Last month in Defeat Debt we discussed Check 21. This month we’ll take a look
at e-checks. And yes, Virginia, they are different.
Electronic check conversion, or an e-check is a one-time debit made from your checking
account. You may be asked for information from your check, for example: bank routing
number, checking account number, check number, and so on, to process your payment
by electronic withdrawal through the Automated Clearing House (ACH) network.
Yes, that’s the same system through which Credit Advisors receives your monthly
electronic funds transfers (EFT) for your debt management program. So it’s
clear...with electronic check conversion your check itself is no longer the method
of payment.
They have to tell you.
Federal law, The Electronic Fund Transfer Act and the Federal Reserve Board’s
Regulation E requires that you be notified that information from your check may
be used to make an electronic payment from your account. This notification can take
many forms. For example, the notification could be in the terms and conditions of
a bill or on the statement itself, for a mailed check. A retailer may notify you
with a notice in writing at the time of purchase or over the register at the point
of sale. Some may have you sign a statement acknowledging that your check may be
converted. You may also find that companies that take your payment by phone or over
the Internet will notify you at the time of the transaction.
Information is obtained
from your check to
process your payment
electronically.
You can opt out.
Some companies may give you a choice if you ask. (Especially now that Check 21 is
in place). With others, your only choice may be choosing another type of payment,
i.e. debit card, credit card or cash.
You may or may not receive your check back.
If you mail your check and it is converted, the original check must be destroyed
within 14 days. At the retailer, the clerk may ask you for your check (blank, partially
completed or fully completed), process it through a machine, mark the check void
or processed and hand it back to you.
The transaction will be listed on your bank statement.
While the specific check (number) used should not be used again, it will list on
your statement, but it may not list with your other checks (those that were not
converted). The transaction may list on your statement as an ACH transaction. In
such a situation, the transaction will provide you with name of the company (rather
than just the check number), the payment amount, and date.
How will this affect you?
The impact of electronic check conversion will be similar to the effects of Check
21. There may be no "float time" for your check. In other words, if you write a
check today, make sure you have funds in your account today. Otherwise, the potential
for bounced checks will increase dramatically. As a smart consumer, you are aware
of the fees and charges connected to bounced checks, as well as the damage such
a miscalculation can do to your credit record. If you have such concerns, investigate
your bank’s policies and charges for connecting a savings account to your
checking account, or overdraft protection. Remember, although the check may be paid,
you may be charged for these services and the overall cost should be compared to
the cost (both monetary and to your reputation) for insufficient funds checks.
With electronic check conversion
there may be no "float time" for
your check.
What if an error is made?
As always, check your bank statement immediately upon receipt. Don’t delay.
In most situations you have sixty days from when the statement was sent to you (note:
not when you receive it). Once you notify your financial institution, they
may take as much as forty-five days to investigate.
What about identity theft or unauthorized electronic transactions?
If, when examining your statement, you suspect an unauthorized transaction, notify
your financial institution immediately. According to the FTC if you report to your
financial institution within two business days, your loss will be limited to $50.
If you wait longer, say over sixty days, you could lose all the money in your account
and any unused portion of the maximum line of credit you have for overdrafts. Ouch!
In addition, the FTC recommends keeping track of all deposits, withdrawals, checks
and ACH transactions from your account and balancing your check book, while watching
for duplicate transactions. They also suggest using caution when sharing your account
information, especially over the phone, unless you initiate the contact or know
whom you’re dealing with. (If you need to file a complaint, contact the FTC
at www.ftc.gov or toll free at
1-877-382-4357.
Finally, the Federal Reserve has some suggestions for consumers as well. Before
you agree to electronic check conversion, you should first ask yourself:
- Do I understand that the information from my check will be used to make an electronic
payment from my account?
- Do I have enough money in my account to cover the payment?