DIGITAL DOMAIN
Our Payments Were Automatic. Stopping Them Wasn't.
By RANDALL STROSS July 26, 2009
MY wife likes to anticipate things going awry. When she signed an auto lease agreement three years ago, she authorized the leasing company to pull its monthly payments directly from our checking account. But once the final payment had gone out, she gave me an assignment: cancel the automatic payment authorization with our bank. She was concerned that the payments would continue.
A world-class worrier!
Her premonitions came to pass, however. The week after she mailed her check to buy the car at the end of its lease and we thought that all was settled, we got a surprise: an extra, 37th monthly payment went to the leasing company. How was this even possible logistically? I had done as my wife asked and put in a preventative stop-payment request just in case with our bank, Citibank.
In an e-mailed response, Citibank attributed the failure to stop payment to a mistake made by an employee, "an isolated incident due to human error." (It later restored the funds, but by that point the bank knew that its customer was a reporter; asked whether it was bank policy to always make customers whole when payment isn't properly stopped, a Citibank spokeswoman declined to answer this or any other questions.) At least Citibank owned up to having made a mistake. The leasing company, U.S. Bank, said that no mistake was made: it asserts a right to withdraw payments indefinitely until it declares a lessee's account closed.
When my wife called U.S. Bank after discovering the surprise debit, she learned that her check to buy the car had been deposited two days earlier but that a refund for the 37th payment had not yet been set in motion. The refund eventually came in an old-fashioned paper check, which didn't show up until 22 days after U.S. Bank had processed the purchase check.
When funds transfer automatically as all parties wish and expect, we are well served. Automatic direct payments like those lease payments are but one small part of the vast electronic payments system in the United States, known as the Automated Clearing House network.
Direct deposits are another part of the system - and a wonderful invention indeed. A system that brings money automatically into an individual's account is efficient, and a vast improvement over the time when banks would lock up the funds for three to five days. But when the money moves in the other direction and goes out as a direct payment - again, automatically - the door is opened to potential problems.
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