Posted by Mark Brousseau
An interesting article from yesterday's Mail Tribune newspaper:
When banks mess up, consumers often pay, and the costs can be steep
By Gail Libermanand Alan Lavine
MarketWatch
May 04, 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 percent rise from 2006. By contrast, total complaints rose 7 percent 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 percent rate, but your account balance retroactively can be charged 31 percent!
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.
Monday, May 5, 2008
Sunday, May 4, 2008
Online Bill Pay Concerns Reporter
Posted by Mark Brousseau
Below is an article from today's Baltimore Sun that illustrates the lingering FUD factor (fear, uncertainty and doubt) surrounding online bill pay:
Paying online can weave a web of problems
Dan Thanh Dang
Consuming Interests
May 4, 2008
My friends tell me it's quick and painless. They say doing it makes life feel so much easier. They also swear that once you start, you won't be able to live without it.
It sounds so enticing. But I still refuse to bank online or pay my bills online. I do feel like an oddball whenever I sit down a couple times a month to write checks. I still lick the envelopes, press a stamp on each and then walk all of it to a mailbox or post office that I trust to get my bills where they need to go, on time.
Scoff if you will, but I'm not really sure it's more secure to click a few buttons on a computer to digitally send a payment in bits to some numerical account somewhere.
It's not that I haven't seen the writing on the wall.
A recent report from the Federal Reserve showed that more than two-thirds of noncash payments are now done electronically. Studies have shown that the chances of someone stealing my data online are no greater than the chances of someone swiping my mail. I know most banks use some sort of encryption and cryptography to safeguard my transactions. I know online banking scored 82 out of 100 on the University of Michigan's American Customer Satisfaction Index this year. And, yes, I would likely save some money since I wouldn't have to buy stamps anymore.
And yet, I'm still leery about taking the electronic plunge.
Why? Because once every couple of weeks, I hear from someone I know or get a call or e-mail from someone like Laurie Hansen who scares the bejesus out of me about how some company withdrew two electronic payments in one month or how a payment never made it to a designated recipient.
And don't even get me started about automatic bill pay, which is the equivalent of giving someone else license to steal straight out of my bank account whenever they want.
In Hansen's case, the 46-year-old Catonsville lawyer signed up for online bill payment in 2003 when she bought her Dodge Durango. Her online payments to Chrysler were trouble-free for five years until last February and March, when she discovered that two $460 payments didn't make it. It was sent to some mortgage company.Stories like that make me cringe.
The fact of the matter is I'm a bit of a control freak about paying my bills. I don't like relying on anyone - be it my bank or the company I owe money to - to make sure I pay a bill on time.
When I write a check and mail it, I know I've done all I can to make sure my bill gets paid.
When I click a button, I'm relying on my bank to make sure that transaction goes through on time. What if the system crashes and my payment does not get sent? What if my bank sends two payments instead of one to my mortgage company?
I'd get whacked with late fees and overage penalties, which would ding my credit, and bad credit would make my interest rates go up, high interest rates would make it harder for me to pay my bills, and before you know it, my dog and I would end up living on a bench in Patterson Park.
OK, I exaggerate. But only a little.In Hansen's dilemma, butterfingers did her in. Someone typed in some wrong keys, and her money was sent to some company she didn't owe money to."
When I signed up for online bill payment, I didn't have to type in an address," Hansen said. "Bank of America said it already had a relationship with Chrysler Financial, so all I had to do was fill in my account number. Things went fine until my payments went missing. When I called Chrysler, they told me they changed their billing address recently."
When Bank of America went back to look at what happened, they found that an incorrect ZIP code was entered from their merchant list. It resulted in my money being sent to the wrong company. The biggest problem for me was not knowing when they would put my money back."
Hansen said one customer service rep told her it would take three to five days to resolve the case, another said five to seven, and a third told her seven to 10 days. Banks have 10 days to conduct an investigation, and if they can't come up with a determination in your case, they must provide you with a provisional credit, according to Craig Stone, deputy ombudsman for customer assistance for the Office of the Comptroller of the Currency, which regulates all national banks.
Bank of America declined to comment on Hansen's personal account because of privacy concerns, but spokesman Tara Burke said, "We capture payments by using P.O. boxes and ZIP codes. You have to enter both correctly in order for the payment to go through accurately. If one is wrong, the payment can be diverted to the wrong place." But, in any case, Burke said, "If a mistake or a late payment is made on our end, our customers are protected under zero percent liability guarantee."
True, but it could still take 10 days to correct the problem. That's a long time for some people living from paycheck to paycheck.
Whether it was Hansen's fault, the bank's fault or both, the whole situation was resolved in one day after Hansen called the OCC, which put her in touch with Bank of America's executive office.
The $920 owed to her was placed back into her account on April 1 - less than 10 business days after she called the bank on March 19."
