DEMAND DRAFT

Demand drafts were originally designed to benefit legitimate telemarketers who needed to withdraw funds from customer checking accounts. However, the lack of a signature required to authorize the transfers have left demand drafts open to fraudulent use. The only information needed to create a demand draft is a bank account number and a bank routing number - this information is found on a standard check.

In 2005, the Federal Reserve proposed new regulations over the fraudulent use of demand drafts. The regulation increases a victim's ability to claim a refund and makes banks more accountable for cashing fraudulent checks.