out from the buyers the information from the earnest money check had been intercepted by fraudsters who attempted to write more checks using the same exact check number in various amounts to different payees.

In February 2013, the buyers wrote a check to Chicago Title Company in the amount of $18,450 as an earnest money deposit on a new house. The check was receipted by the escrow branch, copied at the bottom of the receipt and then sent via unencrypted email to all parties.

Five days later, the buyers' bank contacted them as several checks bearing the same account number and same check number (6725) were presented at the bank for payment to different payees, all in large amounts. In addition, the bank told the buyers their online account had been threatened, and it was important they come to the bank to close the account and open a new one.

The buyers were furious and were convinced their account was compromised due to the actions of Chicago Title Company. Chicago Title Company reacted swiftly to the allegations they had anything to do with the exposure of the bank account information by providing the buyer with a free year's worth of CreditCheck® Basic through Experian®.

The buyers were not satisfied with the gesture, as they spent many hours and phone calls to change account numbers on their online payments (including four hours at their bank and 10 hours following up with creditors). The buyers demanded a full refund of their escrow and title charges.

Chicago Title might not have been the source of the theft, but they did expose the account information over the Internet by transmitting unencrypted emails containing copies of the check to parties entitled (and un–entitled) to the account information.

The escrow operations manager answered the buyers' demand for a refund of fees, letting them know fees cannot be discounted or waived in their state. They have to be collected in accordance with the rates filed with the State's Department of Insurance. The escrow manager requested a time and effort report reflecting the time expended by the buyers to change their compromised account, including any and all bank expenses.

The buyers provided letters from their employers and their bank verifying loss of work hours and production. The husband's employer reported the husband was unable to work for a total of 12 hours while dealing with financial issues brought on after his escrow with Chicago Title Company. The employer went further to report that based on the husband's salary and commission he would have earned close to $1,600 during the absence.

The wife is a dental hygienist. Her employer reported she was unable to work for 12 hours while dealing with financial issues as a result of their escrow transaction with Chicago Title Company. The employer estimated a loss of wages in the amount of $1,000.

The buyers' bank substantiated the loss of time by reporting that they spent several hours in their branch due to fraud committed on the account after the account holder wrote a check to Chicago Title Company. The losses exceeded $2,600.

 

 
 

MORAL OF THE STORY

Operations who mishandle a customer's non–public information can suffer much more than just embarrassment. In some cases the costs are immeasurable. They face bad public relations with their customers, loss of business, the possibility of fines and loss of profit.

In this instance the customer was not satisfied with the offer of a free year's worth of CreditCheck® Basic through Experian®. As a result, the manager had to make a business decision which resulted in the loss of $2,600 to the operation.

If the escrow branch is sending copies of the earnest money check to un–entitled parties – meaning those individuals who should not otherwise have access to the buyer's non–public information – the MICR line of the check should be whited out or blacked out prior to sending the check copy.

That said, most lenders will insist the escrow holder provide a copy of the earnest money check unaltered. The lender already has access to the buyer's bank account information, since they had to supply the information to the lender in order to qualify for a new loan. The lender is entitled to the information.

The escrow holder complies with this request by sending an unaltered copy of the check and receipt using the Company's encryption software called Voltage. To find out more information on how to send an encrypted email, see escrow technical memorandum #148–2011, Secure Emails.

 
 
 
 
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