Big Banks, Big Business and the Little Guy
 

My 83 year old mother either lost her checkbooks (two checking accounts) or had them stolen and without her knowledge of the theft/loss. Following the recent 3 day weekend, four checks hit her checking account. All the checks were written to Wal-Mart and all were processed as electronic checks. Six more checks hit in the days that followed... all electronic checks. And it isn't over yet; they're still coming in.

Wal-Mart and other large retailers do electronic checks. You present the merchant with a blank check, they scan it, put a hold on the money, print a date and amount on the blank check and then hand it back to you (or whoever has your checks). No ID card of any kind is ever checked in this process and the check is never signed. Anyone with one of your blank checks, or even the information necessary to duplicate one, has full access to your checking account.... and you won't even have a copy of the check. The money is just gone, and your legitimate checks are bouncing. All this can happen before you get your monthly statement or even recognize there is a problem.

Besides buying all the products available at Wal-Mart, the thief can also buy gift cards, phone cards and get $25 cash back. All with no ID and no signature. Just a blank check.

It would seem the banks and big merchants are taking care of their business in the way they see as most efficient. But, that comes at a huge loss of protection for the rest of us. I am at a loss as to how to protect myself in this crazy world where the little guy doesn't have a chance and the merchants won't even check an ID before taking money out of my account.

This is fraud and you can get your money back some day, but the paperwork is a nightmare. You're going to get the hassle of your lifetime dealing with all the legitimate checks that bounced. Your credit rating may take a hit, potentially causing you to lose your credit cards, pay higher interest rates, or get turned down for a loan or a job. If you are easily frightened by threatening letters, get some Valium now because you're going to need it.

So, how do the rest of you do business? Credit cards? ATM Card? Checks? Bank transfers with Bill Pay? What's the safest way? Do you use a shredder? Is this a USA problem only, or is it everywhere? Every merchant and all their employees where you've ever written a check have access to your account number, so we are all at risk daily.

Where does all this end... cause it's just too darn easy to take your money the way it is? Is the only solution to this a microchip embedded in our forehead?

My wife and I have become very wary.

We have two credit cards, and only two, refusing all others. One has a high enough limit so I can purchase something expensive at a trusted store or pay a travel expense, the other has a very low limit (hard to get the bank to do, BTW) used for everything else for which we don't pay cash. That card is the one Paypal records for internet purchases, and I always use Paypal, if available, rarely the card itself, never the other card.

Neither my wife nor I ever use a check for a store purchase; they are used only for bills I can't pay via internet banking (surprisingly few). I use an ATM card to make purchases that exceed the cash in my pocket (or that will deplete it too drastically) rather than a credit card, but only in a few trusted places; otherwise we use cash obtained from an ATM in our bank's lobby.

We have an 12-page cross-cut shredder and everything that has our name and/or address on it goes through it, even the cover page from subscriptions, etc. We have a shelf at the top of the basement stairs to hold this stuff until one of us goes down for some other reason, then it gets shredded.

So far, so good.

NovaScotian, you're well ahead of me on this. I'm rethinking the way we do everything. Blank checkbooks are now in a lock box... in today's world they are the same as cash. I'm in the process of reducing the amount of money in the checking account to a bare minimum and reducing the number of checks I write. I've replaced all the bank passwords with stronger ones, and there's definitely a shredder in my near future.

Mom grew up during the Great Depression. She's never had, and refuses to have, a credit or debit card. She's old and her eyesight is not very good. Accordingly, we put my name on her checking accounts and I monitor them daily. We picked up the bad checks day one and put a freeze on both accounts the same day. No money left the accounts and she now has new accounts. We put fraud alerts on both our names with the credit bureaus.

Wal-Mart's response to all this was, "We're so very sorry this happened to you. Please take it up with our collection agency." Then the fun starts.

As identity theft has escalated to a pandemic, my wife and I have become increasingly wary. When you use your credit card in a store, make sure your receipt doesn't show it before discarding it. My pcbanking site shows checking, savings, and US currency account details as well as credit card details (with a handy section: credit card transactions since the last invoice). I look at them fairly often; it only takes a minute.

We get lots of junk mail and, of course, requests for charitable donations. Anything that identifies us is shredded, the residue recycled. We refuse to give our credit card number on the telephone with extremely rare exceptions. We refuse to give our SIN (your social security number) to anyone for any reason. When one company insisted on my SIN (social insurance number) to get a cell phone with them, I refused and went to another. They asked, but accepted that I wouldn't give it and set up the account. To my knowledge only my bank, my broker, and the government know what it is, because they have to for tax purposes.

