Semi-Urgent Banking Question (Getting Screwed!)

[runningbird]

A long time ago I closed an account; following customer service's directions, I brought my account balance to zero so that it could be automatically closed. I did this by paying the exact amount in my account to a merchant. Got the receipt. Threw away my card. Situation settled.

Not so. Over half a year later, I am called by the debt collection agency. My bank claims I owe them $100, and my credit rating is about to get killed (in 6 days now).

I requested a transaction statement to see what the hell was going on. On the day I "closed" it, I brought the balance to zero, but there was an automatic $30 overdraft fee. And more fees to follow on that fee...because I didn't know it was there. Now I owe $100.

After many many calls, I found out that my bank charged me for a temporary authorization. A temporary authorization is a common procedure where the merchant holds a few dollars to verify your check card before the actual transaction takes place. The temporary authorization never actually "goes through" - it is a place holder. It attains a "pending" status on your account, until the actual transaction occurs, wherein the "temporary authorization" falls off. This is what happened. But the automated system registered an overdraft, even though the actual account statement shows no such thing.

My bank manager is just ridiculous about this. He keeps telling me to call the merchant and try to "settle" it with them! That is absurd. They are not the ones that sent the debt collection agency after me. He is talking to me like a kindergartener and won't follow any kind of rational argument.

Clearly, the bank is stealing my money. But I was wondering if anyone could clear a couple things up for me.

1). Who clears the temporary authorization? Is it the bank, or is it the merchant? If it is the bank, it is their job to make sure that the temporary authorization does not overlap with the actual transaction. In case, would make it an indisputable bank "error".

2). Is there anyone I can talk to when my own bank manager is being so unreasonable? Trying to call "higher up" seems like it will only give me customer service reps, who will tell me to call my own bank or say there is nothing they can do.

I am almost thinking of calling a "five on your side" type of thing. Could anything like that help? The $100 is forgivable, but the credit plummet is going to severely hurt my financial situation.

Any words of advice....sympathy....comraderie?

[Kanzeon]

Originally Posted by runningbird

Any words of advice....sympathy....comraderie?

I am confused by this temporary authorization. Is it similar to a situation where a hotel holds a reservation on the card? Or is it really a situation where you buy a $20 item, but for some reason the merchant holds $30?

Or is it like this, from a bing search:

As soon as an order is entered through the Kixclusive website, a temporary authorization is placed on your credit/debit card to secure the funds. This does NOT mean we have charged your card. Your card will only be charged when your order has been processed and is ready for shipment. If your order is cancelled, the temporary authorization is removed and no charges will post to your account. Depending on your debit/credit card issuing bank, it may take 5-10 business days for the hold to be released and the funds to be returned to your card.

Frequently Asked Questions

If it's along the lines of a reservation or a purchase subject to confirmation, then I side with the bank. The merchant has the right to confirm funds. The only way the bank can give the merchant assurance is to hold the funds. If you had written it on your check register as a sale, you would have overdrawn, and this seems no different.

[runningbird]

It is exactly as described on the Kixclusive website you copy/pasted. The temporary authorization does NOT mean the card has been charged. It does not show up on an account statement. For example if I spend $5.00 in my account and I spend $5.00 on gas, the gas station may place a $1.00 hold to verify the account information. When the actual $5.00 goes through, the $1.00 is dropped. It never actually is charged; it only attains "pending status". I am not sure of the distinction you are making between this and a hotel hold.

Can you explain what you mean by "If you had written it on your check register as a sale"? I just used a debit card. I spent exactly what was in my account.

Anyway, if the bank is the one holding the funds so that the merchant can verify the account, isn't it their responsibility to know that the hold is not included in the actual transaction amount between merchant and customer?

Think of it in old fashioned terms. If we didn't have an automated system, and the merchant wanted to verify the funds in the account, they would call up the banker and ask. Now, does it make sense that the account holder should receive an overdraft fee for a phone call?

[Dreamline]

My bank, Wachovia, just screwed me out of $700 dollars in overdraft fees even though they had a deposited check in their possession which conveniently cleared three hours after the last overdraft charge was issued. So, getting screwed by your bank is their new way of making money since they fugged up their old, tried and true method. (And screwed the world while they were at it.) Don't even fathom trying to get any customer service satisfaction either. Banks are rapidly gaining on Monsanto as the most evil entities on the planet.

Better to write your local news people...they probably have one of those consumer advocates and also send a letter to your Attorney General. They are very attuned to bank abuse now.

Jennifer

[runningbird]

Thanks for the advice, and I'm very sorry to hear about your $700! I have never heard of such a large fee; did you have a large number of small overdrafts?

Do you have any experience with your local media to loom the threat of bad PR over your bank manager's head? The thing is that I have moved far away from my bank where I closed my account, so I am sort of "out of the picture" to them. I will try contacting the local media there anyway though.

