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FTC Kills Dirty Online Check Processing Outfit
coondoggie writes "The Federal Trade Commission today got a US District Court to stop permanently what it called the illegal operations of an Internet-based check creation and delivery service, and to require the group to give up over half a million dollars in ill-gotten gains. According to the FTC, Qchex.com created and sent checks drawn on any bank account that a Qchex user identified, but did not verify whether the user had authority to draw checks on that account. As a result, fraudsters worldwide used the Qchex service to draw thousands of checks on bank accounts that belonged to unwitting third parties. 'The evidence shows that the launch of Qchex.com was a "dinner bell" for fraudsters and resulted in a high number of accounts frozen for fraud...' said District Court Judge Janis Sammartino."
This is one of many things wrong with our current banking transaction system. It's not even the worst (though it is pretty bad). But the established financial institutions find the status quo extremely profitable, and aren't anxious to see it changed. So they write off the losses from the occasional fraud that they can't stick on somebody else.
I've often wondered if this institutional inertia is why online micropayments have never gained traction. The usual argument is that people prefer the alternatives (advertising supported media, flat rate subscriptions, etc.) But I don't see where these arguments have ever been tested by giving users a real choice.
Checks are also obsolete except that they make convenient gifts, but it's still not that difficult to deposit into another's account given the number. And note that when you buy something with a check the amount is now instantaneously debited from your account but when you deposit a check, it takes at least a few days to a week to clear. Why the inconsistency?
I've also noticed that some particularly thieving rat-bastard banks, the ones that Obama is trying to bail out, treat in-person bank teller withdrawals as "cashed checks" and perform other anachronological voodoo to maximize fees should something go wrong. For example, say you make 3 charges and the charges are posted in chronological order when you check your balance. Then you charge again a day or two later, but the latest one overdraws you $1.25 . The bank's database will then rearrange the charges so that the expensive one is posted before the others, resulting in 4 overdraft fees when you should have been charged only one. That's a little too "tough" for an account which may as well be labelled "broke student", paying over 100 bucks for 1 or 2 dollars overdrawn. Extreme example, but it happens.
And to think those fuckers want a bailout. Credit unions FTW.
The real problem is the ACH system? It relies almost exclusively on blind trust. Trusting that whomever I'm debiting authorized me to debit them, etc. It always amazes me when I build an ACH file to send to the bank as part of my business and send it through without a hint of a question from the bank or the processor. They just merrily send the file on through. I guess the bank and processor are counting on me being a good citizen. Hmmm...
I'd happily pay you Tuesday for a biopsy today!
It's comforting to know that my entire savings is up for grabs every time they mail me a checkbook.
and every time you give anyone a check, or cash any check (both transfer the same information.) after all this is not the last way to use a ABA# + account # to clear a bank account. I have in my canceled checks the account number, and bank ABA number for everyone who has cached one of my checks. I think we had a social agreement not to turn over the other guys bank info to a Nigerian scammer and wipe them out. But who knows...
Personal checks haven't been in use in Finland for 30 years. What we have is a system of personal direct deposits. So instead of authorizing the payee's bank to withdraw funds from your account, you transfer funds from your account to the payee's bank.
Yes, everybody is virtually forced to own a bank account.
Heck, you can actually buy a check printer yourself which can even use the same magnetic ink that bank-issued checks use. Nothing illegal in that.
Never email donotemail@WeAreSpammers.com
The problem of micropayments (payments of less than US$ 0.05 or even fractions of a cent) is that you ask a user all the time when they want to see certain content, whether they want to pay for it.
So the user not only gets an extra step in between (accepting a payment) to see an article or blog post or youtube video, also they have to think and decide whether or not to make this payment.
This is probably the main reason why micropayments never took off. Setting up an account at some provider and charging it up with say US$10 now and then and then have this provider take care of the payments is the trivial part, technically at least. Charging a credit card with anything less than a cent is of course impossible: and a cent is already too much for a real micropayment.
Actually, all you need is to have the check number, account & routing number hashed with a secret key known only by your bank & check printing company. Have this unique hash (unique to each check number) appear on the bottom of each check, and the bank can refuse to clear it if it doesn't match up, or if a check number is duplicated. You end up with the same paper check everyone is used to, but with a bit more security. The only way fraud can happen is if someone steels your blank checks, or duplicates an uncashed check and changes the amount.
You can go a step further and include a maximum dollar amount with the hash, and have separate checkbooks for small vs. large amounts