Legal Matters: Automatic Bank Withdrawals You Didn’t Approve
Wednesday, July 24, 2013
To save themselves the cost of handling paper checks, banks set up a system to replace them with completely electronic transactions processed through a computerized Automated Clearing House process. On the plus side, ACH transactions allow you to get paid by direct deposit instead of by paycheck and it allows you to have your mortgage payment automatically debited from your account instead of having to write and mail a check every month. On the negative side, it basically allows any business to get money from your account by telling your bank ‘Joan authorized us to withdraw $100 from her account. Here is her account number. Give us her money.’
Legitimate businesses like ACH transactions because they are fast and do not have the same fees as debit and credit card transactions. Illegitimate businesses like them for the same reasons. Those shady businesses have also realized many people won’t scrutinize their monthly bank statements closely enough to realize they are making unauthorized withdrawals every month.
All a thief needs to steal your money is your account number and bank routing code. They are the numbers printed on the bottom of every one of your checks, so:
- Even if you are not balancing your check book every month, review your statements for unauthorized withdrawals;
- Shred your checks and bank statements before throwing them away;
- Use your credit card whenever you are shopping on the internet or dealing with a potentially sketchy company; and
- Never ever give your bank account information to anyone on the phone.
You Can Stop Automatic Withdrawals
You can stop automatic withdrawals. If a business tells you that you cannot, they are lying. To stop them, send the business a letter saying “I hereby revoke any authority you may think I ever gave you, or any of your affiliates, partners or associates, to withdraw any money from any of my bank accounts for any reason. I will consider any attempts to withdraw money stealing.” Include your name, address, bank name, and account number on the letter. Keep a copy and send it via certified mail or using FedEx’s ground or 2-day delivery services.
Your Bank Has To Help
Think about the irony of the situation I described at the start of this column: you tell your bank they sent money from your account to a thief without your permission and they tell you to talk to the thief. Unfortunately, that is the attitude my clients run into when they talk to their banks.
Banks should be telling fraud victims about their rights under the Electronic Funds Transfer Act. In most circumstances under the Act, as long as you tell your bank about the theft within 60-days of it appearing on your bank statement, the bank has to return your stolen money.
If a company you do not recognize made the withdrawals, ask the bank for the name, address, phone number, bank and account number for the business they sent your money to. The bank knows where your money went; make them tell you.
Stand Up For Your Rights
If you are the victim of ACH fraud, notify your bank right away by phone. Then file a police report and go to your bank with a copy of the report. (The police probably won’t do anything but the report will make it harder for the bank to ignore you.) You should also file complaints with the Federal Reserve Board (which regulates ACH’s), the Federal Trade Commission, and the Consumer Financial Protection Bureau. If the banks blew you off, file a separate complaint with the entity that regulates it.
Never rely on just a phone call to your bank. The phone is fine for the initial report but I recommend you also go to a branch and meet with someone. When you get home, immediately send the bank a letter saying ‘Following up on my meeting today with Ms. Smith in your Elmhurst Branch when I explained my problem with unauthorized withdrawals from my account, I understand the bank (describe what the person said the bank would, or would not, do).’
Banks are not doing enough to protect their customers from ACH fraud. Perhaps they will if more people assert their rights and complain.
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