More retailers turning paper checks into e-transfers - MarketWatch - 0 views
-
SAN FRANCISCO (CBS.MW) -- When an unidentified $30 debit showed up on her bank statement as an electronic funds transfer, Cheryl Hicks was mystified.
-
Each month, three electronic transfers go through her account -- and this wasn't one she recognized. "It just said ACH debit and the amount," said Hicks, a 33-year-old communications manager who lives near Everett, Washington.
-
Hicks soon discovered her phone company transformed the paper check she sent for payment into an e-transfer, and her bank failed to list either the check number or the recipient on her statement.
- ...11 more annotations...
-
Hicks' inability to readily identify the EFT debit illustrates a mounting bookkeeping problem some checking customers are encountering as banks and retailers seek to minimize the handling of paper checks to cut costs and boost profit.
-
"While the EFTs are helpful to everybody and clearly more efficient, I'm not sure the banking system has adequate safeguards," said Kent Phelps, a vice president of software engineering for WitsEnd Software, which develops programs enabling check scanning.
-
Customers lack the ability to set parameters on the practice, he said. "I ought to be able to tell the bank 'I'm going to authorize EFT, but I want to be called if its over $5,000 or will empty the bank account."
-
A fast-growing number of U.S. retailers are scanning images of checks into banks' computer systems and destroying the originals. An estimated 461 million check payments have been converted into e-payments since January 2002, according to NACHA, the Electronic Payments Association.
-
Meanwhile, a law called Check 21 will go into effect next October allowing banks to send checks to each other electronically, eliminating the need to transport them manually from bank to bank, and authorizing check "substitutes" to be used in a court of law.
-
Banks and merchants say electronic check scanning helps detect fraud more quickly, while also saving 5 to 25 cents a transaction, according to NACHA.
-
Some problems arise In bank-to-bank electronic transactions, the check payment moves faster through the system -- meaning consumers should no longer count on a three- to five-day lag time. Otherwise, check-writers are unlikely to notice a change, aside from receiving copies of their returned checks in lieu of the originals.
-
Some consumer advocates warn that many merchants aren't fully educated in the legal ins-and-outs of check scanning. Gail Hillebrand, senior attorney with Consumers Union, nonprofit publisher of Consumer Reports, said she's received complaints that companies have run checks through twice, once as an electronic transfer and again as a regular check.
-
"There are a lot of merchants who don't really know what the rules are," Hillebrand said. "The merchant thinks 'you owe me money, I have this check here because I didn't send it in last month, I'll send it through now.'
-
"The fact that that is inconsistent with NACHA rules and probably illegal, the merchant doesn't know and hasn't been educated."
-
Hicks couldn't find any notice on phone bills that her checks would be converted to electronic transfers, though the NACHA rules governing the process require companies to notify consumers every time they plan to convert a check into an electronic payment.