If someone had explained to me that the money would be returned in 10 days, I would have felt a lot better," Hansen said. "I'm definitely going to pay closer attention to everything in the future and double-check that my payments are going through. I've only ever had one other problem come up in the eight years that I've been using it. I use online bill paying all the time, so I'm not sure I could live without it now."
I remain unconvinced.
Below is an article from today's Baltimore Sun that illustrates the lingering FUD factor (fear, uncertainty and doubt) surrounding online bill pay:
Paying online can weave a web of problems
Dan Thanh Dang
Consuming Interests
May 4, 2008
My friends tell me it's quick and painless. They say doing it makes life feel so much easier. They also swear that once you start, you won't be able to live without it.
It sounds so enticing. But I still refuse to bank online or pay my bills online. I do feel like an oddball whenever I sit down a couple times a month to write checks. I still lick the envelopes, press a stamp on each and then walk all of it to a mailbox or post office that I trust to get my bills where they need to go, on time.
Scoff if you will, but I'm not really sure it's more secure to click a few buttons on a computer to digitally send a payment in bits to some numerical account somewhere.
It's not that I haven't seen the writing on the wall.
A recent report from the Federal Reserve showed that more than two-thirds of noncash payments are now done electronically. Studies have shown that the chances of someone stealing my data online are no greater than the chances of someone swiping my mail. I know most banks use some sort of encryption and cryptography to safeguard my transactions. I know online banking scored 82 out of 100 on the University of Michigan's American Customer Satisfaction Index this year. And, yes, I would likely save some money since I wouldn't have to buy stamps anymore.
And yet, I'm still leery about taking the electronic plunge.
Why? Because once every couple of weeks, I hear from someone I know or get a call or e-mail from someone like Laurie Hansen who scares the bejesus out of me about how some company withdrew two electronic payments in one month or how a payment never made it to a designated recipient.
And don't even get me started about automatic bill pay, which is the equivalent of giving someone else license to steal straight out of my bank account whenever they want.
In Hansen's case, the 46-year-old Catonsville lawyer signed up for online bill payment in 2003 when she bought her Dodge Durango. Her online payments to Chrysler were trouble-free for five years until last February and March, when she discovered that two $460 payments didn't make it. It was sent to some mortgage company.Stories like that make me cringe.
The fact of the matter is I'm a bit of a control freak about paying my bills. I don't like relying on anyone - be it my bank or the company I owe money to - to make sure I pay a bill on time.
When I write a check and mail it, I know I've done all I can to make sure my bill gets paid.
When I click a button, I'm relying on my bank to make sure that transaction goes through on time. What if the system crashes and my payment does not get sent? What if my bank sends two payments instead of one to my mortgage company?
I'd get whacked with late fees and overage penalties, which would ding my credit, and bad credit would make my interest rates go up, high interest rates would make it harder for me to pay my bills, and before you know it, my dog and I would end up living on a bench in Patterson Park.
OK, I exaggerate. But only a little.In Hansen's dilemma, butterfingers did her in. Someone typed in some wrong keys, and her money was sent to some company she didn't owe money to."
When I signed up for online bill payment, I didn't have to type in an address," Hansen said. "Bank of America said it already had a relationship with Chrysler Financial, so all I had to do was fill in my account number. Things went fine until my payments went missing. When I called Chrysler, they told me they changed their billing address recently."
When Bank of America went back to look at what happened, they found that an incorrect ZIP code was entered from their merchant list. It resulted in my money being sent to the wrong company. The biggest problem for me was not knowing when they would put my money back."
Hansen said one customer service rep told her it would take three to five days to resolve the case, another said five to seven, and a third told her seven to 10 days. Banks have 10 days to conduct an investigation, and if they can't come up with a determination in your case, they must provide you with a provisional credit, according to Craig Stone, deputy ombudsman for customer assistance for the Office of the Comptroller of the Currency, which regulates all national banks.
Bank of America declined to comment on Hansen's personal account because of privacy concerns, but spokesman Tara Burke said, "We capture payments by using P.O. boxes and ZIP codes. You have to enter both correctly in order for the payment to go through accurately. If one is wrong, the payment can be diverted to the wrong place." But, in any case, Burke said, "If a mistake or a late payment is made on our end, our customers are protected under zero percent liability guarantee."
True, but it could still take 10 days to correct the problem. That's a long time for some people living from paycheck to paycheck.
Whether it was Hansen's fault, the bank's fault or both, the whole situation was resolved in one day after Hansen called the OCC, which put her in touch with Bank of America's executive office.
The $920 owed to her was placed back into her account on April 1 - less than 10 business days after she called the bank on March 19."
If someone had explained to me that the money would be returned in 10 days, I would have felt a lot better," Hansen said. "I'm definitely going to pay closer attention to everything in the future and double-check that my payments are going through. I've only ever had one other problem come up in the eight years that I've been using it. I use online bill paying all the time, so I'm not sure I could live without it now."
