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Too Easy For Bank Accounts To Spring a Leak
The NYTimes has a cautionary tale of automated clearing house fraud. Parties unknown siphoned money from an individual's bank account. Nothing too unusual there, except that it was an elite private banking account at JPMorgan Chase, and the account holder is out $250K — the bank will only cover $50K of his loss. The $300K came out of the account in small transactions over 15 months. The bank offered no recourse except to open a new account, a large hassle given that the account is more than 20 years old and its holder writes a thousand checks a month. The article details how the spread of electronic settlements between banks has given rise to growing automated clearing house fraud — if anyone gets hold of the magic combination of account number and bank routing number, and once has permission to withdraw funds, all bets are off. Banks are unlikely to question future withdrawal orders. Moral of the story: go over your bank statements line-by-line every month, and question anything that looks funny.
Why are not banks responsible for fraud?
Is it not the bank's responsibility to maintain security and keep secure transactions?
Then... Why the limitation of 50k$ when FDIC covers 100$k ?
Ummm, you do realize that's on the bottom of every check that you write (in MICR). That's how your check gets matched up to your account for processing....
A bank account is a loan to the bank in exchange for money or services. If the bank is defrauded out of some money, why is it the account holder who loses out?
If someone claims to be my bank and tricks me into giving them $200, can I deduct that amount from my next car payment?
Really think about what has happened here. Person A loans Person B $100. Person C tells Person B that Person A owes them $100, so if Person B pays Person C $100 everyone will be square. Person B obliges not realizing Person C is lying. Is Person A the one out $100?! He had no control over the actions of Person C or Person B!
We just had a story on automatic bill pay where I voiced my support for credit cards over writing checks. This story supports that:
First, if someone defrauds your credit card, you're not liable. Dispute the charge and you're done, the onus is then on the merchant to prove the validity of the transaction. With cash accounts, once the money is gone, it's gone.
Second, checking accounts are difficult to reconcile as can be seen from the linked story. The person in question despite being financially sophisticated, was not able to be SURE about what his balance should be. Because the checks settle out of your account at the timing discretion of the recipient of the funds, it's not possible to say what your balance on any given day should be, which makes it hard to spot problems as they occur.
While the Guy (hah) in the article probably cannot avoid writing many checks due to his business, the fewer checks an individual writes the easier it is to keep track of one's balances. As long as you have the discipline to not abuse your credit card, it's the way to go.
-Ed
http://ed.markovich.googlepages.com
There's a big difference between "your records don't agree with mine" and "this transaction, right there, was not authorized by me and does not appear in any of my records". This fellow did the former but apparently never got as far as the latter.
If you mod me Overrated, you are admitting that you have no penis.
And I don't understand how a statement can be "complicated". For each transaction, there is a line. There is an amount, and a name of some kind that tells you what it was for.
That is because you are a retail banking customer.
Private banking statements are incredibly complex. I should post one of mine just so you can see. I can see how if you did a lot of transactions (I don't), it would be impossible to have clue #1 what the hell was going on. Truly. And I am an economist.
Personally, I have a manged portfolio at a private bank, but my day-to-day transactions are in a retail bank account for precisely this reason. My banker once asked me why I didn't take advantage of their transactional accounts and I told him because it would make my life too complicated.
The guy in the article, frankly, should have had a bookkeeper, and that bookkeeper should have known what was up.
They don't grade fathers, but if your daughter's a stripper, you fucked up. --Chris Rock
... that or just paying somebody monthly to keep track of it all.