[Dreamline]

Yes, alot of small overdrafts for our business, personal and automatic bill pays, plus a daily charge for just being overdrafted, a spiral effect, so to speak. Like compounded interest, only in the bank's favor. The charges were only $200 when we went to speak to them about the uncleared check. Within two days, they had wrangled the other $500 out of us, and THEN cleared the deposited check.

And get this: when we fired them, and went to our new bank to open an account, they said that banks, on top of taking ridiculous amounts of money in fees for overdrafts, are now reporting you to a credit-like agency for reporting overdrafts which keeps you from being able to open new accounts at other institutions.

The suckage has become so vast that it boggles the mind. I think they know their days are numbered. It's the feeding frenzy before their re-regulation.

Credit Unions: get one.

Jennifer

[Lil Chris]

If a credit union is unavailable to you go with a smaller local community bank, instead of a larger national bank. I find they are more likely to work with you. They still charge for overdrafts and fees though...

[Kanzeon]

Originally Posted by runningbird

Can you explain what you mean by "If you had written it on your check register as a sale"? I just used a debit card. I spent exactly what was in my account.

The way I understand it:

You order some shoes, or something else that they need to get from the warehouse or custom order.

They run the card though as a temporary authorization. The bank hold the money. Then, if the sale doesn't go through fo some reason, they release the hold. It's exactly the same as a sale. They could have run it as a sale, then a refund, but they probably have accounting reasons for doing it as a pending transaction (that is, probably sales tax). If it were a sale and return, you would have overdrawn. It's the same thing, and you would might have avoided it if you had written the transaction in your register.

That said, there's no reason for them to be so inflexible about such a small amount of money. But, as you know, it's not the "old days" and hasn't been for awhile.

[Dreamline]

It's the same as when you swipe your card at the gas station. When the little screen says "authorizing" what they are doing it checking to see if you have an arbitrary sum available in your checking account: Say $50. What it would cost if you bought a full tank of gas. So your bank puts aside $50 even if you only buy $5 of gas. Then, eventually, that hold clears but I bet that time it takes to clear is ALSO in the bank's favor as it would be much more lucrative for them to keep that hold a couple hours in case you go over your limit.


Jennifer

[Kanzeon]

Originally Posted by Dreamline

It's the same as when you swipe your card at the gas station. When the little screen says "authorizing" what they are doing it checking to see if you have an arbitrary sum available in your checking account: Say $50. What it would cost if you bought a full tank of gas. So your bank puts aside $50 even if you only buy $5 of gas. Then, eventually, that hold clears but I bet that time it takes to clear is ALSO in the bank's favor as it would be much more lucrative for them to keep that hold a couple hours in case you go over your limit.


Jennifer

Makes sense. That is discussed a little more here:

snopes.com: Gas Stations Charge Credit Card Users Extra


I'm on the banks side in the case of the shoes (because the transaction amount was known and an order placed), but not with the gas (because it's a placeholder put in without discussion, not reflective on the amount of the transaction).

[ssandra]

If it does not show on your statements, can you not just ask the bank to prove the overdraft for which they charge the fee?

They will not be able to proof it, and therefor cannot charge you with it.

Good luck anyway!

[runningbird]

Originally Posted by Kanzeon

The way I understand it:

You order some shoes, or something else that they need to get from the warehouse or custom order.

They run the card though as a temporary authorization. The bank hold the money. Then, if the sale doesn't go through fo some reason, they release the hold. It's exactly the same as a sale. They could have run it as a sale, then a refund, but they probably have accounting reasons for doing it as a pending transaction (that is, probably sales tax). If it were a sale and return, you would have overdrawn. It's the same thing, and you would might have avoided it if you had written the transaction in your register.

I still don't understand your position. The temporary authorization in my case was not representative of the sale amount, or a place holder. It was 1$ that the bank held onto while the merchant verified the funds in the account. Then, when verified, the actual transaction goes through. The transaction amount is not added onto the 1$; it is separate because the 1$ is never intended to be transferred between accounts.

They definitely could not have treated it as a sale and a refund. A merchant cannot take an additional abitrary amount from your account and refund it at their convenience.

[runningbird]

Originally Posted by ssandra

If it does not show on your statements, can you not just ask the bank to prove the overdraft for which they charge the fee?

They will not be able to proof it, and therefor cannot charge you with it.

Good luck anyway!

Thanks, but this is exactly, the case, and they are charging me with it. There is no overdraft, only overdraft fees.

[Dreamline]

That's very similar to my case. There was no actual overdraft. My posted balance was never below zero. Only overdraft fees due to some mysterious behind-the-scenes banker rules that are invisible to the rest of us.

The $700 in fees, however, was very visible.

