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TD Bank: “We Don’t Have to Obey the Law” on Check Processing

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I’m going to tell one on myself in the of exposing an abuse in retail banking that is likely news to you. It certainly stunned everyone that has heard my little tale so far. I’m hoping that readers who know of or have had similar experiences will pipe up in comments.

My Check Misadventures

My bank is TD Bank, which is now the 8th largest bank in the US.*

Earlier this year, I mistakenly put a check to my cat sitter in the payment envelope for my health insurer, Cigna. Not only did Cigna process the check despite the amount being vastly smaller than the amount shown on the little form sent back with the payment (as in someone had to key in a clearly different amount, hence look at the face of the check) but my bank made payment to Cigna even though the check was made out to “Jeannie A”.

The only way I figured out what had happened was by weird happenstance. Of course, Jeannie the cat sitter politely said she had not been paid. I was pretty sure I had paid her and the bank said the check to her had cleared, so I told her that and asked if she could have deposited it and forgot. She was not happy. I later got a bank statement that included an image of the processed check.

I also got a monthly statement from Cigna asking me to pay a weird amount. Not trusting Cigna as far as I can throw them, I called the billing department to find out what was up. The rep was able to pull a scanned image of the check they had gotten from me and told me the amount and that it was made out to Jeannie A. I was stunned that that could have happened.

Fast forward. Earlier this week, I made out some checks, including one drawn on my personal account to the IRS (made out to “United States Treasury”) to pay my Federal income taxes due. I also wrote a slightly bigger check to me from my business account. Later the same day, I realized I had put the check on my business account made out to Susan Webber in the envelope to the IRS.

Now in theory, either the Department of the Treasury or my bank should see the error and not process the payment since the payee is Susan Webber, not United States Treasury. But based on what happened last time, I realized the payment could go sailing through again. So I went to my bank branch in person to have them explain why the last check to the wrong payee went through so I could make an informed decision as to what, if anything, to do.

The branch staffer I spoke to first wasn’t sure and brought over the “Store Supervisor,” Hisabel Santiago. Ms. Santiago said that the Treasury processed thousands of checks so she was sure they’d present my check to the bank. She said the bank would then pay it because they processed checks from the Treasury in bulk.

I said something like, “Wait a second, you are telling me that you don’t verify the information on the check to see if the payment should be made? How can that be right? That check isn’t made out to the Treasury. You aren’t allowed to do that.”

She said, and this is an exact quote: “We don’t have to obey the law.” At least a half dozen customers were within earshot and started staring at us.

I said, “That’s not correct. I know something about bank regulation. You aren’t permitted to pay out to the wrong payee.”

She repeated “We don’t have to obey the law,” more loudly that the first time. She added that if the payment went to the wrong party, it was between the payee (I think she actually meant funds recipient) and the account holder, and I could take them to court.

I said, “You are telling me even with forewarning that you are prepared to make payment to the wrong party.” She said I could pay $30 to stop the check, which at that point I had no interest in doing.

I said, “I have a business and when I bring checks to the teller to deposit, if there’s a small discrepancy, they refuse to accept the check.” Ms. Santiago said that was different, it was a business account (which of course makes no sense, since the payment that mistakenly went to Treasury was also drawn on a business account).

During that discussion, I felt I had entered into the Alice in Wonderland version of banking. So can banks just make it up as they go? There no chain of endorsements between the payee and the person depositing the check, yet the bank insists it’s kosher. If it really doesn’t matter who the check is made out to if it winds up in the hands of a bulk processor, does any paperwork generated by the consumer matter if the bank arbitrates based on what is cheapest and most convenient for it?

Effectively, we have two legal regimes in operation: one for the bulk processing of checks (for big entities) where anything goes, and one for small fry who have to dot every i and cross every t. For anyone who followed our coverage of foreclosure abuses, you can see the same pattern: a “might makes right” attitude; the prioritization of operational efficiency over integrity of processes; and most important, an open admission of flagrant disregard for the rule of law.

Yes, Virginia, This is a Big Problem

Now my sending the wrong check in this case isn’t ultimately a problem (so please refrain from offering helpful ideas, I’ve already sorted this out with my accountant). But you can easily see from my two different screw-ups the sort of mischief it can cause. Remember, in most cases, people won’t realize the wrong party got the check until it is too late, like the first instance, with Jeannie and Cigna.

So who gets hurt?

The payee who it looks like got payment but really didn’t. I was convinced I had paid Jeannie and the bank’s records said so too. So she would have been screwed had I not got inquisitive about what looked like an error in my favor at Cigna. So the person who didn’t get the check intended for them is harmed. The person who wrote the check, either out of neglect (not figuring out what went wrong) or bad faith can tell them the check to them cleared and bugger off.

The check-writer if the person getting the wrong check successfully deposits it and refuses to give the excess over what they were due back. You can see what a nightmare this is. What if the person got extra money refuses to return the overpayment or drags their feet about giving it back? People or businesses who are cash strapped could really suffer even if the other party is honest but slow to get the money back.

Is This Kosher?

To get a sanity check, I spoke to Walker Todd. Todd worked for the New York Fed as an attorney and later the Cleveland Fed as assistant general counsel and research officer. He has since (among other things) taught law, history and economics at the graduate level, and is a research fellow at the American Institute for Economic Research.

His initial reaction was to get exercised about the size of the stop payment fee. “A good rule, since TARP, would be that banks should accommodate their consumers to the same extent that the Fed accommodate the banks.” The Fed now engages in time-sensitive pricing, so if a bank puts through a stopped-check order at 9:45 AM, the Fed’s charge is much lower than at 3:45 PM (the banking day ends at 4 PM). He thought the cost to the banks of stopping a check is well under $5 and questioned the policy justification for allowing banks to charge such high amounts (stopped check charges used to be on the order of $10 to $15).

I said I though the bigger issue was the consequences of the depositor’s money winding up in the hands of the wrong party, particularly if the check that went astray was large. Todd said that the banks had the right to reverse a payment made in error, but they weren’t usually willing to do that.

I also contacted a law professor who is an expert in banking and the Uniform Commercial Code, who asked not to be quoted by name since he did not have a hard copy of the UCC with him to double check, and it has a lot of oddities hidden in is comments. His quick and dirty response:

Here’s the answer: First, are you sure your check was presented as a check, rather than as an ACH item? A lot of checks are now converted to ACH. If it was converted to ACH, different rules (the NACHA rules and possibly EFTA/Reg E) apply.

Here’s the rule: UCC Article 4 (4-401) says that the bank can only debit your account if an item (read a check) is properly payable. “An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and bank.” This check was not properly payable to Treasury. It was only properly payable to Susan Webber. That means Treasury was not a “person entitled to enforce” the check. The bank should recredit you promptly and to the extent you were hit with fees, etc. because of the improper debit, they should recredit those, as well as any interest you otherwise didn’t earn.

Your bank might have an argument that you are precluded from raising the issue because of contributory negligence, per UCC 3-406. Cmt. 4 to 3-406 actually gives an example of a check mailed to the wrong party…but the example is of a check mailed to the wrong party with the same name as the correct one (two John Smiths). So, I don’t think they really have a viable contributory negligence defense.

The bank should be able to recover from Treasury. Treasury violated its UCC 3-417 presentment warranty that it is a PETE (and if there was an intermediary bank, the UCC 3-416 transfer warranties would be violated because the signature of Susan Webber as payee wasn’t authorized).

In the modern checking system, human eyes rarely look at checks. Most small dollar checks are never examined, while largely dollar checks tend to be sampled. The cost of being careful outweighs the cost of dealing with mistakes.

The “we don’t have to follow the law” line is just ridiculous BS.

Policy Issues

I have a sneaking suspicion this sort of mistake happens more than people want to admit. But until my rash of goofs this year, I’d blithely assumed that a misdirected payment would not go through.

In the 1990s, I had an account at US Trust, and I’d occasionally get calls as to whether to pay particular checks because they thought my signature didn’t look right. Thus not all that long ago, banks were monitoring check processing to make sure the payments made were valid.

Of course, having the bank do what you assume would happen, that it won’t pay out on a check that gets in the hands of the wrong person, will mean you’ve got a missed payment somewhere, but you don’t have the additional complication of having to do forensics to figure out what went awry, unscramble financial eggs, and in a worst-case scenario, lose the money or have to engage in a pitched battle to get it back.

If you’ve made or know someone who has made a mistake like this, please tell your story in comments, including the bank name and roughly when it happened.

The reason for seeing if this is indeed a real problem is that in an odd bit of synchronicity, the Fed is soliciting input on how to improve the payments system, so comments on this post could help inform a submission to the Fed. In addition, it’s also curious that the CFPB seems to be missing in action. Richard Cordray showed in the subprime mess that he was not at all proactive, and it was only when he looked like he might look bad relative to other attorney generals in foreclosure-ridden states that he saddled up to take action. He looks again to be acting on the squeaking wheel principle as the head of the CFPB. So the onus is on you to help make noise!

Cleveland Fed Payments System Consultation Paper Press Release

____
* I never picked TD Bank as my bank. I was a customer of Commerce Bank, which was a very customer-friendly bank whose branches stay open really late and are open on weekends. TD Bank bought Commerce.

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154 comments

    1. Yves Smith Post author

      I’m well aware that the parent entity is Toronto Dominion Bank (I did consulting to Canadian banks for McKinsey in the 1980s), but in the US, their name is “TD Bank.” And a bank licensed and operating in the US is most assuredly subject to US regs.

        1. Yves Smith Post author

          No, TD Bank is not acting particularly abusive because its Canandian and thinks it can get away with it, although it may have particularly stupid people as its branch supervisors. Walker Todd basically said that what went down was clearly wrong but he wasn’t surprised that this had happened, which means its common, if not pervasive.

          I’m letting this roll to see what happens. There is a small possibility that the IRS won’t process the payment (pretty much everything is wrong with that check: the payee, the payor, and the dollar amount). It would be amusing if the IRS performed better on this one than the private sector.