I remain unconvinced.
Friday, May 2, 2008
Regulus Sale Just The Start?
By Mark Brousseau
The sale of Regulus Group LLC earlier this week to 3i Infotech, a global information technology company (see TAWPI Top Stories), could be the start of a wave of consolidation among lockbox providers.
Regulus is the largest independent remittance provider and one of the leading providers of document processing services in the United States – addressing the full document lifecycle from print and electronic bill presentment to remittance. Under the terms of agreement, 3i Infotech has proposed to acquire 100 percent of Regulus, including the company’s products, trademarks and product brands.
John Mintzer, vice president at Citizens Bank, expects more consolidation among lockbox providers, some of it simply as a result of mergers and acquisitions among regional banks.
But the real driving factor, in Mintzer’s view, is the declining number of consumer checks. “The ability for lockbox processors to meet their fixed costs gets increasingly difficult as check volumes decline,” Mintzer told me. “The single biggest challenge that lockbox processors face is the cost of labor, including benefits. This is a significant expense, and one that harder and harder to cover as customers require more exceptions-type processing.”
Serena Smith, senior vice president, Fidelity National Information Services, agrees with Mintzer. “All of us our facing economic pressures as volumes decline,” Smith told me, adding that consolidation among lockbox providers will be biggest story in the market over the next 12 months. “Providers will need an aggressive approach to the market, which means expanding their product offerings or exiting the business altogether. Providers who have not embraced a complete payments offering will miss the boat.”
Smith said that many in-house processors already are looking to outsource, to find the best mix of price, quality and functionality. “Processors have to be creative to differentiate themselves on something other than price,” she noted.
Mintzer believes that survivors of the coming lockbox market shakeout will need to have significant automation that makes their operations less dependent on heads-down labor. “Surviving processors also will require the ability to combine inputs of information received from multiple sources into one concise file or report, essentially providing the customer with an information dashboard.”
Smith said survivors would need to demonstrate robust product offerings, a commitment to the business, sustainable market share, and ready capital for investment.
With consolidation on the horizon, the obvious question is why companies like 3i Infotech are entering the lockbox space. Smith said the trend of in-house processors outsourcing their volume is very compelling, and can offer successful providers a large amount of volume.
But Mintzer warns that the financials don’t seem to support new entrants: “The significant investment in plant and equipment is extremely hard to make up in this ‘penny’ business, and this is before factoring costs associated with disaster recovery.”
Do foresee more consolidation in the lockbox market? Post your comments below.
The sale of Regulus Group LLC earlier this week to 3i Infotech, a global information technology company (see TAWPI Top Stories), could be the start of a wave of consolidation among lockbox providers.
Regulus is the largest independent remittance provider and one of the leading providers of document processing services in the United States – addressing the full document lifecycle from print and electronic bill presentment to remittance. Under the terms of agreement, 3i Infotech has proposed to acquire 100 percent of Regulus, including the company’s products, trademarks and product brands.
John Mintzer, vice president at Citizens Bank, expects more consolidation among lockbox providers, some of it simply as a result of mergers and acquisitions among regional banks.
But the real driving factor, in Mintzer’s view, is the declining number of consumer checks. “The ability for lockbox processors to meet their fixed costs gets increasingly difficult as check volumes decline,” Mintzer told me. “The single biggest challenge that lockbox processors face is the cost of labor, including benefits. This is a significant expense, and one that harder and harder to cover as customers require more exceptions-type processing.”
Serena Smith, senior vice president, Fidelity National Information Services, agrees with Mintzer. “All of us our facing economic pressures as volumes decline,” Smith told me, adding that consolidation among lockbox providers will be biggest story in the market over the next 12 months. “Providers will need an aggressive approach to the market, which means expanding their product offerings or exiting the business altogether. Providers who have not embraced a complete payments offering will miss the boat.”
Smith said that many in-house processors already are looking to outsource, to find the best mix of price, quality and functionality. “Processors have to be creative to differentiate themselves on something other than price,” she noted.
Mintzer believes that survivors of the coming lockbox market shakeout will need to have significant automation that makes their operations less dependent on heads-down labor. “Surviving processors also will require the ability to combine inputs of information received from multiple sources into one concise file or report, essentially providing the customer with an information dashboard.”
Smith said survivors would need to demonstrate robust product offerings, a commitment to the business, sustainable market share, and ready capital for investment.
With consolidation on the horizon, the obvious question is why companies like 3i Infotech are entering the lockbox space. Smith said the trend of in-house processors outsourcing their volume is very compelling, and can offer successful providers a large amount of volume.
But Mintzer warns that the financials don’t seem to support new entrants: “The significant investment in plant and equipment is extremely hard to make up in this ‘penny’ business, and this is before factoring costs associated with disaster recovery.”
Do foresee more consolidation in the lockbox market? Post your comments below.
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