8/20/2008

Why Does The Checking System Suck?


A few months back, our bank - which we've been otherwise pleased with - made a bit of a boo-boo. A $1000 boo-boo. We didn't blog about it at the time because we weren't entirely sure what to make of all of it. At the time I was ready to tell the branch manager off and pull every red cent of ours out and move it to the credit union that holds our mortgage. Would not have been tough. The wife, who took a slightly cooler approach, talked me down. Guess that's why they call it 'the better half'.

Here's what went down:

A check cleared our account - Twice!

At first, the Mrs. thought maybe it was just a glitch when viewing our account online, but deep down she knew better and called right away. Yes, she had indeed caught an error, but they could not handle it over the phone. She was told that she would have to fill out a form at an actual branch. What!?

The CSR couldn't fill it out for us? The CSR couldn't just take care of it, ya know, electronically? No, you-screwed-up-now-fix-it online form? No, no. To fix their mistake, we had to take time out of our day, to go to a branch and fill out a form in-person. They want to see me pissed off in-person, then they got it.

The details of the assistant manager's state of aloof and our discussion are not important. Entertaining, but not important. The real highlight is that clearing a check twice raises no red flags in their system. I had an account at a different bank in college that put an asterisk on your statement when the check numbers were not sequential. They have no provision to raise an alert - even a small, internal one - when two check numbers are identical? No. None. They are essentially a clearinghouse for incoming checks - no time to check to see if it is real, no way to check to see if the funds are there, nobody to check signatures. I mean really what did I expect?

I wrote the woman off as being another mindless drone - the kind that banks like to hire these days instead of intelligent folks with financial knowledge and skills. The real kicker was that she filled out the form for me! Poorly, too! Took about three stabs to get it right. I just had to sign the correct one. She also couldn't tell me how long it would take to fix. I asked for a ballpark, "...hours, days, weeks?" To which she replied, "Well, it won't take weeks!" I told you she was aloof.

The whole experience showed me just why check fraud is so prevalent - because there is no-one checking anything! No wonder so many places offer free checking.

So we see why it's so popular to pass a fake check, especially since banks hold responsible the person cashing it, not the person who wrote it. It's so easy for the criminal since no-one is going after them. On the same note, ID theft is just as easy a deal. I personally know some folks who were victims in a way that few would anticipate. They run their own business, and some of the paychecks that were sent out got intercepted in the mail. Fraudsters started writing bogus checks with the company's bank account info - and it worked!

It was amazing how many went through. In the end, it was a huge mess - employee's paychecks delayed, shutting one account and opening a new one, making sure real payments went through. It hopefully ended with a new policy of mandatory direct deposit.

There is a whole host of scams involving checks that leads one to ask, "Why does the checking system suck?" Is upgrading so terribly difficult? It took the events and subsequent canceled flights of 9/11 to get attention to Check 21 and eventually get it passed. Otherwise, checks would still 'float' as it would still take days (physically) for a check written to pass from the recipient, to their bank, and finally to your bank via commercial flights. This obvious improvement, among other things, allowing checks to be scanned and sent electronically took until October 2003 to pass and October 2004 to go into effect.

Just about the only other significant improvement to the checking system has been the advent of online billpay. Kind of a 'duh' thing for the tech-savvy, but apparently this was not obvious to our banking overlords. Really, this amounts to a convenience for the consumer, but little else. ID theft is still a problem as there is still a paper check that can be intercepted.

This all leads me to the following conclusions:

  1. Banks are too busy collecting NSF fees to care about improving the checking system.
  2. You get what you pay for with free checking (mostly), but are pay-checking accounts any better? Do they exist today?
  3. It's best to minimize the use of paper checks - both giving and receiving.
Are we wrong? Is the checking system in America better / worse than we think? Or have we got it right?

4 comments:

Anonymous said...

At the company I work for, we have dual signatures on all our cheques, but occasionally one goes out without a second signature, and never once has the bank caught it, they just clear like any other cheque. Once we even got a check back with our statement that had NO signatures on it. I guess we should have complained to the bank. I really wonder why we have signing officers when apparently anyone could sign a cheque.

Sometimes someone is watching though. A couple years ago, a cheque from my landlord (damage deposit return) bounced because his wife wrote it in the wrong chequebook, and she didn't have signing authority on that account......

Mr. (not) the Jet Set said...

Thanks for your comments. Few things are quite as annoying as unsigned checks being honored.

The whole signature aspect seems like such a false sense of security. Same goes for credit/debit transactions. If no-one looks at it, then what is it worth? I suppose if there were a dispute, a bank or card issuer could go back and check the sigs... Other than that, it's nothing more than the front gate at an apartment community. It won't keep the baddies out, but just make you think it will keep the baddies out.

Funny about Money said...

LOL! You ain't seen nothin'!

My ex- and I banked for years at what started out as a local bank and eventually was acquired by Wells Fargo. He was prominent in the community and so we had a personal banker, with whom I continued to deal after we divorced. I noticed that they were making mistakes, but because he had taken care of all our finances for 20 years, I assumed they probably were my errors, as I struggled to learn how to deal with money.

Then this outfit LOST a $30,000 bond!

The bank's financial advisor had suggested I put a chunk of money into a low-interest, almost worthless municipal bond. Having followed that dopey advice, I later learned from a real financial advisor that the money should go into a mutual fund. So I asked them to send me the bond.

Instead of Fed-Exing or having it delivered by messenger, as they said they would do, they dropped it into the U.S. mail, where it was promptly lost!

Then they told me it was MY responsibility to get the U.S.P.S. to track it down, and if it was gone for good...well, tough nougies!

I ended up having to file a formal complaint with the U.S. Banking Commission. Within minutes of that hitting the president's desk, the "personal banker" showed up at my front door with the bond in his hand.

Anonymous said...

I work in law enforcement dealing with a lot of financial crimes. Once a co-worker was presenting to a room or banking security big wigs, I worked in NYC at the time. They asked what was the one best thing to do to prevent many forms of bank fraud. My co-workers answer was enforce your own banking rules.

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