      1. PaulW

        That was my first thought: are you referring to TD/CanadaTrust? Where I do my banking. For the record, I quit the big five in the late 1980s and switched to a trust company. Naturally it later merged with TD.

      2. Robert Post

        I had an experience with Commerce Bank where they paid a check I wrote twice! Although the staff agreed that the check had been paid twice, the best they could do for me was to daily credit my account with the amount of the error. After two weeks I closed the account and have used a credit union exclusively ever since.

      3. Willie Lomax

        L A Times — Banks lobby to kill credit unions.

        http://articles.latimes.com/2013/jul/06/business/la-fi-credit-union-taxes-20130706
        Credit unions have been snatching customers from banks amid consumer frustration over rising fees and outrage over Wall Street’s role in the financial crisis.
        Now banks are fighting back by trying to take away something vital to credit unions — their federal tax exemption.
        With fast-growing credit unions posing more formidable competition to banks, industry trade groups are pressing the White House and Congress to end a tax break that dates to the Great Depression….
        Credit unions said the effort to take away their tax exemption was simply an attempt to stifle competition and remove one of the only checks on bank fees for consumers.And it comes as some in Congress are pushing to loosen regulations on credit unions so they can expand their business further, including legislation that would lift a cap on the amount of money they can lend to businesses.
        The tax exemption is crucial to credit unions, which by law can’t raise capital through public stock offerings the way that banks can, said Fred R. Becker Jr., president of the National Assn. of Federal Credit Unions, a trade group with about 3,800 federally chartered members.
        “They’ll have to convert to banks, which is what the banks want,” he said. “Then they’d have, for lack of a better term, a monopoly.”

  1. Elyse

    A weirdness I ran into a couple of weeks ago — I had sent a large online payment from the wrong credit union checking account, so that one that gets used for some automatic payments was more depleted than I liked.

    I set up an online payment between the two credit unions to move money over from the CU that should have been used for the payment. The payment was listed as ‘in-process’ for several days, and there was a couple of days where the money was gone from the online balance of the sending account but not yet showing at the online balance of the receiving account.

    I know from experience that if I had written a physical check and driven it over to the credit union with the depleted account and deposited it at the ATM, the funds would have shown as transferred within 24 or 48 hours depending on things like the time of day I deposited the check.

    I did not expect an ACH to be much slower than a physical check.

    In the future I’ll know to use physical checks to make the transfers unless I am out of town when the need for a transfer arises.

    1. LucyLulu

      When I’ve done ACH transfers between institutions (in different states), the money appears in the account at the second institution the day after it leaves the first institution. There is most likely a caveat that the transfer must be made before mid-afternoon or such.

      Unless credit unions are different or there was a banking holiday, 2-3 days seems excessively long. Perhaps 2 days if the day’s deadline is missed, but 3 days is definitely too long.

      Yves,
      When I called my bank in 1995 about a signature discrepancy as somebody else would be writing checks for me for a few months due to illness, my bank told me not to worry. They said they never checked signatures anyways. It was First Security in Lexington, KY. My current bank charges $30 for a stop payment on a check (so I took my chances and figured I’d seek recourse if somebody else cashed it, not as safe as I thought, eh?)

  2. Rick Cass

    This has been going on for a long time. I sometimes signed business checks with the signature “Mickey Mouse” or “Donald Duck” once or twice a month to see what would happen. Never was any check so signed challenged, all were honored, and I never got a call about any of them, from the payee or from the bank.

    1. ex-PFC Chuck

      This brings to mind an hilarious anecdote I read of several months ago. A couple was out to dinner with another couple and the man in question was a well-known writer on economics and financial issues whose name I unfortunately don’t recall at the moment, and his wife had her own career although without the public profile he had. When the check came his wife put out her credit card and when the server brought it back she put the tray in front of him instead of her. He signed the slip and then handed her the customer’s copy which she took and started to put in her purse without looking at it when one of the two people asked a question which led her to examine the receipt. She started in surprise then looked at her husband and said, “You didn’t sign either my name or yours? What did you write?” “I have a penis,” he said. “What?!” “I have a penis.” “For the last fifteen years whenever you’ve put out your credit card and the server has put the slip in front of me that’s how I’ve signed it. No server, no restaurant manager, no bank, no one has ever questioned it.”

    2. Tim

      Rule #1 when doing business with Banks. They will never ask questions when you are depositing (giving them) money. You don’t even have to sign a check for them to deposit it.

      Although I am suprised to hear they are equally laxed about sending money to a thrid party as this article suggests.

      1. TimH

        So true (US anyway). Whenever I get a check with misspelling, it goes in the ATM deposit. Never a problem. And I have never signed the back of a deposit check fed in that way either.

      2. Ed S.

        Tim,

        Gotta tell you, that’s not been my experience.

        My best (worst) story involves Wells (they all involve Wells) when I was trying to deposit a double endorsed check (a check that was signed over to me). Now IANAL, but IAACPA, and vaguely remember the rules on negotiable instruments. It wasn’t a small check, but I was a long time customer (like that matters) and had roughly 10X the amount of the check on long term deposit.

        Wells refused to accept the deposit. After a 15 minute screaming match the “manager” found some truly fine print in the Agreement that said (in so many words) “We can refuse to accept any item for any reason or no reason”. Which is (and some attorney can correct me if I’m wrong) a violation of the UCC.

        My experiences with Wells would rival, in length but not interest, a Lambert post on ACA (which are AWESOME). Wells’ issue, at the retail level, is that they hire inexperienced people and don’t bother to train them — so they are consistently incompetent. Untrained so they are unable to execute the tasks they are assigned.

        My first real job was as a “summer relief teller” for a mid-sized East Coast bank – a 10 week gig. As a new employee, I spend 5 FULL DAYS in training before I sat behind a window. But training costs money………………

        One final anecdote: as I was trying to resolve a $10k+ fraud against several Wells accounts, I had the “banker” (yes, they call themselves bankers) say, “Hey, don’t get an ATTITUDE with me — it’s not my fault that your money was stolen”.

        Yves, apologies for the off topic remark.

        1. sleepy

          Yep, I banked at Wells for years and it was unpleasant.

          Would you by any chance know the reason they put a 10 business day hold on a large deposit–comprised of several checks, but all from the same account, drawn on another bank?

          Yes, I understand they want to make sure the checks cleared. But ten days?

          Also, isn’t a bank required to give you $100 in instant credit for each check deposited.

          Wells gave me zero. I suspect the checks cleared in 2 or 3 days and Wells played with my money for a few more days before clearing it for me.

        2. Yves Smith Post author

          Sadly, this is what I had indicated the pattern is in the post above. In my argument with the “Store Supervisor” I had said that they were sticklers when I was depositing checks, and she made up some sort of excuse that made no sense involving business accounts.

          So we have two different legal regimes: ones for little people and business who deal with bank tellers, and one for big fish.

          1. Bucky

            Yves, back in the 90s I worked for a while in the Returned Items department of a major, now defunct, bank, and to MY knowledge, there wasn’t the slightest tinge of “we don’t have to do squat if we don’t want to” there. The bank routinely put thru missing-signature or not-endorsed-as-drawn checks, and when customers squawked the bank made good (I know that because I typed the refund checks myself, most of them under four figures). Maybe back offices will always be immune from the public-be-damned attitude your branch manager displayed, but it’s certainly true that retail banking was a MUCH different animal back then: aside from occasional clerical stupidity (or a paper claim falling down in between two desks) I would have trusted any of those guys to do the right thing, and I think they did. Now??? Fexgh!!

    3. participant-observer-observed

      New NC feature: Robo-signers Gone Wild!

      I did succeed in reversing insufficient funds charges from USAA after they deposited my check into the account other than the one designated on my deposit slip, which was also accompanied by a typed letter of instructions regarding the account designated for the deposit!

    4. Matt

      Your story jives with my understanding from my son experiences is that checks no longer require payer’s signatures at all.

  3. Import from IL

    I recall this happening to me as far back as 1995 – and that was with a small local bank handling transactions with two local businesses. The bank’s response was “suck it up and deal with it.”

    1. Cugel

      This has been going on since the early 1980s at least. It is totally routine. Back in about 1983 I placed a check to the phone company in the envelope to the Public Service electric and gas company and vice versa. BOTH checks cleared and the bank never bothered to contact me or do anything.

      The Public Service gave me a credit on my next bill for the extra amount I’d paid and the phone company sent me a deficiency notice.

      The banks simply don’t examine the checks to see if they are made out to the payee. Ever, as far as I can tell.

      Sure, they check the individual customer who goes into the bank with a single or a couple of checks to deposit. But, if you had a business account and submitted 50 checks for processing I doubt whether they’d catch it.

      And if your business employed a processing company to submit thousands of checks a week like a utility company or phone company? Forget it! They would never find any error.

  4. sea

    Four years ago, a coworker with a first name similar to mine (formal name versus nickname of same) accidentally picked up my paycheck, took it to her bank (which happened to also be my bank; Eastern Bank in Massachusetts) and cashed it. Not only are our last names significantly different, my salary was set up to direct deposit and the paper “check” had “NOT A CHECK” prominently printed across the face of it.

    About an hour later, my coworker came and told me what had happened. We went to the branch together and the manager was horrified. The teller, who had cashed the check, was unperturbed. My coworker turned the cash in and my account was credited.

    It turned out okay, but it was unnerving.

  5. Jim Haygood

    When a midwestern megabank acquired an NYC-suburbs regional bank at which I had an account, they ‘grandfathered in’ the old account numbers, which had only eight digits.

    A few months ago when depositing a check (endorsed with my name and 8-digit account number) with a teller, it failed to credit to my account. The teller called up the account number on his terminal, and found that a depositor in Ohio has the same account number, at another branch.

    Back in the antediluvian days when interstate banking was prohibited, this would have been a non-issue. Now a bank with branches in multiple states has, thanks to its rats nest of acquisitions, duplicate account numbers … and no plans to fix them.