Who knows if this is paranoid? It doesn't interfere with our lives in any way, and it makes us feel safer. Good enough for us.

I wonder if you could sue Wal-Mart as a co-conspirator in fraud, since they are looking the other way by not requiring ID and a signature.

I'd donate money to that suit.

We rarely use checks any more, but every time we do (electronic or not) we are asked for an I.D. I"m surprised Wal-Mart didn't.

We have a debit card for our checking account, used for most day to day purchases.

We have two credit cards (one in my name, one in my wife's). Mine is for some online purchases as well as the rare purchase that is larger than the debit card's daily limit, my wife's is in a safe in case of emergencies. We never carry a balance beyond 30 days.

We use our bank's bill paying service for most bills, and a PayPal account for most online purchases. Originally tied to my credit card, it's now tied to a bank account. It took a long time to become comfortable enough to do that.

We try to be diligent about protecting our identities and credit. We refuse to make purchases over the phone, limit access to our personal information and bank accounts, use strong passwords, take our receipts, much of our mail ends up shredded (cross-cut) and recycled. If we can't comfortably afford something, we do without. If we can't pay off the debt (excluding our mortgage) without accruing interest, we don't make the purchase. If I ever have even the slightest doubt or discomfort, I hang up/quit the browser/close my wallet. We prefer a little cash in the bank to "keeping up with the Joneses".

It's a Sisyphean undertaking, and I'm never quite sure we've done enough.

Since what you and your wife are doing matches our approach to a tee, it may be Sisyphean, but at least independent minds arrived at the same mix.

First, let me admit I had to look up Sisyphean.

Suspect that would go nowhere since they are the ones who, eventually, took the financial loss. Ass far as our inconvenience, they would blame that on the thief, collection agencies, etc., etc. But I agree they should bear some of the responsibility for their lax practices.

IDs are never checked here at Wal-Mart or Sam's Club for checks. Never. Most everybody else does and writes your driver's license number on the check. Wal-Mart has a better idea.

I had an off the record talk with the bank's branch manager.... checks scare him to death, too. As for debit cards.... guess what, you can use them without a pin. The transaction just get processed like an electronic check. Fooled me. I tried to decline the debit card from the bank, but no go. If you want to use an ATM, then you have to have a debit card... not many years ago they were separate cards. No more. One bank refused to open a new account for Mom unless she took a debit card complete with a pin assigned.

My sense is this is all too easy for a dedicated thief. Something will have to change once the losses get big enough. I'm guessing it will be a tamper proof national ID card, and I would not rule out the possibility of an embedded microchip some day. Can you imagine walking out of the store with a full shopping card, and everything you bought and your microchip gets auto scanned as you exit the front door.... no more waiting lines. Too great a temptation for consumers to resist. Someday, it will happen.

If they've sent it to collections, they've done a lot more harm than merely inconvenience you. Try to buy a house or a car with that on your record.

That is absolutely correct if it gets reported to the credit agencies and goes uncontested. I've filed notarized fraud affidavits with the two collection agencies involved so far, so hopefully the stolen checks won't get reported. For sure, you cannot ignore them or you will get nailed to the wall in a hurry.

I've also put fraud alerts on both Mom's and my credit files at Experian. By law, they are required to provide the alert to the other two major agencies. You can do all that from Experian's web site and get an email confirmation that it has been done. That's only good for 90 days, but they have a permanent alert you can affix to your records. AARP is recommending this to all their members as a guard against identity theft.

I fully expect at some point something will go wrong and we'll have to get an attorney to sort it out. So far, the system seems to be working.

Don't really foresee a situation where either of us will need credit. Worst case scenario for Mom is she won't be able to write checks at Wal-Mart. If it takes an attorney to fix that, then that' s what we'll do. Either that or Mom will have to learn to live with a debit/credit card. My parents' philosophy was always that if you can't afford to pay cash, then for sure you can't afford to pay for it with interest. Worked for them (Dad passed away earlier this year).

That must be different than in Canada. Here you cannot use a debit card without knowing the PIN. I've also never heard of electronic cheques, perhaps another thing that is different in Canada. It would seem that electronic cheques address the exact same need (convenience) as debit cards though, so what is the reason for their existence?

