Putting the ACH in ACHE?
July 13, 2012 12:18 PM Subscribe
I use ACH transfers for a lot of things: my paycheck and retirement money go directly into my bank account, my rent and several credit cards and utilities get paid out of it, and i transfer money back and forth between various banks. What safeguards keep anyone who has a check of mine (with routing # and account #) from making a transfer to themselves? Or for that matter, keep businesses that i gave the information to from taking out more than i authorized?
What safeguards keep anyone who has a check of mine (with routing # and account #) from making a transfer to themselves?
For normal people trying to do this with a personal bank account the usual security method I've seen is that before you can make a transfer through a bank or other financial institution, the banks make two very small deposits, and you verify the amounts. Sometimes they also verify that your name is on the account but not always. It seems to be handled by each individual bank differently.
I don't know any details of what goes on behind the scenes with companies being authorized to do direct transfers for bills, but I do know that getting overcharged or double charged and it causing overdrafts and whatnot is relatively common. That's why it's safer to use a credit card for bill pay systems, since you have a window to dispute erroneous charges before they clear.
posted by burnmp3s at 12:32 PM on July 13, 2012 [1 favorite]
For normal people trying to do this with a personal bank account the usual security method I've seen is that before you can make a transfer through a bank or other financial institution, the banks make two very small deposits, and you verify the amounts. Sometimes they also verify that your name is on the account but not always. It seems to be handled by each individual bank differently.
I don't know any details of what goes on behind the scenes with companies being authorized to do direct transfers for bills, but I do know that getting overcharged or double charged and it causing overdrafts and whatnot is relatively common. That's why it's safer to use a credit card for bill pay systems, since you have a window to dispute erroneous charges before they clear.
posted by burnmp3s at 12:32 PM on July 13, 2012 [1 favorite]
ACH is... Complicated. Basically, no ACH transaction can be initiated without approval from the account holder. Simply having the routing and account numbers isn't likely to be enough. Now, if they had that information plus your online banking password, yeah, you'd be screwed. This article describes the ACH fraud process.
posted by valkyryn at 1:20 PM on July 13, 2012
posted by valkyryn at 1:20 PM on July 13, 2012
This is sort of a round about answer to your question but here is how I do it.
valkyryn -Basically, no ACH transaction can be initiated without approval from the account holder.
That is the way it is supposed to be, but the reality is that it gets abused quite a bit. I was the victim of one of these scams via PNC bank. While I was refunded the money supposedly, there were overdraft fees that the bank said they would forgive, but it all kept coming back. Eventually, after many rounds with PNC, I just stopped dealing with them and accepted the inevitable - they closed my account adding another notch to my already pathetic credit score.
So while ACH is supposed to be a great thing, at the same time you really have to be careful. What happened to me is not all that uncommon. Sorry not to have an stats for it, but i bet the numbers have been put together somewhere.
Also, this is not to say that ACH does not work for people. It is just that in my case, I think due to the amount of payment stuff I did online and in regular ways (utilities, phone etc), there was a greater chance for my problem to happen. As a contrast, my mother with all her credit and self paying bills, has not had a problem in years. Go figure.
Anyway, my solution to the possibility of more ACH issues was to keep my B&M bank isolated and allow absolutely no automated electronic transactions to happen without my absolute and total approval. To get around the need for direct deposit and other online transactions, I use a pre-paid debit card that is linked to a temp checking account. When I get any surplus of money in there, I transfer that to my B&M bank account. If the prepaid is compromised, I just dump the thing and buy a new one and in doing so that debit card turnover has never appeared on a credit report.
All this comes with some extra fees, but those fees are far cheaper than a few overdrafts.
posted by lampshade at 4:09 PM on July 13, 2012
valkyryn -Basically, no ACH transaction can be initiated without approval from the account holder.
That is the way it is supposed to be, but the reality is that it gets abused quite a bit. I was the victim of one of these scams via PNC bank. While I was refunded the money supposedly, there were overdraft fees that the bank said they would forgive, but it all kept coming back. Eventually, after many rounds with PNC, I just stopped dealing with them and accepted the inevitable - they closed my account adding another notch to my already pathetic credit score.
So while ACH is supposed to be a great thing, at the same time you really have to be careful. What happened to me is not all that uncommon. Sorry not to have an stats for it, but i bet the numbers have been put together somewhere.
Also, this is not to say that ACH does not work for people. It is just that in my case, I think due to the amount of payment stuff I did online and in regular ways (utilities, phone etc), there was a greater chance for my problem to happen. As a contrast, my mother with all her credit and self paying bills, has not had a problem in years. Go figure.
Anyway, my solution to the possibility of more ACH issues was to keep my B&M bank isolated and allow absolutely no automated electronic transactions to happen without my absolute and total approval. To get around the need for direct deposit and other online transactions, I use a pre-paid debit card that is linked to a temp checking account. When I get any surplus of money in there, I transfer that to my B&M bank account. If the prepaid is compromised, I just dump the thing and buy a new one and in doing so that debit card turnover has never appeared on a credit report.
All this comes with some extra fees, but those fees are far cheaper than a few overdrafts.
posted by lampshade at 4:09 PM on July 13, 2012
I became an involuntary expert on this when one of my accounts was being fraudulently debited last year, and (contra valkyryn) I can tell you that ACH has essentially no safeguards. Anyone with access to the ACH system can debit any account for which they have the routing and account numbers. They are "required" to have approval from the account holder, but that's enforced by the honor system.
The law requires that banks refund fraudulent debits against consumer account if they are reported within two months – but business accounts only have two days. Banks offer large business customers the ability to block all ACH debits except those originated by specified accounts – but, at least so far as I could find, they do not offer that service to businesses with under $10 million in annual deposits, for whom the only advice I got was:
posted by nicwolff at 8:06 PM on July 13, 2012 [2 favorites]
The law requires that banks refund fraudulent debits against consumer account if they are reported within two months – but business accounts only have two days. Banks offer large business customers the ability to block all ACH debits except those originated by specified accounts – but, at least so far as I could find, they do not offer that service to businesses with under $10 million in annual deposits, for whom the only advice I got was:
- don't give your account number to merchants you don't trust implicitly
- don't write checks on your own account; use your bank's bill payment service
- check your account activity on-line daily and report any unrecognized debits immediately
- close your current account and open two new ones: an operating account and a reserve account that you transfer money into only as needed to fund expected ACH debits
posted by nicwolff at 8:06 PM on July 13, 2012 [2 favorites]
Banks offer large business customers the ability to block all ACH debits except those originated by specified accounts – but, at least so far as I could find, they do not offer that service to businesses with under $10 million in annual deposits
That's certainly true with the national commercial banks. You may have better luck with a smaller, more regional bank. Those can't count on having a client with $10 million in annual deposits, so they're more likely to offer services to smaller customers than the really big guys.
posted by valkyryn at 12:52 PM on July 14, 2012
That's certainly true with the national commercial banks. You may have better luck with a smaller, more regional bank. Those can't count on having a client with $10 million in annual deposits, so they're more likely to offer services to smaller customers than the really big guys.
posted by valkyryn at 12:52 PM on July 14, 2012
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posted by dgran at 12:29 PM on July 13, 2012