    In every respect, the primitive infrastructure of the U.S. banking system is mired in the Morse code telegraph era, while the FOMC’s PhD morons believe they can diddle the economy back to prosperity. Lewis Carroll captured this preposterous scene long ago, in the Mad Hatters Tea Party.

    Abolish the freaking Fed!

  6. Wake Up America!

    Nothing a bank does surprises me.

    Yesterday I went into a Citibank branch to cash a check drawn on a Citibank business account.

    Having done this at this very branch on numerous occasions, I knew the drill of having my driver’s license and another form of ID ready to present.

    The teller than pushed a blank piece of paper under the window and instructed me to write down my social security number and occupation. When I politely refused to do so, she politely refused to cash the check.

    I asked to speak with the branch manager, who confirmed this was now policy. She would not advise whether this was a new, blanket Citibank policy, whether this was a “rogue” branch or some new, bullshit Patriot Act requirement.

    Rest assured, I’ll be doing some investigative work today. I’m very curious as to why Citibank is requesting this information.

  7. indio007

    I’m sure if you read your banking agreement, you consented to converting checks to ACH. ACH checking is a whole sale run-around to avoid the UCC Which incidentally, is simply a codification of the law relating to promissory notes and bills of exchange going back to the 1600′s. This is when Lord Holt merged the common law with the law merchant regarding them.

    ACH is the avoidance of that. AFAIK it doesn’t guarantee a payment in money (or legal tender) at all. Only credits and debits of units of account.

    This is a very deep rabbit hole that involves ALL “electronic dollars”. They have no relation to the dollar at all.

    I would get into it in more detail but then this comment would be longer than the article.

    I’ll just sum it up and say. Electronic dollars has no relation to Federal Reserve Notes in the same way the Federal Reserve Notes have no relation to gold or silver.
    Think electronic script. Legally, money is whatever the parties agree it is.

    1. Dr. Noschidt

      Then is the “petrodollar” digital/electronic only? If so, what is the “USD” and what is a Federal Reserve Note commonly called “the dollar” today?

      In the conversion of “currency” you describe from bill/note to digits, who are the owners of Currency Central? The topdogs of the BIS?

      If so, what actually is the Bank of N. Dokota, and what currency does it honor?

    2. Yves Smith Post author

      The law prof told how to tell if my check had been converted to ACH:

      You can tell if it is ACH conversion by how it shows up on your statement. It would have a 3 letter code and then some numbers.

      I’ll have a look at the earlier mishap and at this one. As other readers indicated, ACH payments actually go through more slowly than checks (I’ve seen this with parties that pay for ads via ACH, it takes 5 days when an in-state check is 1 or 2 and an out-of-state check in theory 3-5 but I find usually on the shorter end of the time range).

      I’d bet given that Cigna kept the check image that they processed it as a check and did not convert it to ACH.

      1. Adam1

        The check probably didn’t get processed as an ACH but under check21 electronic imaging standards. The bank took it on faith that Cigna was sending it a valid check21 image and once it left Cigna I doubt a human ever looked at it.

        The way “lockbox” imaging works is that large volumes of checks and payment receipts are scanned. Any discrepancies, unreadable amounts or discrepancies in amounts from the checks and receipts) are manually adjusted but when your processing thousands I would bet the adjuster never looked at the payee to verify that it was correctly made out to Cigna.

        Cigna then sent a file of images to its bank who then stripped out its customers check images and forwarded the rest to the FED for settlement with other banks including TD. TD had no way of knowing that you presented it to Cigna and not someone else. That of course does not excuse the gross behavior of that employee.

        Of course I would also never tell anyone to ask a frontline bank employee anything about back office operations. They typically don’t have a clue.

        In the end it would be Cigna who falsely presented the check as I am sure the banks legal department made sure that their electronic interface contract with Cigna leaves them as the responsible party for presentment verification.

  8. skippy

    Back in the 80s an emanate law professor at ULCA had a snafu with BofA and his account. The hole thing was a creation of BofA from the onset, which they compounded at every turn. After going through 5 or more gate keepers he finally ended up conversing with the top regional C – Level commander. After deposing the commander – of his – interpretation of legal standing wrt BofA actions, the Prof. revealed himself.

    Long story short… everything was rectified with interest post haste, including a very large article in the LA Times describing in gory detail (names) every ham fisted machination BofA tried to pull off, authored by said Prof.

    Those small days are gone~…

    skippy… As Citizens United foretold… who writes law… these days… as wet ink dies… so does accountability.

  9. anon

    Something similar happened to me a few weeks ago. A rent check mailed to my long-term landlord’s PO box was delivered to the adjacent box by USPS unbeknownst to either of us. A few days later landlord and I had the same exchange whereby I was sure he had deposited it and he was sure he had not.
    The check was made out to “ABC Management” but on the scanned image the “payable to” had been crossed out and above it written an individual’s name. PNC bank here in Chicago cashed the check with no questions asked and no delay.

    In the end my money was recovered through BofAs fraud department but it took 4 WEEKS. Fortunately I had the cash to make 2 additional rent payments before being reimbursed but many do not. What is the point of a check if you can simply replace “payable to” (or in your case just deposit it in bulk)?

    Shame on PNC bank for cashing it and 4 weeks to reverse the transaction is unconscionable.

  10. Con

    Interesting. But to me the oddest thing about this “check” story (and the other stories in the comments) is actually the use of checks. I haven’t used one in several years, except for this one time 4 years ago I had moved from NZ to Australia, and renting an apartment I had to pay a bond to a letting agency which wouldn’t accept an electronic payment. How archaic and frustrating! I had to actually go back, in person, to my new Aussie bank branch and get them to cut a bank cheque. That, I think, is the last time I even saw an actual cheque.

    1. Yves Smith Post author

      I greatly prefer checks as does my accountant. Better level of proof in the event of an IRS audit.

      1. evodevo

        YES!!! Electrons are too tiny and unreliable. Since we farm and have two small businesses, I have cancelled checks and payroll stubs going back to 1973.
        Call me cautious.

  11. Michael Katsimbris

    This happened to my company literally in the exact same fashion. We wanted to pay one vendor, and had the check accidentally mailed to a different vendor, who STILL deposited the check, and STILL had it honoured.

    This happened two years ago now, I believe. With PNC Bank.

  12. McWatt

    I have had the exact same experience both on deposits and checks. The smallest error on a deposited business check kicks it back to the depositor. Any error on a written check for payment is skipped over when the recipient is a mega corp.
    Maddening!!

  13. Glen

    This has been going on for years in Canada. Banks only look at where the money is coming from and where is going. Names, dates etc. are all ignored. Adding insult to injury is that that bank fees have risen while the banks cost of service has fallen dramatically. Stop payment, NSF and other fees have skyrocketed, despite automation and a foregoing of DD. Yet every bank, it seems, has been unable to pass these saving on the consumers. The free market at its best I suppose. It appears that the FED is not the only ones that can print money.

    1. Dr. Noschidt

      Glenn, true. All that counts are the scannable digits and sigils.

      Recently there was a mass mailing from my bank that from now on all matters in dispute shall be settled by “arbitration.” So the customers are told, by “fiat”.

  14. craazyman

    once in the early 90s I had an account at Chemical Bank. Basically I was a broke Bohemian at the time. Maybe $2000 to my name. I needed cash for beer and food.

    Went to the ATM and it said I’d made a $60,000 deposit. My account was frozen until the money cleared into the account

    I couldn’t withdraw a penny,

    I went to the branch and they talked in hushed whispers, eyeing me suspiciously. There was nothing they could do. Nothing they would say, except “We’ll look into this.”

    It took 3 days before they admitted it was their mistake and let me have my money. I don’t think they even apologized.

  15. jo6pac

    I’m not sure why you are still with the bank and not a small credit union or region bank. I bank with a small privately owned regional bank. If you write a check it goes through the giant system from hell and before my bank OKs it for payment someone at the branch I deal with looks at it. I didn’t sign my name in the normal fashion one time so the called me to make sure I wrote it. That’s service.

    On another note is there any way to have the site keep my info, so I don’t have to fill it out each?

    1. patrick

      jo6pac –thats my question! -i belong to the largest CU in Washington state and i can’t understand why anyone would give business to any bank, especially the TBTF ones! Go to BECU.org and compare fees etc. I haven’t used a paper check for years-Patrick, Seattle

      1. participant-observer-observed

        Yes, exactly!

        When we are wringing our hands over Whale fiascos and Slimon Dimon, meanwhile the public is lining up to open new accounts in the new CHASE retail outlets that have sprung up on every street corner (in this part of LA county anyway) to vaccuum up as much cash as possible as quickly as possible!

        Until this codependency of dysfunction is broken, there is no hope!

        Long live the credit unions (but are they keeping *their* funds on Wall St???)

    2. Larry Headlund

      About “the site keep my info” question:

      What browser do you use? Some browsers have extensions which will fill out forms for you, giving you control.

      Even without that Firefox, for example, will fill out the information given just the first letter.

    3. Yves Smith Post author

      Please re-read the post.

      I was with a small bank, Commerce Bank. They were bought by TD Bank.

      To join a credit union, you need to belong to a particular group. They aren’t open to every Tom, Dick and Harry. I don’t have time to do research.

      And here is the killer…..TD Bank is No. 1 in JD Power customer satisfaction ratings. Their branches are open super long hours (8 PM weeknights, midnight Friday, 12-6 on Sat and 12-4 Sunday). If you make a deposit up to 8 PM they credit it the next day.

      So based on the JD Power rating and the long hours (which are really important to me given my terribly off cycle schedule), I don’t think I’ll do better. I’ve heard horror stories from people in Manhattan at small banks too.

      1. Lyle

        Check local credit unions, there may be one that you can join just by virtue of your address (it might well be called the xxx community credit union). Where I live there is one that has the whole community in its scope. Also if you went to a university and graduated you may find that you can join that credit union. Also many credit unions allow one to join if one joins some organization for $20.

        1. Lyle

          I might add I checked the two credit unions where I have a degree and if you join the schools alumui association for $20 or so then you can join the credit union (actually the alumui associations have a membership category of friend, so you don’t even need to be a member. Also many credit unions have an arrangement where they share offices for the purposes of making deposits. Further one can fill an application on line as well.

