Checks and ACH transfers query

A couple weeks ago I received a letter from my homeowner’s insurance company angrily reminding me that I hadn’t paid them for the upcoming 12 months. So I wrote them a check and attached the little “mail this with your payment” thingy and went down to the post office to buy stamps since I mail something perhaps once every six months.

Today I was looking at my bank statement and saw an ACH electronic debit to State Farm for the amount of my check. Now, when I write checks (which isn’t that often) the bank statement always notes it as a check, not an ACH debit, and provides an image of the returned check after it has been processed. Is it possible that State Farm used the routing/account numbers on my check to initiate an electronic debit instead of processing my check the slow way, and if so are they really allowed to do that?

The whole thing seems rather fishy. I have a real desire to burn my place down just to teach them a lesson.

I am not sure about NY law and the way mortgages there work but do you really handle this yourself? In many areas of the country, the mortgage holding bank manages homeowners insurance and the payment is wrapped into the total mortgage amount. You may not have a mortgage at all for all I know however. In any case, it does seem like someone made a mistake on your policy.

Mine isn’t, probably because it’s a co-op mortgage which is a whole different ball of wax.

In any case, I wonder if a clause in my existing insurance contract allows them to process payments this way. Maybe I’ll dig up the policy tonight.

Not sure what’s “fishy” about it. What do you care about the exact details of the check processing as long as the correct amount is withdrawn and that it is performed in a timely manner? I am presuming that you do not write checks without the funds to cover them when they’re written.

This is actually becoming rather common, and should be seen as part of the general movement to paperless transactions. You think paper grows on trees? :dubious:

I always assumed it was made from lead and asbestos in China by shoeless peasants.

I don’t know the reasoning for it, but when I send out a bunch of checks (yes, the old-fashioned way), I notice that the check to JCPenney, for one, will look like it was processed as an ACH, rather than a check. I figured that it’s their way of processing payments.

Perhaps that’s what happens when a business has a check scanner, rather than taking the checks to the bank.

The Check 21 Law would be why your insurance company/bank are doing this. You should expect pretty much everyone to be doing it down the road…

Thanks, TroubleAgain. It looks like that’s it.

Interestingly, the gummint (both New York and the Feds) processed my income tax checks the old-fashioned way. You’d think they’d be on top of this sort of thing – the only time governments exercise any efficiency is when tax revenue is at stake!

For whatever it’s worth, I used to work someplace that processed a ton of checks. We eventually got the necessary hardware to run the checks via ACH, and I’m pretty sure we didn’t need to get any separate authorization from the customers to process their checks that way (other than the signed check, of course).
If definitely did generate inquiries such as yours from our customers, but I didn’t know the first thing about the legality of it. But you guessed the mechanics of it correctly - we used the routing # and acct # to initiate the electronic transfer. We actually had a check reader that scanned the #s off the check, but they could be manually entered as well. I can’t remember what happened to the checks themselves, but I think we kept them for a certain # of months and then shredded them.

That was a few years ago, in California.

I don’t mind that a check clears as a ACH debit, except that my bank statement doesn’t associate the check number with that debit. I keep track of which checks have cleared and which are outstanding by check number, not the amount. For instance if I write check number 100 for $500, the statement will show the $500 debit but it will never say that check number 100 was paid. If I don’t note it, I’ll think that I still have a $500 check outstanding.

There are other banks that do include the check number with the ACH debit. So switch your business to one of them.

First try complaining to your current bank about this, and remind them that they have competitors who do this correctly.

The debit on my statement shows up as “STATE FARM RO 27 PYMT 0000000315”

I just realized that it was check number 315, so that removes some mystery. Checks processed the regular way show up with the somewhat less baffling description “CHECK 315”

The other problem with this is that you have to count on them entering the ACH transaction correctly. I had a credit card payoff of $8.94 last December that was processed in the same manner using ACH, but they processed it against my checking account for $894! What the heck - only a factor of 100, right? Especially fun thing to discover right before Christmas!

I have never had the mortgage holder handle the insurance. I don’t even recall it being an option - I remember them wanting to handle the property taxes, unless I opted out - which I duly did.

The same thing can (and has) happened with paper checks. Someone still has to manually encode the check with the amount as read off it by a human being.

God, yes. I used to accept proof-batches from other banks, and try to balance them, and that *one * bank had the worst proof operators I’ve ever seen. Both accuracy-wise, and in being neglectful about changing the ribbons on the proof machines.

WalMart, at least around here, only processes ACH transactions. When you buy something, write the check, and hand it to them. The cashier runs it through his/her scanner, the check is read and voided, then the cashier will hand it back to you. MAKE SURE YOU GET THE CHECK BACK. The debit shows up as an ACH debit on the your bank statement. My wife does this all the time. Drives me crazy. I just use the POS debit terminal. Why use up a check that WalMart doesn’t even want?

Having actually been a proof operator (and an installer of proof machines, sorters & the like), I can say that in order to be “in proof” your debits & credits must balance. The likelihood of someone (at the company changing it to an ACH transaction) taking a check and mis-reading the digits, keying in the wrong amount is half that of two people (the person depositing the check and the proof operator) making exactly the same error. Further, in a check processing world, the error would have easily been handled by looking at the physical document. In the ACH world, I luckily was able to produce the carbonless copy of the check as proof of the error.

Are you saying that your only recourse to correct an overcharge was the carbonless copy in your duplicate check register? It seems to me that there ought to be something more substantial to go on than that.

Consider WalMart. I go in and buy $10 worth of stuff and write a check. The cashier takes the check, keys in $10, puts the check through the machine to read the numbers and put WalMart’s imprint on the check. The cashier hands the check back to me and I leave with my stuff. If the cashier keys $100, the imprinter will put $100 in the amount space and instruct the cashier to dispense $90 in change. If the cashier keys $1, then $1 gets printed and the cashier is instructed to collect $9 more. All the proofing gets done at the point of sale. A dishonest cashier could retain the check and run it through the imprinter multiple times, removing $10 from the till with each run. The till balances and the customer gets hit with fraudulent charges. Always get your check back.

In your case, the error was with a credit card payment, so you couldn’t get the check back. Still, it does exist somewhere. Once the error was discovered, couldn’t you request that the credit card bank recheck the original document? Shouldn’t something be out of balance somewhere?

Something probably could have been done eventually. However, this little problem arose at Christmas. There were delays because people were on vacation, etc. As it was, it took me several days to get my money back. Meanwhile, transactions that were already in flight were automatically trying to hit a checking account that was short almost $900.

Because I had the carbonless copy, and because I deal with a Credit Union that really went the extra mile for me, nothing bounced & no fees were assessed as they covered everything for me. They also reversed the ACH transaction as fraudulent and processed the refund to my account in fairly short order.

Don’t even get me started on the number of phone calls it took with Bank of America when they sent me a letter over my bank “declining” my last payment! That, too, was eventually worked out. But it took a LOT more effort than getting the money back in my account.