There is no federal law that limits your liability due to paper check theft, fraud, or abuse. However, the state laws vary. State laws typically hold the financial institution responsible for these types of fraud with certain parameters.

First, financial institutions and state laws typically hold you responsible for managing your account for unauthorized transactions.

The laws also typically expect you to report any suspicious or fraudulent activity at once. If you don’t monitor you account and does not immediately report the activity, then you may be held liable for the theft that occurred. Alternatively, the financial institution may be liable, but may also be allowed to file suit against you for not living up to your responsibilities.