  16. Reuben Kincaide

    At the risk of being accused of victim blaming, I would suggest practicing mindfulness when writing checks. Failing that, I would recommend writing one check at a time and putting each check in its return envelope before writing another check. When dealing with criminal enterprises, you have to be careful.

  17. Steve

    We’ve had several Maine mortgages with Gorham Savings. They have treated us well; we have done loan modifications twice with zero hassle and low fees–no special government programs to “help”. Good people for a mortgage.

    This turned out to be especially crucial this year because we have an earth shelted home. Despite being very nice, it does not fare well in an appraisal in this economic climate (obviously when we got the original loan, things were different). Modifications at Gorham don’t require an appraisal.

    On the other hand, my theory about banks is that sooner or later, the bank you are at will do something so outrageous that you feel compelled to change banks….but they all have the same capability to ignore all sense and laws.

    Locally owned banks or even better, credit unions are much better choices than staying with a large, irritating bank.

    1. Walter Map

      It’s boggling to see that people still do all their business with banks in this day and age when they can sign up with a credit union. Simply boggling.

      I know of speculators who had shorted bank stocks, expecting that they had severely damaged their customer relations and their businesses, and were somewhat surprised and rather disappointed when that tactic turned out to be infeasible.

      What’s wrong with people? Why is there no general and ongoing boycott of financial racketeering banksters? How is it possible that OWS could not even accomplish that little?

  18. YankeeFrank

    This same thing happened to me at TD Bank before I closed my account there Yves. I was amazed. What this means is that anyone can forge checks galore. Anyone with a fake id who can open a bank account can have a field day as long as they have the account numbers of people with large bank accounts. Its insane.

    After reading about ACH’s and checks being transferred to ACH payments nothing is any clearer. I actually lost around $100 recently when an ACH transfer never went through, although the parties swore that A) it went through and B) the payment was returned. Obviously not both could be true and my money was lost forever apparently. Who’s gonna sue for $100? Unbelievable.

    The ACH system is a POS. Tell me why it can take days for an electronic payment? It should take a few minutes at most. That company Dwolla is trying to build a name for itself for fast easy cash transactions to ultimately replace ACH. Good luck breaking through the banking cartel’s “systems”.

    Banking has become a cancer in all ways. Name one reliable service they provide…

    1. Jim Haygood

      ‘The ACH system is a POS.’

      Except for a few megabanks, most banks do not even offer the possibility of one-time ACH transfers to another party.

      Easy, near-costless e-transfers have existed in Europe for years, and even some ‘less developed’ South American countries have them.

      But the primitive U.S. banking system, regulated by its own cartel, remains mired in the quill pen era.

      Burn it …

    2. Ed S.

      Anyone with a fake id who can open a bank account can have a field day as long as they have the account numbers of people with large bank accounts.

      Reading the article and comments I’m reminded of a comment made by Frank Abegnale (anti-hero of “Catch Me if you Can” — book is excellent, movie just OK). He was forging checks (in the 1960′s) payable against Pan-Am’s payroll account — when arrested he commented in passing that Pan-Am never noticed the checks. Just paid them.

  19. Deloss Brown

    Errr–I’m sure you’ve heard of Hanlon’s Razor, sometimes known as Heinlein’s Razor: “Never attribute to malice that which is adequately explained by stupidity.”

    1. Lambert Strether

      Is there a corallary which says that malice and stupidity are not mutually exclusive?

      Surely, there must be, since the malicious are malice-maximizing, as the stupid are stupid-maximizing, hence would be unable to recognize their won malice for what it is.

    2. Martin Finnucane

      I’ve yet to understand why people find this maxim compelling. As an axiom it is certainly invalid. As a heuristic it is certainly naive. As some sort of commentary on contemporary affairs it is entirely off the mark. Can anyone read this blog and NOT find malicious intent as an engine of our on-going degeneration? I mean, the Angelo Mozilos and Jamie Diamonds etc didn’t accidently destroy the economy, and the Tim Geitners and Barack Obamas etc. didn’t accidently let them do it. We bear witness not to some monstrous mistake, but to a coup.

      1. Walter Map

        The preponderance of evidence clearly shows that the 2008 crash was deliberately engineered to enable the transnational banking cartel to have its way with the global economy. Similar evidence exists for other crashes occurring since the beginning of the 19th century. Several people have shown that these crashes are usually, if not always, engineered as a means of indirect, large-scale stealing. Banksters have deep expertise and centuries of experience in creating bubbles and positioning themselves to profit immensely when the bubbles burst, going back to the tulip craze at least. And they usually get away with it, the 1980s being a remarkable exception.

        And the general population still has little problem risking their financial lives with these criminals. Which is astounding.

    3. hunkerdown

      Hanlon’s Razor privileges apparent stupidity with respect to apparent malice. A malicious person who is not stupid will take pains to mask genuine malice with apparent stupidity.

      Hanlon’s Razor is a cruel sham in a culture whose major religion’s scriptures teach duplicitous imitation of stupidity (Matthew 10:16 “sly as serpents but simple as doves”) and which has elevated callous duplicity to a high and well-rewarded art. Kindly stop aiding the enemy.

    1. anon y'mouse

      cat got himself stuck under the bookcase.

      cats will do crazy things, especially when they think Mom is never coming home again.

    2. Yves Smith Post author

      No, the cat had gotten himself stuck sometime between when the doorman came up to feed him (one of the doormen used to work for a vet, he comes up on weekdays) and the weekend, when cat lady came.

      That doorman was also part of the cat rescue party.

  20. Maude

    The ‘problem’ is due to the majority of checks are processed as an image and read electronically. Payments are also processed this way. No human intervention is required. An operator sits in front of a screen and only corrects those the machine can’t read and that percentage is very low. High volume payments are processed at the bank for mortgage, cable, insurance, etc and only a payment file is sent to the customer while the checks are sent downstairs to be scanned again for clearing. At this point there is software that has the ability to read payees, but this is only typically used to verify check listings submitted to the bank as ‘positive pay’ files by customers. They would only know that you issued a check for that amount, to that payee, not that it was deposited into an account that did not match your intention. Solely a fraud prevention exercise.

    As for the customer service end; Retail Banks have become sales machines and care for little else but fee income. My paycheck direct deposit is delayed until after 3pm on the day it is deposited at the large TBTF bank while the credit union gives me credit first thing in the morning on the same day. I also rage to my boss whenever I see that the TBTF bank we use for business is still using a ‘float’ schedule to delay our check deposits. This is ridiculous since they clear images same day instead of physically shipping the check through the fed to the paying bank. What a crock! My teenage son has his paycheck held for up to 7 days and direct deposit is not available to him. If he goes through an employment verification, they will give him availability same day on more of his funds, but still hold the rest for up to 2 days.

    Whatever trick banks can use to separate you from your money, they will use. I am no longer shocked.

  21. xax

    A few years ago, moved to a new residence. Gave a check to the local utility company to set up a new account. They ran the check through a small scanner that only read the lower edge – the account number,and handed the paper check back to me.

    I asked my bank how it could verify the request for payment since they at no time would they see evidence of the actual check. Answer: They wouldn’t do any verification at all. As long as the company requesting funds from an account was on a trusted list, the money would be pulled from the account.

  22. JEHR

    The banks in Canada used to be small commercial banks that took an interest in each of their customers. Now the big 5 are deregulated and can take deposits and lend, make investments in derivatives and sell insurance. TD in now TBTF and that is why they fail in the little things like checking the information on cheques.

    I use a credit union for all the important financial things.

  23. bluntobj

    To be a little bit flippant with what is a serious matter, the CFPB is too busy monitoring credit card payments to build a tax information database with which the Service can go after non-reporters.

    This is another example of the structrural destruction of the body of law in favor of convenience.

    I think maybe we should restructure the old quote:

    “Those who would trade freedom for safety (or convenience) deserve (none of any).”

    Opt out!

  24. Shutter

    I don’t think humans ever look at personal checks. Its probably all done by scanners. How do I know? A couple years ago I inquired about my checking balance and found it to be approx $1500 short. After calling the branch manager (Union Bank in California) I asked for photocopies of my last months checks. Was I ever surprised to see a series of checks cashed thru my account that had 1) the wrong name, printed and signed. 2) The wrong address. 3) The wrong city. What was correct on the check was the routing number and my account number. After a few deep breaths I drove to the branch to speak to the manager personally. It was an interesting conversation. As it turns out, NO human being ever looked at my checks. The name, address, signature etc are never considered when processing the check. The bank scanner looks for the routing number, my account number, the account number of the institution or firm depositing the check and the amount of the check. Thats all. Period. If the check is deposited from a commercial account (power company, Costco etc) its processed thru their account number so even the payee isn’t looked at.

    So don’t be surprised to find your checks being mis-applied, your account drawn down without explanation etc. You’re lucky you can get your money at all.

    And I got my money back. That day. In fact, I got it back five minutes after I started screaming at the branch manager to do their goddamn job and get me my money.

  25. off_leash

    When I pay U.S. Federal income taxes, I’ve noticed that the check is routinely stamped “United States Treasury” over whatever I’ve written in the “payee” line on the check. Although I write “United States Treasury”, I’m guessing that if I wrote “Donald Duck” they’d still take the money. I can’t imagine how altering the payee line could be legal, regardless of the circumstances.

  26. CB

    Like you, Yves, I was a Commerce customer. Very user friendly bank, I especially liked the online pay setup. When TD bought out Commerce, I stayed because it’s a pain moving accounts. But the culmination of changes forced me into another, entirely local bank and I’m here to tell you, TD did me a favor. Soooooooo much better now. Goodby and good riddance, TD!

