Should You Cash Litigation Settlement Checks?

If you received a check in the mail that says it's from a litigation settlement, you might naturally be a little suspicious. After all, many unexpected windfalls are thinly disguised scams. But if your check comes from the American Express FX Fee Litigation Settlement Fund, then it's probably legitimate, and you can cash it without worrying.

Here's the background: A class action lawsuit against credit card companies has resulted in settlement checks for about 7.4 million consumers who made foreign transactions on their credit cards between 1996 and 2006. The latest round of settlement checks were mailed starting in mid-May; consumers will continue to receive them through the middle of this month. (The checks are valid for 90 days, so anyone who receives a check should deposit it within that time frame.)

The checks have unnerved many recipients, leaving some wondering if they should cash the check or if it's some kind of scam. After all, one popular online scam involves sending someone a fake check and then asking them to wire a portion of it back, or collecting personal information before the check can be cashed.

[Read: Beware of Official Looking Mail - It's Probably Not.]

While the foreign currency fee litigation settlement fund in legitimate, Gerri Detweiler of Credit.com warns that scammers often take advantage of these types of events. She writes, "I haven't heard of any scams coming out of this settlement yet, but if you receive an email or phone call from someone offering to help you process a refund, ignore it. You will not receive phone calls or emails from the settlement administrators."

The Better Business Bureau similarly vouches for the legitimacy of the settlement fees, but also warns it could spark "look-alike" scams that try to fool consumers into giving up their personal information or money. The bureau recommends verifying the authenticity of any check claiming to be from the fund.

Here are some other basic tips on protecting yourself from mail fraud:

Ignore false threats. Mail marked with intimidating language, such as, "2nd Attempt," "Request for Immediate Action" and "$2,000 fine, 5 years imprisonment, or both for any personal interfering or obstructing with delivery of this letter" isn't necessarily from a government source. In fact, such letters are often advertising extended service contracts for vehicles, and can be safely ignored.

Beware of official-looking mail. According to the Federal Trade Commission, which protects consumers from deceptive business practices, impersonating the government is a common technique among fraudsters, even though it's illegal to do so. The FTC has brought cases against companies that use letterheads designed to fool consumers into thinking it came from a government agency, such as the FBI or U.S. Postal Service.

[Read: Change of Address: USPS Will Confirm.]

Make sure you're receiving all your mail. If mail goes missing, especially statements from financial institutions, then it could be a sign that a fraudster has intercepted your deliveries. In the past, the FTC has warned the identity thieves sometimes fill out "change of address" forms for victims and then collect the diverted mail, which allows them to co-opt financial accounts. Anyone who thinks they are missing mail should contact their financial companies to double check they have the correct address.

Don't believe "you won." Fraudsters might claim that the recipient "won" a free vacation or a sweepstakes, but these types of claims are often false and connected to fraud. The recipient might be asked to give up personal information or even pay before collecting the "prize." Similarly, chain letters that ask the recipient to send money in return for future payback are illegal.

[See: 50 Smart Money Moves.]

Being vigilant against this kind of "prize" fraud is what has led some people to inadvertently discard their American Express FX Fee Litigation Settlement Fund money. But a true scam usually lures its victims with much bigger rewards. The check from the fund won't take you to another income level - for many people, it's just $8.23. Still, that's enough to buy coffee, and maybe a cookie.