Jennifer

[ssandra]

Originally Posted by runningbird

Thanks, but this is exactly, the case, and they are charging me with it. There is no overdraft, only overdraft fees.

Can you go to a consumer legal rights group, or a lawyer or something? Because I´m having a hard time believing they can charge you for something they cannot proof...

What did they tell you when you asked for proof of the overdraft?

[drakecatz]

Originally Posted by Dreamline

That's very similar to my case. There was no actual overdraft. My posted balance was never below zero. Only overdraft fees due to some mysterious behind-the-scenes banker rules that are invisible to the rest of us.

The $700 in fees, however, was very visible.

Jennifer

OMG! I almost wish I hadn't read this! I wish I could help you. Please everyone remember that these days BANKS ARE EVIL!

This year someone I didn't know wrote me a check for $2000.00 for something I sold. I took the check to the bank and had it verifyed before I cashed it. The funds were good, the bank said no problem. The the following week the bank called and said the check was fraudlent and I now owed the bank the 2000.00!! This was after I was told no problem!!

I contacted a on line company out of California called "Fraud Aid." I have not heard from the bank since. Truly this sounds like fraud to me so you might give them a try. This happened to me in February. If nothing else Fraud Aid may very well know about this bank scam you are going through.

The inside of my mattress is looking very appealing as a bank these days.

what you are going through is unbelievable!

[drakecatz]

Originally Posted by runningbird

Thanks, but this is exactly, the case, and they are charging me with it. There is no overdraft, only overdraft fees.

Opps! sorry runningbird, I meant my above post for you. (And of course anyone else who needs help with fraud.)

[runningbird]

Thanks everyone, I am going to talk to the state consumer affairs department.

[Kanzeon]

Originally Posted by runningbird

Thanks everyone, I am going to talk to the state consumer affairs department.

The state may not have authority. Here is probably your first option:

Federal Reserve Consumer Help

[jendoe]

Oh my!

I want to make sure I understand, because it's a little confusing. You had a (checking?) account with debit card (?). You zeroed out the account by making a payment to a merchant for the exact amount left in the account, via your debit card, and allowed the account to be closed automatically (which is what you wanted.)

But - due to a temporary authorization on the debit card, which occurred after the account was empty, you were charged overdraft (and other) fees.

Was the temp auth for something that never went through (i.e. you secured something with the debit card, then paid with another method), was it for that last final purchase, or something else?


I'm not an expert, but from what I've read - well - I think you should start looking up "debt collection laws" and maybe check out the clarkhoward.com website or fatwallet.com (I've found good info on both.)

My understanding is that you need to DISPUTE the charges, in writing, and there are very specific letters out there that should tell you precisely how to word it, so that you're referencing all the appropriate laws.

Once it's in dispute, I don't think they can ding your credit score?

I'm sorry - I'm not sure what else to tell you beyond that. I think the typically advice is to try to fight them, but for $100, I don't think you'd want to pay a lawyer.

If the overdraft fee is really based on something that never went through, technically, I don't see how they could charge that. If they never PAID an overdraft, then they can't charge an OVERDRAFT fee - so I almost wonder if you could take the bank to small claims court over that (no lawyer, and it makes enough sense -tho you'd have to prove it - that it should be simple?)

And if you can get a judge to say no to the overdraft fee, then the rest of the fees (the I assume are a result of not paying the erroneous overdraft fee) should also be removed.

I don't know - but I'd try to get the thing put into dispute immediately (and send your dispute letter CERTIFIED with RETURN RECEIPT REQUESTED of course, so you can prove you sent it ) - at least being in dispute will buy you some time to figure this out, and keep them from reporting it.

Also, make sure you DO watch your credit reports... so that if it DOES get added, you can dispute it with the credit agencies.

What a pain, I'm sorry you're having to deal with it - good luck.

[runningbird]

Thanks for all the advice! I recently sent in a letter of dispute, so I think the pressure is off. I looked up a template and included all the legal jargon and references, except I didn't send it certified with return receipt requested, nor do I know what that means. I scanned a copy of the hand written letter, which may help, or not.

I don't know how small claims court works; I would learn about the process but I am in a different state now so I don't think it would be practical.

Okay, to clarify:

- Yes, checking account with debit card
- The $1 temporary authorization was initiated before the account was empty, but it was held by the bank so that it overlapped with the actual (final) transaction
- It was for the final transaction, which went through. The $1 did not go through, and never under any circumstances would it go through. It is only something that the bank "holds" so that the merchant can "see" the account. It's a bit confusing, but I think of it as like in the movies where one guy flashes a briefcase full of paper bills to another when they are making a deal. No actual exchange takes place.
- The temp authorization and actual transaction were tied to the same debit card (necessarily).

[Beuford]

Wow all this makes me want to not trust banks, but I think you'd need to if you wanted to run a business and do online transactions