NovaScotian, I find it interesting that you are particularly worried about your credit cards and, it would seem, not your debit cards. My credit card carrier provides me with insurance against fraudulent purchases, identity theft, etc. However, my bank provides me with no such insurance on my savings and chequing accounts! If a thief learns my PIN (looking over my shoulder perhaps) and steals my bank card, the bank will not reimburse me the lost funds. If the same thief steals my credit card, I can have the credit card company reverse any charges on the card that the thief made before I realized it was stolen and reported it. Accordingly, I guard my bank card more closely even than my credit card. I am, however, very careful with both.

I agree with your comments about a bank card -- I too guard it with my life and don't carry it in my billfold; I have a separate card case elsewhere on my person than my back pocket. I use it to get cash from the bank, to pay fees in government offices, to by beer, wine, etc. in the provincial liquor commission, and to buy pipe tobacco from a trusted tobacconist. I use the low-limit credit card when what I'm buying costs more than I have in cash. I use the high-limit credit card when I'm away on a trip. I never let them carry forward (although the high-limit one is very low interest -- it's tied to a line of credit account that's only a bit over prime).

NovaScotian (and/or any other Canadians out there), have you ever seen electronic cheques in Canada? Is it even allowed in Canada? I'm having trouble finding info on this on the web.

Words of wisdom. My father, sadly swears by credit to improve lifestyle. Naturally, he's in danger of losing his house.

In my case, my debit card can be run as a debit card (with pin) or a credit card (with signature). Using it as a debit card incurs fees (curse those Byzantine bank rules), so I don't use it that way.

I worry about loss theft of my debit card, but I worry a little less about loss of the cash in my account than damage to my credit rating (the highest our mortgage officer had ever seen). My brother experienced identity theft once. Years later, it still causes occasional trouble - despite his filing fraud alerts, hiring a lawyer, etc.

If I remember correctly, my bank offers protection from fraudulent use of my debit card. (And it's easy enough to maintain multiple accounts, and keep minimal cash in the one with the debit card.) But, as is this is a Sisyphean task, I need to review that information (curse those terms subject to change without notice) and, perhaps, update my approach. I am careful with both credit and debit cards, and as a creature of habit, I only put my wallet in certain places. In the rare instance that I can't find it immediately, I can virtually always find it within a minute.

Part of the reason we switched to reliance on debit cards is we spent a couple of years paying off all credit cards. We weren't profligate spenders, but a series of emergencies played havoc with our finances and we needed to recover. (Also, my wife tends to scatter cash and receipts among a variety of pockets, purses, bowls, and drawers. I like the orderly and reliable records that I can access online and in monthly statements.) I don't even like carrying the debt for thirty days - I pay my balance long before I receive the statement to free myself of that millstone.

Same here, except it is not technically a credit card charge and when processed it comes directly out of the checking account.... that is, no statement, no 30 days to pay. Least, that's the way it works here. PIN is optional as is ID (though most merchants will require one).

Wal-Mart does credit cards the same way they do electronic checks.... you swipe the card, it's electronically approved, and then you sign Peter Rabbit or any name you choose on electronic screen... doesn't matter what you sign. There will be no ID check.

All our gas stations/convenience stores operate the same way.... swipe the card and fill up. No signature, no ID, no need to even go into the station. Not even a receipt unless you ask for one (i.e. hit print receipt button).

It is just too easy.

It comes directly from my bank account whether I select credit or debit when I use my bank card. I would prefer it to be solely a debit card with a pin - and no fees - but Visa, MasterCard, et al. make the rules. As I understand it, the profit margin is higher when we select credit. Sigh.

I've never seen or heard of them, but that doesn't mean they don't exist.

Google "electronic check processing" and you'll get lots of info. Seems the newest push in this arena is electronic check processing by phone.... that's right, some guy in Nigeria can spend money from your checking account with a phone call and precious little information.

No doubt there is some level of security built into this system, but darned if I can find anything that protects the little guy. It's all designed to help big business and big banks do their processing and minimize their expenses.

This from Cheque Imaging in Canada which is advocating electronic check processing:

This document is advocating the use of check imaging technology for clearing checks without sending them to a central point. I gather from this discussion that in the US, stores can do that. Here in Canada, they can't, so most stores will only accept checks (we spell that cheques) from folks who have some sort of a loyalty card.

I'm now almost a month into this fiasco, and I've learned a lot. Before the thread closes out, may I humbly suggest the following:

1. Far and away the safest way to do business in the US is to use a credit card. It has two distinct advantages:

a) Loss is limited to $250 by federal law. This federal protection does not exist for debit/ATM cards.

b) The money does not come out of your account until you pay the cc bill. You have time to dispute unauthorized or fraudulent charges BEFORE your checking account is emptied.

