May 8, 2007 at 8:00 AM ET
A bounced check is rarely just a single problem. Often, a cascade of events follows -- one bounced check leads to another and another, and then a series of non-sufficient funds fees, along with late fees from creditors.
Clawing out is often a one-step-forward, two-steps-back battle. The bank sucks money out through fees even as the consumer tries to put money in to cover the losses. But what if the bank isn't the only one sucking out money? What if, as a consumer dumps in money to raise the balance above zero, both the bank and an identity thief are taking money out?This 21st century nightmare hit 27-year-old Rachel Poor in March, when she discovered that an identity thief had drained her checking account and even overdrawn it by several hundred dollars.
But that was just the beginning of her ordeal. For two full weeks after Poor reported the crime to her bank, her imposter continued to withdraw money from her account as fast as she added it. As a result, she was hit with 20 overdraft fees totaling $670, and nearly six weeks after the fact, she was still fighting to get all her money back.
"Basically, I feel like I was the victim of fraud twice, once by the (person) who was using my account and again by Bank of America," Poor said. "Every time my balance went positive for even a moment another fraud charge would pass through ... so you can imagine my frustration."
Bank of America spokeswoman Betty Reiss said the bank couldn't comment on an individual consumer's account, but didn't dispute any of the details Poor provided.
An ATM breaks the bad news
The trouble began on Saturday, March 10, when Poor went to a cash machine near Boston and tried to withdraw money for the weekend. She was denied, and the machine indicated her account was overdrawn by nearly $350. She knew something was wrong. She ran home, looked at her balance online and spotted the bad news immediately. An identity thief had gone on a $466 shopping spree using her checking account the night before.
Poor, a public relations professional, called the bank immediately to report the theft, knowing the speed was of the essence. She was out of cash and had a series of automatic bill payments pending. And she was worried about what the identity thief might do next with her money. Poor acted fast; her bank didn't.
A maddening event cascade followed. During the next six weeks, Poor faced repeated barrages of bounced check fees. She had to take out a small loan from her employer just to get spending money.
Like Sisyphus -- the doomed king from Greek mythology destined to endlessly and futilely try to roll a rock up a steep hill -- each time Poor deposited money into her account to bring it positive, the criminal was able to withdraw it, leaving her with no cash and facing yet another insufficient funds charge.
"I was to the point where I broke down in frustration, crying," she said. "I see why people freak out. Every day when I logged in to check my balance, there were the big red numbers that kept getting bigger. I spent every single lunch hour trying to get a hold of people. Each time I said, 'This makes no sense. Can't you just stop paying people?'"
More complicated than credit card theft
Banks constantly market their zero liability programs, which aim to convince consumers that they stand to lose nothing from most cases of identity theft. Financial companies often complain that media reports exaggerate the risks to consumers after reports of lost or stolen credit card databases.
But these reports rarely discuss the more challenging problems connected with the theft of debit card or checking account data theft. Getting a credit card company to waive fraudulent charges may be hassle-free for most people, but beating back electronic transfer fraud – usually carried out via cloned debit cars or counterfeit checks -- is another matter entirely.
Consumers facing such fraud find their checking accounts drained, and must wait for banks to refund the money. Legally, banks have 10 days to issue refunds. But victims like Poor, who face ongoing ID theft fights, can find the process takes much longer.
When Poor spoke to Bank of America on March 10, she was told she'd have to sign an affidavit before the missing $466 would be returned. She had to use the bank's blank form, which would be mailed to her, and would arrive in five days or so. "Can't we do something quicker?" she asked.
With her account emptied, she no access to cash. The bank offered to fax the affidavit form instead, but said it would have to be sent to a nearby bank branch, which wouldn't begin processing it until Monday. By then, two $20 overdraft charges had already been levied against her account.
'How do we know you're not making this up'
The next day, Poor was unable to stop a series of pending online payments, and she was hit with eight overdraft fees for $35 each. Her account was now $808 negative.
