[WARNING] Paper Checks Can Lead to Fraud
In March 2016, I wrote about electronic bill payment, and asked “Are You Still Paying Bills With Paper Checks?” The overwhelming majority of readers who left comments said that they do. Some recent news casts serious doubt on the safety of this practice. If you pay bills with paper checks, you MUST read today's article...
STOP USING PAPER CHECKS NOW!
Even the organization that processes your check payments advises you to stop writing, mailing, and passing around paper checks. The National Automated Clearing House Association, or NACHA, recently said in a statement to Fusion online magazine,
“The most effective way for consumers to safeguard bank account numbers is to stop using paper checks. Since money transferred electronically passes through fewer hands than a paper check, electronic payments can be a safer option for consumers.”
Need more convincing? The author of Fusion’s article, Felix Salmon, dropped his checking account number and bank routing number into a content-management system used by all of his colleagues at Slack, just to see what might happen. “That’s not exactly top-secret information,” he wrote. “It’s on every check I’ve ever written, not to mention countless invoices and other forms. How dangerous could it be?”
Kashmir, one of his colleagues, used his routing and account numbers to pay her American Express bill using the Automated Clearing House service. She just entered an amount, typed in Salmon’s account and routing numbers, and that was that. Money instantly left Salmon’s account and landed in American Express’ account.
Hard to believe, isn’t it? Salmon was incredulous himself, writing, “At no point did Amex or anybody else ask or seek my permission for Kashmir to raid my account to pay her credit card bill; instead, the money just disappeared one day. All that was left behind was an unhelpful note saying ‘Amex Epayment’.”
Paper Checks Offer No Security
In response to the ease with which his money vanished, Salmon remarked: “This is, to put it mildly, suboptimal.” You have to admire Mr. Salmon’s flair for understatement.
While he did get the debit reversed, Salmon notes that he might easily have overlooked a smaller unauthorized payment, particularly if he was the kind of person - all too common - who doesn’t look at his bank statements very often. And it was a time-consuming nuisance to challenge the unauthorized debit successfully.
If someone emptied your checking account completely, how many days could you do without that money? Most Americans are one week away from total financial meltdown; if they miss a paycheck (or it’s taken from their checking account), they will suffer cascading waves of financial disasters.
The ACH system was never designed with online transactions in mind. It has no security features that can prevent the sort of thing that Salmon’s colleague did. Anyone who has your routing and account numbers can tell Amex or any other business that accepts ACH payments to take your money to pay his bills.
Salmon writes, “If I call up my bank and tell them that I never authorized the transfer, then they will reverse it, and the trail will lead back to Kashmir very quickly. If she didn’t have my permission to use my account to pay her Amex bill, the consequences for her could be very nasty indeed.” But what if “Kashmir” is nowhere to be found?
A Possible Fix for this Gaping Hole
It is rare, in the USA, to find an online merchant who accepts the sort of “ACH rail” that Salmon’s colleague used to appropriate his money for her benefit. (Shame on American Express!) Most online merchants insist on debit or credit cards. So this type of fraud is not easily perpetrated by the average person. But things could be very bad if the crook who has your routing and account numbers also has his own fake “company” that accepts ACH payments. Then he can just pay himself until your bank account is empty, and skip town. If he's operating from outside the country, tracking him down is exponentially harder.
Salmon says there is a simple fix for this gaping hole in ACH security. “All they would need to do is require permission from the bank account holder if the names on the accounts don’t match. Is that really too much to ask?”
In other words, if I am trying to pay an Amex bill that is not in my name, somebody at my bank or the ACH system should stop the transaction and call me. But apparently, that is too much to ask!
The only remaining fix is to stop using paper checks, which spread your routing and account numbers all over Creation. Just stop. Use plastic, or Paypal, or money orders or “bank checks” that bear your bank’s account info, not yours.
Your thoughts on this topic are welcome. Post your comment or question below...
This article was posted by Bob Rankin on 10 Jun 2016
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Article information: AskBobRankin -- [WARNING] Paper Checks Can Lead to Fraud (Posted: 10 Jun 2016)
Copyright © 2005 - Bob Rankin - All Rights Reserved