  27. PaulHarveyOswald

    FWIW: When I was in high school (~1980) I worked at a small–tiny–local bank in a small midwestern town. Everyday I sat with two or three other employees and filed checks into account folders. We checked every signature–first, if it existed and then if it matched the signiture card or previously processed checks, if any. After some time I was familiar with many signatures. At times we’d catch somthing, but usually it was a missing signature. Later, as a (grown a–) man, I realized that the TBTF banks could not be doing that, and I stayed away from them. I have a credit card from Chase, but I pay it off every month. My way of borrowing from Jamie Diamond for free…

  28. Maggie

    More than 10 years ago, I sent a Gas co payment to Southern California Edison and the SCE check to the Gas co. Both checks were cashed. That same year I forgot to sign a check to the US Treasury for an IRS payment. The check was cashed and the cancelled check was mailed back to me in my regular monthly statement. All of the above were checks written on a business account with Washington Mutual.

  29. Gaius Publius

    This has happened to me a half-dozen times over the years. It’s become apparent that humans aren’t involved unless you go to a teller.

    I’m not even sure humans are involved at large companies that process payments. I’m almost certain humans aren’t involved in banks. Every check-writing error I’ve made has been processed, including errors when the written-out version of the amount differs from the numbered amount.

    You could probably write Void on a check and get it processed, assuming there was also an amount and a payee. (Would make an interesting test, yes?)

    GP

    1. Anon

      I’m pretty sure that if you write VOID across the check, you will find that the banking system will catch it. You’d win a lawsuit on that easily.

  30. Anon

    Having just taken a law school course in payment systems maybe this will help.

    The reason your bank is not being responsive is that it is legally not the job of your bank to make sure that the payee on the check is correct. If you think about it this makes sense. It’s the payee’s bank that is liable if the payee on the check does not match up with the name on the account into which the check was deposited. You would have the right to sue the payee’s bank. But they have a defense: if you owed the payee the money anyhow (e.g. Cigna) then no harm was done to you by them processing the check. Effectively under the law, it has always been the checkwriter’s responsibility to make sure that the right check goes to the right creditor.

    On the other hand, stop payment is an absolute right under the law. So it’s pretty objectionable that banks are using high fees to reduce the value of that right.

    1. Anon

      More accurately, you might be able to sue your own bank, which would be then be indemnified by the payee’s bank. But as noted, they both have a sound defense: you actually owed the money to the creditor who was paid.

    2. peace

      I am not a lawyer but it seems that the harm done to Yves was that her intended payee was not credited. Thus, her business relationship and reputation were harmed and there were damages in terms of her time and effort expended to attempt to rectify the situation. Obviously, there were obviously damages done to her intended payee not receiving payment.

      1. Anon

        As I understand it, the way the law looks at the problem is this: (i) Yves erred in sending the wrong check to Cigna. The banks are obviously not responsible for this error. (ii) The banks erred in giving some of her money to Cigna without authorization. This error is, however, under the law, offset by the fact that Cigna was Yves’ creditor and has a legitimate legal claim to the money.

        The fact that Yves thinks she has proof that the catsitter was paid is incidental under the law. While I don’t claim to understand ACH, I am confident that Yves can learn from her bank to whom the money from her check was transferred. Thus, the issue of proof of payment is an issue that can be resolved by a full hearing in court — and that’s all the law requires.

        I think the problem here is that you are putting more responsibility on the banking system than it has ever had.

        Note: this is not legal advice, just my student understanding of the law.

  31. dw

    is this the greatest gift to fraud ever? if some one were get ahold of your bank account (or just guess it). they could write a check on it, maybe emptying it out (if your lucky) or costing you an insufficent funds fee because you didnt have much in it. or costing you that because now other checks bounced. hm almost sounds like a way for banks to make more money after all. since they dont operate the way the used to. their income is from fees more than those loans

  32. Timothy Y. Fong

    I recently received a settlement check from a high net worth individual. Check was written against an account at a local bank in Southern California. The check cleared very slowly, because as it turns out, he had directed his bank to have it cleared “specially.” I suspect it had something to do with manual intervention and refusing to have it converted to ACH.

  33. steelhead23

    I feel compelled to chastise Ms. Webber just a tad here. She invested substantial time and effort into educating and and reporting on Occupy Wall Street (which we should all applaud), yet to this day, she does business with a large bank. Why? The folks at the tops of these criminal enterprises think they own us. We’re Liliputians to them. I suppose credit unions make similar errors, but I doubt any CU manager would suggest they don’t have to obey the law. Given what we have witnessed over the past 6 years, that bank manager was expressing revealed truth – banks don’t have to obey the law.

    1. Yves Smith Post author

      Did you miss that I never chose TD, I chose Commerce Bank and they were acquired by TD?

      As for changing, I’m chronically time stressed and do not have the time and energy to move accounts. Period. I can barely get my taxes done on time, I have NO social life and don’t have the time even to do basic stuff to promote the business and get the NC point of view out to other audiences, namely TV and radio requests. I have a LOT of stuff that is way higher priority than changing banks that I’m not getting to. So you can either stop lecturing me or pay $1000 to the tip jar to free up enough time for Lambert to cover me for the time it would take me to investigate and execute a change. At least TD is a Canadian problem and Canada is widely recognized as having one of the safest banking systems in the world, no bailouts needed during the crisis just past. So while the Canadian banks are big, they aren’t on any lists of SIFIs (Systemically Important Financial Institutions), which is the official TBTF tally:

      http://en.wikipedia.org/wiki/List_of_systemically_important_banks

      I never chose TD, I chose Commerce and TD bought Commerce. I only have one bank that is a smallish bank with a branch within walking distance. I don’t have time to research whether it is any good, but my options are very limited.

      1. washunate

        If it helps any, I heartily agree. I have accounts with multiple TBTF financial entities, and the time value of changing useful services just isn’t worth it.

      2. Emma

        Yves,

        Presently, I don’t have $ to add to your tip jar, but I’m more than happy to lend a free hand, along with half a brain if and when a little add-on is required…

        However, it would be even better if the filthily naked capitalists and richest “eggnestedheads” of NC could step forward NOW and offer assistance to Yves.

        Otherwise, we girls might have to resort to violence and given Yves’ propsenity for “empressive” cerebral feistiness…..I’d suggest everyone give in to queenly demands and deservedly indulge her so she can continue to feed her fine “catusamily” and provide access for the rest of us, to the best blog in the king and queendom!

      3. steelhead23

        Please accept my apology. Please don’t ignore my compliment in that post. I sense that you were more involved in OWC than you care to share – and I am grateful.

  34. Mcmike

    I seem to recal from high school home econ that for an instrument to be negotiable, it has to have certain elements, including payee.

    If the endorsement does not match payee, seems to me the terms are not met. Can be No valid transfer on an invalid instrument right? (arguing valid instruments and legal transfer sounds so quaint these days)

    Further, this approach seems to open the door to a fraud defense. Just claim it was automatic processing, and you get to keep the money?

  35. Jess

    Previous commenters have done a pretty good job of addressing the specific banking issues involved here so I’m going to take a different approach:

    Dear Susan: I think the confusion in sending the right check to the right person is perhaps a sign that you have been working too hard for too long in performing diligently for both your readers and your clients. Somehow you have to find a way to ease the load.

    Maybe, barring some truly seismic event, you don’t need to post on the weekends. Maybe you and your not-smart phone should leave the laptop and the tablet at home and go out to the Hamptons for a couple of days. Or maybe you just go walking or biking in Central Park.

    If you burn the candle at both ends long enough, eventually your widdle fingers get toasted.

  36. tojo

    i feel ya

    i use the payee line and include the account number
    i have run a small business for – well its too long to remember, with multiple accounts at the same bank and they were makeing so many errors in trasfer payments that i was force to, even though the the deposit slips were to the correct account they would post all the checks to the account, sometimes to the account the check was written on. i also had a problem just like yours with another big bank we sent the wrong payment with the payment slip and they just took the payment even though it weasn’t made out to them.
    Now a always put the account number on payee line and NEVER NEVER return the payment slip with a payment- this forces someone to look at the check and manually enter the account numer to apply the payment no more machine reading the account number from the payment slip and ignoring the payee line of the check.
    AND dont get me started on the missapplied payments for employee deductions at the IRS and the agony of getting a simple missapplication of the correct period even though the account was current- over pay period A and they send you a refund under pay period B and you get a penalty and interest due for under payment of taxes. PAYEE Line to the rescue again – account number tax Code (ie 940 – 941) and the quarter and year.
    Yupper, i am a believer in using the payee line for the account number and refusing to send in the payment slip with payments.

  37. Walter Map

    My bank is TD Bank, which is now the 8th largest bank in the US.

    Why in the name of all things holy and damned are you still doing business with a bank? You’re Yves Smith, for god’s sake. You’re supposed to know better.

  38. Walter Map

    My bank is TD Bank, which is now the 8th largest bank in the US.

    Why in the name of all things holy and damned are you still doing business with a bank? You’re Yves Smith, for god’s sake. You’re supposed to know better.

    1. diptherio

      You must learn patience, Grasshopper…they usually show up eventually.

      And I’m sure Yves has her reasons for banking where she does…and also that she doesn’t need to explain herself to anyone. Let’s try to stay focused here, people…this isn’t the “let’s all second-guess Yves’ personal choices” blog, now is it? ;-)

      1. Walter Map

        My question stands, and I believe it to be a valid one:

        Why, despite the escalating destruction and criminality, do most people still do business with banks instead of seeking substitutes?

        Help me here.

        I’m sorry if I was misconstrued, but I meant no disrespect.

        1. diptherio

          Depends on the type of business you are doing. Maybe you need a bank with branches in multiple states. Credit Unions won’t cut it, so you choose the least bad option that meets your needs. CUs have restrictions on what they can do that banks do not. Specifically, CUs can’t make business loans, only consumer loans. Those restrictions haven’t been a problem for me, but I can easily imagine that they would pose problems for people doing more complex finance stuff than I do.

          Which brings up the point that CU laws and regs probably need to be re-jiggered. I think right now there are also geographical restrictions on individual CU’s membership.

          1. Walter Map

            CUs can make business loans. But geographic limitations would certainly be constraining for an interstate business. Not that any of this would apply to most individuals.