She called the bank again. "I asked, 'Can I get those reversed so I can have some money?" she said. "And the answer I got was, 'How do we know you're not making this up?' " She was again informed that she had to work through the affidavit process and her refunds would come 10 days after the bank received her paperwork.
The bank's skepticism about her claim was particularly irksome because Poor had been a Bank of America customer since she was 17. And she was no stranger to the complicated process of check clearing. Prior to her work in public relations, she worked as a bank teller.
Her former employer: Bank of America.
But even her prior experience wasn't helping her dig out of this nightmare. In fact, her timing continued to be off.
The next day, Poor's paycheck cleared and was deposited directly into her account. She had tried to intercept the payment, to keep the money out of her compromised account, but she was too late. Most of the paycheck was immediately absorbed by the bank to cover unpaid fees. She was left with about $500, but that would soon be gone. Her imposter was ready to go on another shopping trip.
On March 19, fully 10 days after Poor told the bank an imposter was using her account, the criminal spent $370 in two trips to Wal-Mart. The imposter also passed a check for $132. Poor's account was negative again. Four more $35 overdraft charges were assessed.
"As soon as I put money in, he was able to take it out," she said. "I kept asking why they couldn't just close the account." The answer: Accounts that have a negative balance can't be closed.
Reiss, the Bank of America spokeswoman, said it is not the bank's policy to tell consumers to leave their accounts open when identity theft occurs; instead, the bank works with consumers individually to develop the best course of action. Consumers are generally instructed to let the bank know about any pending transactions so they can be appropriately flagged and don't cause additional bank fees. Sometimes, consumers are instructed to open a new replacement account, and pending transactions are redirected to that account. She could not answer questions about why Poor's case wasn't handled that way because she said she couldn't reveal any information about an individual consumer.
Poor still needed money and was getting desperate. When she told her employer that her entire paycheck was essentially gobbled up by fees and the thief, her boss took pity on her and cut her a manual paycheck as a loan.
"Without that I wouldn't have been able to pay the rent," she said.
Credits and fees at the same time
By now, she had opened a new checking account with another bank, but she still was out nearly $2,000, and her checking account was an accounting morass. One side of the bank didn't seem to know what the other was doing. Some refunds arrived -- on March 20, she received $315; on March 21, the original $466 was refunded -- but that same day, her account was hit with another $140 in bounced check charges. The total to this point -- 18 overdraft-related fees for $580.
Then, another series of credits were issued. She asked why the bank wasn't locking her account somehow; she was told not to worry, that it would ultimately refund all the bounced check charges.
Finally, on March 26, she called the bank, received an up-to-the-moment balance, moved some money around, and reached a zero balance. She then tried to close the account only to be refused. The balance, she was told, wasn't zero after all.
In just those few minutes, the criminal had struck again. Fifteen days after the initial crime was reported, the imposter managed to spend $364 of Poor's money at Marshall's. The next day, Poor was hit with another $35 overdraft fee, and an additional $35 bounced check fee. The account was $434 negative.
On April 5 -- one month into the ordeal -- Poor was still out about $400. The final refund arrived April 20, six weeks after the identity theft bout began.
Fake checks not checked
Poor doesn't have any idea how her identity was stolen. All the fraudulent charges involved forged checks, most of which were processed electronically at the checkout line. One of the checks passed by the criminal was processed manually, however, and she has a copy of that check. The name on it is Joe Larry DeLacruz and the address is bogus. But the account number and bank routing number belong to Poor's account.
Poor's story highlights this sad fact: Retailers and banks don't check to see if the numbers on a check match the name that is associated with the account.
That astonished Poor. "With the technology we have ... you would think a computer would read the check and realize that routing number and checking account is attached to a different name," she said. "We're so advanced but then something this simple goes right through. It doesn't make any sense."
A little-known truth about old-fashioned checks: Anyone can take the account number and routing number off the bottom of a check and create new, bogus checks with them. The name and account number don't even have to match.
But that doesn't explain why a criminal was able to steal money from Poor's account more than two weeks after she reported it as suspicious.
"It's absolutely ridiculous how I was treated with such disregard by customer service and the lack of urgency the bank had for resolving this issue," she said.