Livinglies's Weblog

Besides the obvious fraud, breach of duty and illegal disclosure of fees and interest that every lender made by participating in the mortgage meltdown, they continue to make conventional “errors” that can result in extra fees for them and compounding losses for you.

Whether it happens in your account or someone else’s account the costs are going to be paid, at least in part, by you. Many so-called errors are timing issues decided by policy makers at the bank. By not posting a deposit that they know is good, they can create an NSF situation, charge you an NSF fee for each incoming check and thus cause a deficit in an account that you thought you had in money in and where you should have had the money posted.

The bank creates an artificial NSF situation and then charges you. The burden shifts to you to fight with them. This compounds to more NSF fees and in some cases, we have seen those fees go into thousands of dollars. 

CONSUMER BANKING

Bank on mistakes

When banks make errors, consumers often pay — and costs can be steep

By Gail Liberman and Alan Lavine

Last update: 7:25 p.m. EDT April 28, 2008

 

PALM BEACH GARDENS, Fla. — The price tag of one recent bank error: At least $2 million. The bank mixed up the account of 49-year-old Benjamin Lovell with the account of a different person with the same name.

Lovell, accused of spending the money without notifying the bank of the mistake, faces a hearing Thursday in Brooklyn’s Kings County criminal court. The charge against him: Grand larceny. Lovell’s attorney argues that Lovell didn’t intend to steal, but believed he was entitled to the funds.

The case is just one example of the growing problem of bank errors. While most consumers likely won’t face charges of grand larceny, there may be other financial pitfalls in store for those who don’t carefully monitor the accuracy of bank transactions, including:

• Steep, ricocheting bounced check fees — not only charged by your bank, but also by merchants — if a bank error leads to an overdrawn checking account.

• Late fees and default interest rates on credit cards if credit card payments aren’t properly credited.

• Undetected fraud.

The Office of the Comptroller of the Currency, regulator of national banks, said complaints of bank errors rose to 2,217 in 2007, a 10% rise from 2006. By contrast, total complaints rose 7% to 28,362. Of course, the data likely are limited to those customers who detected banks’ mistakes.

But how many errors go undetected by those who are too busy to check every detail of their account transactions? After careful scrutiny of her own accounts, one reader says she caught thousands of dollars in bank errors, including:

• A check debit for $400 should have been a deposit.

• A $3,000 credit card payment was applied to someone else’s account.

• Despite an ATM withdrawal of $40, no cash actually was provided.

“These items were entirely in my responsibility to fix,” the reader complains. “The financial organizations provided little, if any, help, though it was their mistake and if I hadn’t pursued it, would not have recovered the money.”

More errors, or is it fraud?

Tomas Norton, a Princeton, N.J.-based fraud consultant, says the problem may not necessarily be more bank errors. (One sign that bank errors have been around for years lies in a comical “Beverly Hillbillies” video, dubbed “Before identity theft there were bank errors,” at CrazyAboutTV.com/video.)

Rather, more of those errors may be due to fraud, Norton says. That problem is compounded by the fact that it’s increasingly difficult to get bank errors fixed.

“The problem with the errors is that no matter how it occurs, whether it’s an error or deliberate, the bank is always protected,” Norton says.

“If your payment doesn’t get to the bank on time, even though there’s a plausible delay in the mail, they don’t take those excuses,” he says. With a credit card, not only could you lose your attractive 7.99% rate, but your account balance retroactively can be charged 31%!

Also, banks have come to view checking and savings account operations as ways to generate income, Norton says, so fees for customer missteps have escalated dramatically, and your bank may be less willing to quickly fix errors that trigger those fees. In addition, customers often must deal with frustratingly bureaucratic call centers.

Meanwhile, the time period for you to notify your bank of an error — often overlooked in deposit agreements — has been slashed. The latest deposit agreements give you only 60 days to notify your bank of an account error, Norton says. Fail to meet this deadline, and even though an error is your bank’s fault, the price tag for the mistake, including accompanying fees, could be yours.

“Billing disputes and error resolution” represented the top consumer complaint among the 4,451 filed with the FDIC in 2007. The same problem also led the 2007 roster of complaints at the Office of Thrift Supervision.

Protect your accounts

What can you do to avoid being a victim of bank-account errors?

• Immediately reconcile your bank accounts when statements arrive. Check for all errors, including any unauthorized transactions. Monitor check endorsements, credit card transactions and electronic debits.

• Consider checking your accounts between cycles, either online or by telephone.

• If you detect fraud, immediately file a police report.

• For all errors, including fraud, immediately notify your bank in writing by certified mail. Keep copies of your notice. For debit card or deposit account errors, call immediately. But also send the certified letter to a top officer of your bank. For credit cards, mail your notice to the “billing inquiries” address on your statement. Record times, dates, and names of all those with whom you speak.

• Use special care depositing checks or money orders. If they may be counterfeit, don’t deposit them until you call the issuing bank to verify authenticity.

• Beware that if a deposit is erroneously credited to your account, the bank may freeze your account until it’s corrected. For more information on dealing with bank errors, visit this OCC page.

Spouses Gail Liberman and Alan Lavine are syndicated columnists. Their latest book is “Quick Steps to Financial Stability” (Que/Penguin). You can contact them at www.moneycouple.com. 

Filed under: bubble, CDO, currency, Eviction, foreclosure, GTC | Honor, inflation, Investor, Mortgage | Tagged: bank errors, bank policy, banking, fees, NSF, posting |