        2. Yves Smith Post author

          See these comments:

          http://www.nakedcapitalism.com/2013/09/td-bank-we-dont-have-to-obey-the-law-on-check-processing.html#comment-1432571

          http://www.nakedcapitalism.com/2013/09/td-bank-we-dont-have-to-obey-the-law-on-check-processing.html#comment-1432579

          In addition, if you have a credit card, you are basically dealing with a TBTF too. Credit card processing is hugely concentrated, under 10 players in the US. If you are at a little bank, what you have is effectively a white label card. Your bank handles the front end (dealing with customers) but the TBTF handles the back end (transaction processing and record keeping ex the customer service module) and gets a cut. So you are probably with a TBTF too.

          And finally, I know people who are de facto heads of OWS working groups who ‘fess up that they are still banking at TBTF. The big banks have eaten up most of the little banks in Manhattan, so it’s actually hard to find a non-TBTF bank that has a branch nearby, and I don’t have the time and money to take a cab midtown when I want to do my banking.

          1. Walter Map

            I see.

            It would seem that my thesis is still valid, that the big banks should be avoided where possible, up to and including promotion of large-scale boycott. My point is that I don’t see this happening. Resistance is too slight to effect any substantive change.

            Not that it might matter much in the end. Like I said, it appears the class war has been over for a long time, possibly decades if you believe Quigley, and that what you’re mostly seeing now is the mopping-up operations. But it would have been nice to see the general population have a real chance of winning, or at least putting up a serious challenge, rather than going so gently into that good night.

            Alas.

            1. nonsense

              It appears that my thesis is correct, and that you are wrong in stating that the earth revolves around the moon.

              No one believes that the earth revolves around the moon. It’s science, and beyond that, it’s my personal belief that the earth is the center of the universe and all matter flows forth from it.

              Alas, you are wrong.

  39. diptherio

    I had a sadly similar experience with my local Credit Union (so I don’t think this problem is just with big banks). A number of years ago my roommate inadvertently grabbed my checkbook off the coffee table instead of his (same generic blue plastic cover). He wrote two or three checks out of it before he realized it wasn’t his checkbook. We both banked at Missoula FCU and used their standard check design, so I wasn’t too surprised.

    I was surprised, however, when MFCU processed the checks Dave had written on my account without a peep (and our signatures look nothing alike). He payed me back and I wrote it off as a fluke. Obviously, not a fluke.

    1. LifelongLib

      IIRC my local credit union once charged me $25 for a stop payment, and also refused to deposit a check that had been endorsed to me (citing UCC rules) so it’s not just banks.

      Knock on wood, I’ve never sent a check to the wrong party so I don’t know what would happen.

  40. sleepy

    For those old enough, remember the cold war slams against shoddy personal service in the Eastern Bloc, particularly the USSR?

    Sullen, I-can’t-be-bothered, contemptuous type of service. Now, whether that was true or not, I don’t know, it may just have been propaganda.

    At the risk of falling into some good old days myth, it seems to me that 40 or so years ago in the US, you could count on an institution–a store, a service, a bank–normally getting something right the first time, and if they didn’t, they generally did their best to correct it, with apologies.

    What happened culturally to change that? The almighty bottom line? a masks off, no more pretense, cutthroat neoliberalism?

  41. PeonInChief

    In the early 1980s, I was the office manager for a very small nonprofit (as in, “we’ll pay half the phone bill and the rent this month”) and signed the checks. After a year, I wrote a check for $1,000. The bank refused to honor the check, claiming that I was not an authorized signature. It turned out that the person who had taken in the signature card had never processed it. The bank staff was somewhat taken aback when I explained that I had been signing checks for a solid year, and they explained that they never looked at a check for less than $1,000.

    I keep close track of my bank account, and look at the endorsement for all of my checks.

  42. Vatch

    You’re lucky there was an image of the check. About two thirds of my checks are processed electronically, and I never see an image of them on my bank statement. Whether such an image exists within the bank’s computer system or not, is a complete mystery to me.

  43. skeptonomist

    Checks should be obsolete. All this should be done electronically, and if you specify a wrong payee or there is some other discrepancy it should be flagged for your attention. You could be given the option of what to do in such cases. The overhead of verifying transactions should be small; what happens to correct the problem is something else.

    Banks now spend a lot of money advertising how “friendly” they are, but when problems arises the real policy is usually “the customer is always wrong”.

  44. skeptonomist

    Apparently the check processing is really skimpy; the machine reads the bank routing number and acount number (printed in special characters) and gets the amount one way or another, by hand if not machine readable. This is just obsolescent technology – there is no good reason the payee and authorization (signature) could not also be verified. Apparently banks just ignore the costs of mistakes if they can get away with it – it’s not their money that is being thrown around.

  45. Brian

    It’s my understanding is that it’s only illegal to intentionally process a check to the wrong party. A check unintentionally processed incorrectly falls under the heading “bank error” and usually the bank may correct this error when disputed. However, they seem more unwilling these days when the fault lies with the account holder.

    Basically most everything is processed in bulk and from there if a dispute arises then they’ll settle it. Congress does much the same thing with laws: pass them and then let the courts figure out if it’s Constitutional.

  46. Kay

    Yes, I had almost the same thing happen, maybe 5 years back. I was still with Wells Fargo at that time. I must have put the wrong checks in the wrong envelopes when doing bills – the landlord got the check to pay my state taxes, the CO Dept. of Revenue got the much larger check for my rent – I only owned maybe $200, the rent was about $900. The CO Dept. of Revenue cashed it anyways. I assumed all was good until the landlord called and gave me back the check for my taxes…then I looked online in more detail.

    I called the state who did tell me it was just ran as a Batch ACH I believe….they said “We will cash any funds we receive in full value, the details on there don’t matter”. I did point out how I believed that would be illegal if say, I accidentally received my neighbors check in the mail and managed to cash it – they said “the same rules don’t apply to the state as to an individual”. They said that I could report an overpayment on my next years taxes and I might then qualify for some of those funds to be refunded – but eventually transferred me to a supervisor who helped me out of the situation. It was November and they had just taken my holiday budget in addition to some of my rent money – I was sent a ‘hardship waiver’ which I had to fax back – in about a week I did get a check back from the state for the difference between the rent check and what I owed the state of CO, minus a $20 ‘convenience fee’. The check was dated for 2 days after I received it so when I took it to the bank before noticing that, I remember they told me that I’d have to come back in 2 days when the check would be valid – I recall feeling that was not very fair. I did also call Wells Fargo on this – they said “We instantly process all funds requests from government entities; they don’t have the same processing time as everything else so we can’t check for errors; you have to deal with them; we don’t have power to cancel the check since it’s already cashed” and what I now believe was pretty much a line of BS to get me off the phone.

  47. Dana

    I had a switched envelope error back in the late 1980s, and the bank paid both checks to the addressees, not the payees. Took me a good long time to figure out why the one company said my account was past due. I’m pretty sure I had to pay a late fee on that one, too.

    >In the 1990s, I had an account at US Trust, and I’d occasionally get calls as to whether to pay particular checks because they thought my signature didn’t look right. Thus not all that long ago, banks were monitoring check processing to make sure the payments made were valid.<

    Then your bank was more diligent than mine (Bank One, since acquired by Chase). After the switched envelope error I signed a check to a friend "George Washington," just to see what would happen. They got their money the first time.

  48. Dean

    Not entirely germane but I was auditing the disbursements process for my company. The account was set up so that checks had to be signed by two authorized signers. This was a key control in the process, since the organization was rather small.

    Wanting to test this, I got the bank statements with the check images on them. In a 3 month sample, I found 7 cleared checks with just one signature on them, instead of the required two.

    Conclusion? Banks don’t review the payee, signatures, or written amount, only the routing number and numerical amount.

    Needless to say the key control of not getting a second signature internally was ineffective as well.

  49. Lyle

    Banks could offer a check the check service but it would likley require between $2 and $5 a check in fees for that, since a human looking at a check costs money and you did want inexpensive checking—. In addition with at least some banks and now I suspect some credit unions its possible to do deposits via a smart phone. I did have Wells make a deposit to my account that was made by another, but it was due to someone accepting a non pre-printed deposit ticket.

  50. washunate

    Very interesting, both the post and comments. This is exactly what I think of when talk arises about differences in generational perspectives. Things can look superficially as if they are still working like they ‘used to’, but IMO Millennials are sick of the rot beneath the surface. Change is coming one way or another.

    I worked at an organization where the company checks were set up with a regional bank to require two signatures to clear. One day the accounting department was horrified that a check got mailed with just one signature. Turned out okay; the bank cashed it without incident. The cancelled check clearly showed a blank line where a signature should be. Yet the bank requires annoyingly detailed updates to signature logs when key people change roles (such as a new COO or Treasurer).

    Also worked at an organization that was hit by fraud. Somebody made their own home made checks and just put the info from a company check on them. Ridiculous visual, looked nothing remotely like a corporate check, let alone this particular org’s checks or signers. Yet multiple of these were cashed before the behavior was finally stopped (all in increments just under $500, which apparently was one of the thresholds for the bank – less than that wasn’t as important or something).

    Discover cashed a check I wrote them for a credit card payment in the wrong amount. Even charged interest on the deficient portion. However, they were immediately responsive. They waived the associated interest and even apologized for the mix-up. For all the horrificness that getting into sizable credit card debt can entail, I have found credit card companies (well, at least Discover) to be remarkably customer friendly. On two different occasions fraudulent charges were made and I’ve had my wallet stolen, too, and all were resolved with nothing more than phone calls. Two of the three times I called them about 1:00 am. I almost completely have used cash, credit cards, or electronic transfers for about a decade now. I still have old checks from moving because I’ve moved faster than I use checks.

    Very recently, I actually went into a Bank of America branch to cash a check and complain about an ATM withdrawal fee from a trip out of state. The teller was actually willing to negotiate with me and refunded the $2 BoA tacks on (and that was just for a generic, plain vanilla, no min checking account). Then something more interesting happened with the check. The person who gave it to me wrote the number for the dollar amount, but not the spelled out language for the amount. The teller noticed and said she couldn’t accept it in that form. For a split second, I was actually pretty concerned (and felt a little silly for being so careless with these paper thingies).

