Consumer Payment Card News

Account Looting

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Having a check returned for non-sufficient funds has been a nightmare since the “Expedited Funds Availability Act” took effective in 1987 due to “big check first” and “collected funds” policies. Now the growing popularity of re-presentment of bounced checks electronically has opened the door for more bank account looting. If you check is returned, some merchants will now convert the returned check into an electronic funds transfer, add a collection fee, and then process it through the Federal Reserve Automated Clearing House. The amount of the collection fee that can be added is subject to state law. The range is $15 to $30. Nevertheless, payment companies that specialize in e-checks are now promoting the electronic collection of returned checks as a “profit center.” One more big reason to dump your check book and sign up for electronic bill payment or switch to credit cards to pay recurring bills. In a somewhat related note: The Federal Trade Commission has sued three New Jersey-based companies to halt an alleged nationwide scheme to extract millions of dollars from consumers by falsely threatening them with arrest and prosecution unless consumers immediately pay them amounts that the consumers do not owe. The complaint also charges the defendants with misrepresenting the amount of the debt when they added extra charges without telling consumers. In most cases the defendants added at least $130 in collection fees to settle the checks. In addition, the defendants allegedly failed to inform consumers of their right to receive more information about the debt or to dispute the defendants’ claims prior to payment. The three corporate defendants include National Check Control, Check Enforcement, and Goldman & Co.

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