Oct. 2, 2009 at 9:00 AM ET
Mary Cox's consumer nightmare began with poor satellite television reception, but ended up costing her a $430 early termination fee, hundreds of dollars in overdraft charges, and endless hours of frustration. Adding insult to injury, she says, was a phone call with a customer service agent who said his name was "Ding-A-Ling."
Cox's story should serve as a harsh reminder that it's never a good idea to give any company your checking account number. Credit card transactions are always the smarter way to establish a financial relationship with a company. Sharing your checking account or debit card might seem OK at first, when you're excited about getting that new cell phone or TV service. But if things turn sour, consumers who have authorized direct withdrawals, or even merely shared bank account information with a company, often find they've lost all leverage in the dispute. Then they're surprised when money gets sucked right out of their checking accounts.That's what Mary Cox said happened to her. The California resident and six-year customer of DirecTV moved to the city of Fontana in November and took advantage of DirecTV's offer to set her service up at her new home for free. After the hardware was installed, the signal was so poor that the service was unusable, Cox says. She spent several weeks trying to get DirecTV to fix the service, then decided to cancel on Jan. 2. A few days later, she returned the receiver and other equipment to DirecTV.
On Jan. 12, DirecTV sucked $432.58 out of her checking account as an early termination fee because the "free moving" service had obligated her to a two-year contract with DirecTV, she said.
"That's something they don't tell you in those commercials," she said. "I didn't sign anything agreeing to that."
A cascade of problems soon followed, as the surprise withdrawal led her to overdraw her checking account. She bounced a series of checks, including her rent check, and had to pay nearly $200 in overdraft fees.
"It was just a nightmare," she said. "I was on the phone with the bank crying, asking them to fix this."
Perhaps the worst part, she said, was her continued frustrations when calling DirecTV to ask for help. When she complained about the withdrawal, a front-line customer service agent told her there was nothing he could do. She asked for a supervisor, who told her the same thing. Then, Cox says, she demanded to speak to a manager. After a long wait, a man answered the phone and identified himself as "Ding-A-Ling."
"I thought I heard wrong, so I asked him to repeat himself. And he said it again," Cox said. "You might as well be talking to a wall ... I think they just do everything they can to make it hard on you."
Cox is now a plaintiff in a class-action lawsuit against DirecTV, filed in California state court. Lawyers in the case have asked the court for an injunction that would prevent DirecTV from automatically withdrawing funds from consumers' accounts when there is a dispute. DirecTV was facing several similar lawsuits in California; the cases have now been consolidated into a single class action.
"The activity of going directly into someone's account is absolutely shocking. ... Mary had her bank account plundered," said Edie Mermelstein, Cox's lawyer. "We're not saying they can't bill people ... we're just trying to prevent them from reaching into other peoples' accounts like they did with Mary."
'Customers...consent to these charges'
DirecTV, in a statement, denied that it takes money from consumers without their knowledge.
"Contrary to the claims that are being made, DirecTV does not withdraw money from its customers' bank accounts or credit cards without their consent," said spokesman Robert Mercer in an e-mail. "DirecTV only charges an early cancellation fee to a customer's credit or debit card after the customer authorizes the charge so there is nothing for the court to enjoin. Customers are informed of and consent to these charges on multiple occasions, and DirecTV intends to vigorously defend against these claims in this litigation."
On its Web site, DirecTV indicates it may charge consumers a "pro-rated fee of up to $480" if they don't fulfill their "programming agreement," which requires 24 months of service.
Cox didn't use direct withdrawals to make her monthly payments for TV service -- but she did give DirecTV her bank account information when she signed up with the service "under the guise of leaving a deposit for the equipment," Mermelstein said. Cox never imagined the firm would make surprise direct withdrawals from her account.
To date, she's gotten some of her money back, but the problems continue. After the withdrawal, she initiated a dispute with her bank, the now-defunct Washington Mutual. The bank initially sided with DirecTV, but gave her a temporary credit for $430. Cox took the money and switched banks. She was still out about $200 in bank fees.
Then, collection agents working on behalf of DirecTV started caller her home, looking for the $430. The calls stopped when Mermelstein sent them a cease-and-desist letter, but now Cox is worried about a potential impact on her credit report.
"There's nothing there yet, perhaps because of the lawsuit. But we are in a standstill right now," Cox said. "This ended up so ugly, I had to borrow money to cover the checks I wrote. I'm not the kind of person to bounce checks."
Red Tape Wrestling Tips
It's common for consumers who give their checking accounts to firms for automatic payments to later regret the choice. Health club auto-deductions and magazine subscriptions, for example, are notoriously hard to cancel. The U.S. Treasury Department says banks must stop making such automated payments within three days of receipt of a letter from a consumer saying authorization for payment is withdrawn. But relying on banks' quick action is an unnecessary gamble.
Consumers who pay with credit cards have additional rights and superior leverage when a dispute arises. For starters, they still have control of their money, which gives them better bargaining power. Also, credit card issuers make it easy to dispute charges -- much easier than obtaining refunds.
Of course, disputing a credit card charge is not a cure-all. In Cox's case, DirecTV could still have initiated collections proceedings. But she wouldn't have faced the cascading overdraft charges.
Credit cards also are superior to debit cards because debit transactions result in immediate checking account withdrawals, so disputes can lead to unhappy surprises such as overdraft fees.
But for consumers who don't have credit cards, a debit transaction is superior to a direct checking account withdrawal, as debit card dispute procedures tend to be more streamlined.
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