    It was no problem, though – you just write it in there. Right in front of the teller. On all the bank cameras. Not the person who wrote the check – the person depositing it. I was tempted momentarily to write a different number just to see what would happen…

    But the biggest personal problem I have run into relates to debt collection. Our friendly local city and police department rolled out a fancy pants computer system for paying traffic tickets. The trouble is, they issued two phantom tickets. When I say phantom, I don’t mean I challenged them – I mean they didn’t exist. No physical ticket was ever written – they just appeared in the computer system. No one in person or phone can change the system. Meanwhile, the fines are doubling (multiple times) and it gets sold to a collection agency. Over a period of months, the collection agency starts harassing not just me, but my parents also (the previous owner of the car). Ultimately, I settle this the way all 21st century business is settled: luck and inside access. I fortuitously struck up a conversation with a biker on the local train and it turned out she happened to work for whatever administrator has some decision-making authority with the traffic people. In less than a week, everything was cleared as if it never happened. It’s been years, and I still haven’t heard any explanation of what happened, let alone an apology. I ponder from time to time what would happen if that had caught someone with less stubbornness, education, or tenacity.

    It’s beyond shock or fury – it is why our system has to change. It just isn’t working.

  51. Mike Carey

    This ‘lack of response’ to your check problem is the primary reason I switched to Credit Unions a number of years ago. I have always received better & more responsive service from my Credit Union(s) than I ever received from any ‘commercial’ bank. Of course, that is one of the reasons Credit Unions have grown so large (I prefer using one of the ‘medium size’ Credit Unions in my area because of their more ‘personal service’) that the American Bankers Assoc. wants them taxed because Credit Unions are now ‘not for profit’ corporations !

  52. Bridget

    I suppose it’s cheaper for the banks to automatically process bulk deposits than individually check each one to be sure folks haven’t stuck the wrong check in the wrong envelope? Had I been Jeannie A., I would have insisted that you provide me with a copy of the back of the check, which would have shown that I had not endorsed it, nor had it had not been deposited to my account.

    1. Yves Smith Post author

      You need to read the comments.

      You can’t get the images for the backs of checks from your bank if they are bulk processed. The bank where it was submitted uses an image of the front. Checks are processed unendorsed.

    2. washunate

      I’m pretty sure the government itself knows copies of checks are unreliable. If you dig into document requests, the language is usually something like copies of receipts or cancelled checks, not copies of checks.

      For example, do a quick Google of cancelled checks with an agency name (DOL, HUD, etc.). I found this DOL document on information for injured workers:

      http://www.dol.gov/owcp/dfec/regs/compliance/infoinjuredwrkers.htm

      “All reimbursement requests must be accompanied by proof of payment – a cash receipt, cancelled check, or credit card receipt.”

      I assume that banks of all sizes, from global TBTF to local credit unions, charge businesses fees to return cancelled checks each month (or more likely, images of the cancelled checks…).

  53. Keith

    I work in the finance department of a non-profit benefit plan administrator. We push people to recieve their money through direct deposit, but we still cut at least a thousand benefit checks every month.

    What I see every once-in-a-while is that a bank somewhere gets the MICR line info wrong when they scan the check. Even small banks scan the checks and clear the images, not the paper check.

    The check then bounces because they either got the account number or the routing number wrong. There is absolutely nothing that can be done when you point out the bank’s mistake. I’ve tried to talk with various bank branch employees, and from what I can tell it would take a stone-cold act of god to correct their error. Since they scanned the check and destroyed the paper all you have left is the image in their system with the wrong MICR line info that no one at the branch can edit.

    Since our unfortunate payee often has only one account at that one bank we end up having to cut a new check and stop the old one. We can do that within a week usually, but that means they don’t get their money until about two weeks after they should have gotten it.

    Think about what happens if the person or entity that wrote you that check is hard to get hold or or not cooperative in issuing a replacement. You’d be screwed and I doubt that there would be anything you could do about it.

  54. Noni Mausa

    Thirty-five years ago I joined a credit union who gave me great service for many years. Maybe ten years ago it merged with another credit union, still pretty good. Finally, it merged again with one of the biggest CUs in the area, and the level of service dropped dramatically, leading to this awful story.

    I have my own checking and savings account here, plus a separate account set up to handle my deceased mother’s estate. Though i am the executor, I cannot access this account without presenting invoices for debts payable.

    So you can imagine my surprise when my new, very large CU took money from that account to cover a recurring bill of mine, set up to be paid from my own account. It required a visit to the branch office to correct the error. Sheesh.

    So, is it possible that there is a size threshold, above which financial institutions regardless of their charters will begin behaving like arrogant p*****s?

    Noni

  55. chicagogal

    Nothing banks do today surprises me – well, almost nothing. Around the mid-80s or so I had one of those crystal/jewelry/something parties and had several checks in my deposit, then went on vacay immediately after. Got notice that checks were bouncing and went to branch to figure out why. It was only by accident that I figured out one of the checks was also drawn on my bank and the teller had used that account number for the deposit. Thankfully it was a friend/coworker who was good about it.

    From the late-80s to late-90s I worked in the backroom operations for a few different banks in West Central Illinois and the Chicago suburbs. Started in the proof dept, which is deadly dull processing of tellers work where we had to encode the amounts of the checks under the sig line and reconcile the batches. We also filed the checks, which included matching the signatures, and put the statements together for mailing. Also worked in telephone banking processing info requests and in lockbox processing.

    Lockbox is the one that seems germane to Yves problem. Lockbox is when you send your payment to a PO box or other address, but the bank picks up the mail for processing instead of whoever you sent it to. We had to open the envelopes and confirm the checks matched the payment coupons and for what amount. Then we had to process them through machines – similar to proof dept – and reconcile everything at the end of the day.

    Earlier this year I had to take out a title loan to pay for a doctor visit and got the money to pay it off from one of my insurance accounts (really odd since they pay dividends and interest every year). I cashed out the accumulation and took the check to my bank, whose owner is RBS, and asked the teller if I had enough in my account to cash the check or if some of it had to be deposited. The teller supervisor heard me say it was from my insurance company, but nothing else, and came running over to tell me that they couldn’t cash or deposit the check because it was from an insurance company so was only a draft and they would have to counter-sign it. I was so startled that I completely forgot that every check is a draft and was more than a little peeved, plus it turned into a very heated argument. Ended up being “allowed” to cash it because it wasn’t related to a claim. Am now looking for a new bank.

    Started paying everything via internet many years ago and now only write one check per month for rent, though am getting ready to ask my landlord if he has Paypal. Never any delays with ACH, but have wondered why I bothered writing some checks since they have been converted to ACH for years. Have had checks returned when I put the wrong one in the envelope, but the last one was probably a good 8-10 years ago.

    1. bob

      “insurance accounts (really odd since they pay dividends and interest every year)”

      “insurance accounts”- They are not bank accounts, they do not have FDIC protection. They are also not required to “segregate” funds. A “check” drawn from them is just a draft on a general insurance company account.

      There has been a few investigations by state AG’s into these “accounts”. LSS, it ain’t a bank account, and there is a lot more “risk” associated with having an insurance company hang on to “your” money. It’s not yours. It’s theirs.

  56. bob

    Related-

    http://www.syracuse.com/news/index.ssf/2010/03/jpmorgan_chase_to_close_check-.html

    That story is a favorite of mine. It really captures the zeitgeist. Jamie Dimon has the balls to speak at SU’s graduation while closing and actual, real, banking facility which employed 200 people. This was during the period where all of the banksters were trying to manage their images in the press.

    I meant to follow up on this at the time and never did. Does the fed “sub out” check clearing services to JPM? From my little research at the time it seemed possible that they do.

    Check clearing is a legacy system. I don’t think most people realize what this system is worth, who is in charge, who is responsible, and who makes money doing it. At the same time, it’s what “banking” is.

    The real life Frank Abagnale, who the movie “Catch Me If You Can” is based on, has written a lot about the fall off of the check clearing systems, and how easily they are gamed.

    Both my power and telephone company now use ACH, without any sort of authorization from me. I send them a check, they turn it into an ACH payment which shows up as a line item charge on the checking account. No check image or anything is returned.

  57. alex morfesis

    loved commerce…when it hit new york, 7 days a week and until 7 pm…all of a sudden, banks started opening on saturdays to try to compete. The staff was well trained and wanted your business. Dick Bove killed the florida version of commerce by his insane attacks on them…they got eaten by PNC…had a small issue with an account there and the old staffer who was now under the PNC gun just sighed, that the new policy was xyz and that was that…have always kept multiple bank accounts for dealing with recalitrant institutions. One does not have to all at once close down an account and open another…but commerce was great for competiton in new york city…they kept the others up on their toes…

    1. Sam Kanu

      Yes, Commerce Bank was great. The Apple or Starbucks of their industry in a lot of ways. But I knew it wouldnt last. They got chewed up and digested by the ugly hopeless banking system.

  58. Richard

    Please remember, Americans are the stupidest people on the planet (the experience of 22 years in your country) and in addition, 90% of them take drugs recreationally throughout the day, exacerbating their already horrendous incompetence. Guess why I left?

  59. Sam Kanu

    Real question is why US banks persist with the outdated system of checks in the first place.

    In Scandinavia for instance, all payments are electronic and instant. You want to pay your cat sitter 20 bucks, she gives you her account number, you put it in your online bank and five minutes later she has her 20 bucks. No transaction fee – and no 5 days of float for the bank. You dont even need to know the name of her bank – just her name, address and account number.

    The whole thing is the US is a total ripoff.

  60. Jon

    Back around 2000 I sent a check to my CU’s credit card payment processor. Check cleared, was not credited to the card. Long, long investigation followed. E*TRADE on whom the check was drawn was completely unhelpful and only produced scanned check images after numerous escalating threats of closing my (reasonably large) brokerage account. The resulting scans were of such poor quality as to be nearly useless but eventually I determined (with aid from the CU who was an entirely innocent party in all this) that the payment had made its way to Household Bank, an institution entirely unrelated to any account I had. After several more months of letters and phone calls I finally got the money they deposited into a holding account from my illegally endorsed check paid back. No penalties or interest paid, of course.

