ArsTechnica reports that a judge has ordered Neovi, the company behind Qchex, to immediately stop offering their service, which allowed people to create and send checks drawn on any bank so long as they provided the account info. As you can imagine, this led to abuse by scammers who would use Qchex to create fraudulent checks.
The company can’t resume business until it puts in place a verification system to help prevent fraud, and gives up all the money it has made over the past couple of years.
Qchex says that verification is the responsibility of banks, and that customers who were ripped off were often victims of their own stupidity or greed:
Numerous consumers are involved in disputes related to check payments every year. Often the consumers become victims of their own greed, carelessness or fraudulent schemes. Some consumers were affected negatively from Qchex users and blamed Qchex – per the Federal Trade Commission (FTC).
Every year millions of counterfeit, fraudulent and disputed checks enter the banking system from a myriad of sources. Qchex made it easy for banks to recognize checks created with the service by printing its mark on each document. Banks complained to the Federal Deposit Insurance Corporation (FDIC) about losses caused by cashing fraudulent checks created by Qchex software users. Qchex was blamed for actions of its users abusing the system and banks irresponsibly cashing checks created by Qchex software users. A public campaign was initiated.
We’re not sure who Qchex is trying to win over with that statement, but okay. What they’re really saying, however, is that the responsibility to validate the checks lies with the banks, not with a third party system that merely prints the checks. The FTC thinks otherwise, and filed the lawsuit that led to the company’s shut down after they refused to agree to a list of demands that would have implemented a verification process.
(Thanks to Robert!)
Qchex statement [Qchex]