My understanding was that I can recover from Fidelity, Fidelity has to go and recover from the accepting bank, and the accepting bank has to go find the person who forged the check (and that I don't have to deal directly with the accepting bank). Are you saying that Fidelity is only legally obligated to issue a new check if the funds are recoverable by Fidelity too or that in reality Fidelity won't give me money unless they already know they're covered?
I am not 100% certain but I don't believe Fidelity has a legal obligation to replace your check until they have recovered the funds themselves. Otherwise, they are out the money twice even though the fraud was not their fault and likely was caused by poor bank controls. At least that's the way we handle it. Unless we made an error of some sort, we don't pay twice and incur the loss ourselves. To pursue it, yes you would go to Fidelity but then you are at the mercy of whether they can recover the funds.
Payee was changed from Vanguard FBO [wife's IRA account] to a presumably fake name which matched the endorsement name on the back. Seems like this makes the accepting bank's error more understandable and more blame on Fidelity's bank (would they have had a chance to see the image of the check before sending funds to accepting bank?)
The issue here then is how did the bank process the check? Did they literally give the customer cash? This would be highly unlikely unless it was an existing account holder with funds in their account equal to the amount of the check and valid ID that matched the endorsement. If that was the case, then they know who to recover the funds from.
If that was not the case it gets trickier. In scenario B, the person had opened an account using false ID. they likely deposited the check, waited X business days for it to clear, then withdrew the cash and either closed the account or just abandoned it. because of the false ID used to open the account, the bank is never going to be able to recover the funds. Their defense in this case is that they gave the check X of days to clear which is the window in which you or Fidelity could theoretically have stopped pay (note: it is unrealistic to think you could have realized it wasn't just a delay in the mail that quickly, but that's the way it works).
Regarding if Fidelity had a duty to "catch" the altered name, no financial institution (banks or check issuers) is required to manually verify endorsements any more. Not many people realize this until something goes wrong though.
We weren't able to get this in time. Original check was dated 3/18. I began looking into it after a week or two when funds didn't show up in Vanguard. It took Vanguard a week or two to confirm the check hadn't arrived there. Didn't put a stop on the check until 4/16. Then Fidelity later found that it was cashed or deposited on 4/1. Obviously I'd handle this differently in hindsight.
Would be interesting to know if Fidelity uses positive pay on issued checks, but if the amount was not changed then positive pay may not have helped. I also didn't realize in writing my original post that it was a check going directly between Fidelity and Vanguard, and not from Fidelity to you. That actually may put Fidelity on the hook a bit more in that they had a duty to deliver the funds to Vanguard. Most stolen checks get nabbed from residential mailboxes and less so between two corporations that likely use commercial PO Boxes or lockboxes. That would imply that a postal worker was involved.
I think that's what Fidelity, Fidelity's bank, and the accepting bank are all doing. Since CFPB hasn't been any help, I'm planning to file a small claims court complaint. But going back up to my first response - can I file the complaint against Fidelity rather than the accepting bank/check casher?
I don't think I can answer this definitively. Check fraud is highly frustrating as there are no clear rules. Banking regs have language about this but no one seems to follow it directly. We deal with several national banks and some are worse then others. SunTrust is hands down the most awful. We had clear evidence of significant teller errors over a $10k dual payee check that they took with a single endorsement from a company that wasn't one of the two payees and they still refused to pony up. Most recently we had an altered check with blatantly obvious errors (totally different font for the word "nine" written before "thousand" for one thing) that was deposited in an ATM and whichever teller ran the ATM deposits let it go through.