  61. Jon

    For those saying checks are obsolete and electronic transfers are so much better, think again. A couple of years after the incident described above, the IRS transposed two digits in my account number when directly depositing a tax refund. Cue 6 month runaround with the IRS “taxpayer advocate” doing basically nothing and my bank denying that any transfer in that amount to any account occurred on that day. At least in that case they were so smarmily insistent that nothing could possibly have gone wrong that I got them to agree in writing to pay me a penalty equivalent to IRS late-payment penalties should their assertions prove wrong, and they actually did pay it in the end.

    All large financial institutions suck and the only way to have a hope of not getting ripped off is Mad-Eye Moody style Constant Vigilance (and documenting every step of the resulting arguments when something does go wrong). By contrast I’ve had very good experiences with my tiny undergrad school’s CU as an alumni member – pity they don’t provide the complete range of financial services though.

    1. Sam Kanu

      One anecdote of transposed numbers does not invalidate the point that checks are outdated. That’s like like telling you you know of some electronic prescription that went wrong one time, so we should stick to doctors scribbling names of medicine on paper.

      Entire nations are all-electronic on financial transactions, including the vast majority of northern Europe.
      http://en.wikipedia.org/wiki/Cheque
      “…In most European countries, cheques are now rarely used, even for third party payments. In these countries, it is standard practice for businesses to publish their bank details on invoices, to facilitate the receipt of payments by giro. Even before the introduction of online banking, it has been possible in some countries to make payments to third parties using ATMs, which may accurately and rapidly capture invoice amounts, due dates, and payee bank details via a bar code reader to reduce keying. In some countries, entering the bank account number results in the bank revealing the name of the payee as an added safeguard against fraud. In using a cheque, the onus is on the payee to initiate the payment, whereas with a giro transfer, the onus is on the payer to effect the payment.[clarification needed] The process is also procedurally more simple, as no cheques are ever posted, can claim to have been posted, or need banking or clearance.

      In Germany, Austria, the Netherlands, Belgium, and Scandinavia, cheques have almost completely vanished in favour of direct bank transfers and electronic payments. Direct bank transfers, using so-called giro transfers, have been standard procedure since the 1950s to send and receive regular payments like rent and wages and even mail-order invoices. In the Netherlands, Austria, and Germany, all kinds of invoices are commonly accompanied by so-called acceptgiro’s (Netherlands) or Überweisungen (German), which are essentially standardised bank transfer order forms preprinted with the payee’s account details and the amount payable. The payer fills in his account details and hands the form to a clerk at his bank, which will then transfer the money. It is also very common to allow the payee to automatically withdraw the requested amount from the payer’s account (Lastschrifteinzug (German) or Incasso (machtiging) (Netherlands)). Though similar to paying by cheque, the payee only needs the payer’s bank and account number. Since the early 1990s, this method of payment has also been available to merchants. Due to this, credit cards are rather uncommon in Germany, Austria and the Netherlands, and are mostly used to give access to credit rather than as a payment mechanism. However, debit cards are widespread in these countries, since virtually all Austrian, German and Dutch banks issue debit cards instead of simple ATM cards for use on current accounts. Acceptance of cheques has been further diminished since the late 1990s, because of the abolition of the Eurocheque. Cashing a foreign bank cheque is possible, but usually very expensive.

      In Finland, banks stopped issuing personal cheques in about 1993 in favour of giro systems, which are now almost exclusively electronically initiated either via internet banking or payment machines located at banks and shopping malls. All Nordic countries have used an interconnected international giro system since the 1950s, and in Sweden, cheques are now almost totally abandoned. Electronic payments across the European Union are now fast and inexpensive—usually free for consumers….”

      Let’s get with it people. The US is way behind the curve on this one. Fixing a system of payment by check is basically paving the cowpath. Move forward.

      1. Vatch

        Your idea is promising, but I have some doubts. What are the fees that would be attached to a giro payment in the United States? There’s no way that the American banksters would tolerate this situation: “Electronic payments across the European Union are now fast and inexpensive—usually free for consumers”. How successful is the giro system in Spain and Greece? Aside from the militarism of the United States, aren’t Spain and Greece the European countries that most closely resemble the U.S.?

        1. Sam Kanu

          Let’s just be clear – electronic payments is not a “promising idea”. It is daily life in a properly functioning banking system. Any problems you are having with checks, a system that is analogous to faxing or emailing telegraph, are a symptom, not the problem itself.

          The banks are out of control. They charge you too much and they dont even provide you with proper modern banking services for all that. Because they can – after all, they own the politicians that you vote for, lock stock and barrell. There’s your problem, not the sideshow of the mistake on your check.

  62. annieb

    A while back–late 90s or early 00s, I mistakenly mailed our state income tax payment to the feds and vice versa. State and feds both cashed theirs, and I was none the wiser until the feds starting telling me I owed them money. Then I had to get the state of Illinois to refund me the excess I’d paid them. Surprisingly it was remarkably easy, they just said they would deduct what was owed them and issue me a check for the overpayment, and I had the check in about a month. And thankfully, as I didn’t have the funds to pay the feds until I got the refund check from the state. The feds on the other hand were a nightmare to deal with, just getting them to recognize that my total tax liability was not what was owed as they already had some of it in hand from the state check they’d cashed. I had images of the cancelled checks, but apparently they were incapable of believing what they could see.

  63. Publius

    Yves:
    Your story is interesting, but what is more interesting is your excuse for not finding a Credit Union or other locally-owned bank.

    Your excuse is part of the reason that the system is so bad, and getting worse with no end in sight.

    You aren’t willing to take the time or make the sacrifice necessary to do one of the only things that the mere consumer (ex-citizen) can do: make their money talk by making it walk.

    You are therefore complicit in the ongoing ratcheting up of fraud and greed which will, almost certainly, destroy this “nation” (I use quotes, because we aren’t really a nation anymore, but a captured entity being sucked dry).

    Reformism will never work. Might was well prepare for helping to bootstrap the post-collapse order.

  64. Wahrheit

    I did something similar a couple years ago, switching the checks sent to a homeowners association and my mortgage servicer. I heard about the problem from my mortgage servicer, no doubt because the check amount was about 1/30th of the actual amount due. The check processor in Los Angeles happily cleared the check for 30 times what was owed to the homeowners association even though they were not the payee on the check. I had to duplicate the mortgage payment and then wait almost a month for a refund from the management company for the homeowners association. I too was amazed that a check clearing house would just cash the check made out to the wrong payee. My credit union which holds my checking acount did not seem to be aware of the matter in any way whatsoever. Amazing.

  65. Liz

    Yves,
    Yes, it happened to me about 1 12 yrs ago.
    I wrote out a check to ATT and to my apt complex on the same day. I put one check in the ATT envelope and handed the other check to the manager at my apt. complex.
    A couple of weeks later, she contacted me and told me I had given her the wrong check. Luckily I always pay my rent + utilities two weeks early.
    When I saw that I had given her the ATT check. I immediately sent a check to ATT for the correct amt. assuming that they would return the previous check. Wrong. They credited both checks to my acct.
    I called ATT and asked for my money back. Sounds easy. Long story short, in the next three months I had my internet cut off twice before we were back to normal. My bank is BBVA.

    P.S. ATT Warning: I have learned in this situation and others that ATT has all kinds of computer checks that reverse what their clerks tell you if it puts money in my pocket no matter what they overcharge me or lack of service they give me.

  66. Steve Morgan

    Ok. I’ve never commented here until now. First, thank you Yves for everything you do and for sharing so much of your private life with your readership. In practice, banks can usually always find a way to bend whatever law they break that was crafted per their interest anyway. As for the UCC, it has tons of grey areas/gaps and the banks know how to twist and manipulate every section to their liking. For instance, a bank can pretty much decide at any time to reverse a check that has already “cleared” the system for what they term “cause.” Generally, if you are a player (fat cat corporation) and make a demand for a stop payment even a month or more after a check has “cleared” the system, the bank can and will reverse payment per their right of discretion. Bottom line, the banking system serves the elite realm, and small businesses and retail consumers typically get left to choke on fumes.

  67. Vatch

    Now that the Consumer Financial Protection Bureau is up and running, it would make sense for any of you who have had the problems described in these comments to make a formal complaint. You probably won’t get the results that you deserve, but the people at the CFPB may come to realize that there’s a major problem in the way that banks mishandle checks.

    CFPB main web site

    Submit a complaint here

    Also, you should inform your Congress critter about the terrible way that banks are processing checks:

    Congressional web site

  68. bruce

    “you don’t have to obey the law? YOU DON’T HAVE TO OBEY THE LAW? sweetheart, when you’re handling my money, you absolutely do have to obey the law, because i’m a retired lawyer who will pin your ass to the wall of the courtroom like i was collecting a butterfly. do you understand me?”

  69. Donny Wise

    I have been in banking from teller to senior management. I worked for RBC Bank in the US. The Canadians have a strange attitude toward our regulatory system. Second, my family is a major shareholder for a 9 branch bank, and I do not have the technology of a BofA. However, I received a call from my contact person at the bank and the back office sent a check made payable to my insurance company and I forgot to sign the check and someone signed for me. I was called to ask if the check should be paid, and I said the signature is ok. Pay the check. I was workingin DC for a bank where your situation happened to the owner of a hotel chain and the deposit base almost lost was huge. There is a trick about your situation that places responsibility on the banks.

    Forget ACH, Check 21 is how checks are processed and they scan the checks through to capture a copy of each check. Check 21 is automated to catch mistakes and reduce float time. Both entities are resposible and the Consumer Financial Protection Bureau will take complaints against banks acting like TD bank with harsh recourse.

    I would like to follow up on this issue and I have another bank story that I can share with you…

Comments are closed.