2. Blank checks are just like cash with some merchants because no ID is checked. The thief can even buy gift cards as a "prepaid" theft mechanism. A thief can take a blank check to any number of printing shops and have a whole batch of new checks printed that are, in fact, new checks with any numbers they want on them. Protect your checkbooks and backup checkbooks.

3. Debit cards are dangerous. They can be used to empty your account and the thief does not need your PIN to do so. You will not know this has happened until you start getting returned check notices from the bank or collection agencies. Banks do guarantee protection from theft, but your account may be empty while you sort it out with them. If you are not very prudent in identifying and reporting the theft, the bank may not honor the guarantee. Hence, #4 below.

4. There is NO substitute for regular, even daily, monitoring of your accounts on the bank's web page. Set up fraud alerts on all your accounts, credit card as well as checking (e.g. email notification for transactions over $500 or $1000).

5. For obvious reasons, do not let your checking account grow too large. It is better to have any excess in a separate money market or savings account for income purposes as well as for readily available cash should you become a victim.

6. Should collection agencies become involved, and they will, respond to them immediately. Fax in as well as mail in by certified mail, return receipt requested, any and all documentation they request and keep copies. The certified mail is the only documentation you have that you have responded promptly. This is key to protecting yourself against damage to your credit rating. Patience is a virtue as these people are only interested in collecting money... your fraud problems don't make them money, only collections do that. (Two agencies denied having received my fraud affidavit two weeks after I mailed/faxed them. I followed up with another fax and CERTIFIED/RECEIPT REQUESTED mail. You only have 30 days before they can turn you over to a credit reporting company.)

7. Put a fraud alert on your credit accounts at the three major credit reporting agencies.

8. Protect your personal information as best you can.

I've come to the conclusion that electronic checks are not the problem, and may be safer than a paper check. The problem is a couple of large merchants who have elected to not check ID's when processing electronic checks... and the thieves seem to know who they are. An electronic check puts a hold on the money in your account and that will show up a couple days before the demand for payment is made. Therefore, with electronic checks you have the opportunity to catch a fraudulent check before the money is actually taken out of your account. Not necessarily so with a debit card transaction or a paper check.

arnie

Here in Canada, someone with my cash card in his possession does need to know my PIN number to use it. That's even true if you take the card into the bank. To reset the PIN on a card (at least at my bank) you must produce photo ID.

The danger here is in using the pendant for swiping your card and entering the PIN. Evil folks, in a number of cases, have swapped the top of these so they can record your pin and the card strip data and reproduce the card. Banks now have video cameras on their ATMs that record your face while the transaction is made. As I said above, I only use cash cards in a few trusted places.

Given what aehurst and capitalj have posted, I sure am glad that Canada hasn't allowed electronic cheque processing or debit cards without PINs. It would seem that the banks and credit card companies are sacrificing consumer protection for profits in the US.

The same is true here IF you can find a bank that will issue you an ATM or Cash Card. Most will not, instead you get a debit card that is used for both paying for products/services at the register as well as for a withdrawal from an ATM.

Most people are completely unaware that if you swipe the debit card and hit the credit button instead of debit, it gets processed like a credit card only with a direct withdrawal from your account instead of a bill at the end of the month.

Our debit cards can be visually differentiated from a credit card only by the words "debit" or "check card" in small print near the Visa or Master Card logo.

I refused to accept a debit card all the way up till the day the bank simply quit issuing ATM cards. After that it was no easy access to cash or take the debit card... and I caved in. They make the rules.

I just double checked online about my debit card and one of it's features is that it's "protected by Visa's Zero Liability program for all signature-based purchases".

PIN-based transactions are a different story, and there is a resolution process that looks to be tedious and not entirely satisfactory, but I don't use the PIN function and I certainly don't share my PIN.

I never owned an ATM card, and only accepted the debit card with my current account (over a less favorable account without a card) because of the signature-based transactions and protections. PIN-based purchases had fees so I never used that function. From what I've just read, it appears that they no longer do for purchases within the U.S. - but I still need to read the fine print.

This is a bit of consumer culture shock for me I guess. In Canada, "debit card" is synonymous with "bank card" or "ATM card". My debit card is issued to me by my bank and has nothing to do with MasterCard or Visa. Credit cards are entirely separate (although some of the credit card companies are starting to allow cash advances on their cards, which is sort of like a bank card) and the accounts are separate too.