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Company causes bank decline of EFT payment, then charges insuff funds fee


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#1 disabled4life

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Posted 17 December 2012 - 07:33 PM

This seems to be a new issue that is happening more and more I'm wondering if anyone knows anything about this or can refer me to any existing relevant statutes.

My auto insurance company took out my EFT payments with out issue each month for 5 years. One month I see that I have a bunch of bank non payment service fees on my account. They tell me that my payment was declined by my bank. I go to my bank and bank tells me that **** never tried to get the payment. This happens over and over again, i..e me checking over and over again back and forth, hours on the phone with **** and Bank. **** keeps charging me these $20 fees for non payment and it goes around and around. To this day, **** continues to state that Bank keeps declining the payment request, and Bank continues to state that **** never put the payment request through.

In the meantime, my only other option, strangely enough, is to enroll in Debit payments each month instead of EFT. As it turns out there is no charge for EFT and there is a huge service chage each month for using Debit. Strangely enough, this only started happening immediately after I started getting a huge discount on my Auto Insurance, because my Good Driver and "Consistency" (i.e. having the policy for consecutive months) kicked in.

Infuriated, and after hours and hours on the phone trying to resolve the issue (after just getting stuck w/ the service fees for a year) my case is referred to a specialist at ***** who assures me that he will be personally taking care of the matter and requesting each month that the service fee is removed. For months he tells me this. I go to check my bill and see that the fees were never removed and they've just been accumulating and being moved to the next month's bill. Astonished, I send in a new complaint and they tell me that it will be escalated and that it will be taken care of by higher management and that I will here back from them within 72 hours. That was two weeks ago, now I just got a notice telling me my policy will be cancelled unless I pay all the accumulated service fees along with this months payment.

Edited by FindLaw_AHK, 18 December 2012 - 08:17 AM.
This post has been edited to remove personal or identifying information. -Moderator


#2 adjusterjack

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Posted 17 December 2012 - 09:18 PM

Way too long.

I read just enough to be able to tell you that automatic bank withdrawal is the kiss of death.

Sure, it all goes fine for a while. But when it goes wrong, it goes WRONG and can cost you a bundle. Especially when it involves insurance where a non-pay cancellation can put you in a high risk insurance bracket that costs you even more money.

Warning: Legal issues are complicated. Explanations and comments here are simplified and might not fully explain the ramifications of your particular issue. I am not a lawyer. I do not give legal advice. I make comments based on my knowledge and experience. I guarantee nothing. If you act on my comments without the advice of an attorney, you do so at your own risk.


#3 Tax_Counsel

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Posted 17 December 2012 - 09:29 PM

There is no federal statute that deals specifically the automatic withdrawal games that you allege some firms are playing. No state I’m familiar with has a specific statute either. However, you might make an argument that the company is using bad faith and thus violating the contract. The problem is that suing over these charges might well cost you more than the amount at issue. Even if the company is not doing something intentionally wrong, there are all kinds of problems that come up with automatic debits from your bank account. I never authorize that for any payments. I always expressly authorize each payment through my bank so I know exactly what date the payment is made and I avoid the screw ups that happen with automatic monthly withdrawals.

#4 disabled4life

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Posted 17 December 2012 - 09:31 PM

Interesting to note that there is no current legislation. I guess 'bad faith' would be what this would fall under. I've already filed a complaint with Consumer Affairs and I will consider filing something in small claims court. Either way, these companies need to learn that they can't pull this type of stuff. I did a little research that I took out of my initial post and it turns out this is a common little game that alot of these companies play. Seems they use this to screw someone out of promotional pricing deals etc. Then its the whole 'your problem is being escalated etc' until the customer gives up and just pays whatever the fees are. Turns out one guy was able to track it down through the bank and it turned out that when the company tried to put the EFT payment through they intentionally or unintentionally left the amount blank, which is what caused it to be denied. They then charged the guy a return insufficient funds bank fee.

I'd say this is definitely fraudulent. Will run this past some of my attorney friends see if they're interested.

#5 Guest_FindLaw_Amir_*

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Posted 21 December 2012 - 10:07 AM

Have you addressed this automatic bank withdrawal issue?

#6 disabled4life

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Posted 22 December 2012 - 09:05 AM

Have you addressed this automatic bank withdrawal issue?


I'm in the process. So far, from what I can tell, it seems that companies are doing this because they don't think there is anyway for them to get caught. In my case it seems that my EFT went through w/ no issue for 4 years. I was then due for a big reduction in the cost of my policy for having it in place for 5 years and also good driver discount, at which point it seems that they decided they wanted to compensate for that discount by charging me a monthly service fee for paying with Debit. There is no fee for EFT but paying with Debit has a big fee each month. So all of a sudden, they are saying that my EFT is being declined by the bank. The bank has stated over and over again that there is no block and they are not doing anything to prevent the EFT from going through. The customer's only solution is to pay with debit, which, as stated, has a pretty big fee attached to it. The service charges from paying with debit each month is like 30% of the cost of the policy! Apparently this is how they reward people who actually know how to drive and have never recieved a ticket or been in an accident. Seems a guy who had a similar situation with an internet service provider was able to dig deeper and found that the ISP was submitting blank EFT requests with no amount, which is what was causing them to be declined. I'm already working with the Attorney General in my state on the issue, and its quite possible that this will be turned into a class action lawsuit. Any thoughts or insights are appreciated.

#7 disabled4life

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Posted 22 December 2012 - 10:55 AM

What I want to know is what would be the steps for getting a subpoena for obtaining those EFT requests from the bank. I assume that I would have to file a case first and then show cause. Anyway all of this is a hell of a lot easier said than done. Its too bad crooks have such an awful process to hide behind. Seems to me that all of this should be able to be done from my computer. Instead, I have to drive across town, pay for parking, pay filing fees, stand in lines. Thats why people get away with this type of stuff. Its like one big business.. downtown and the courts. Justice really has nothing to do with it.

#8 Tax_Counsel

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Posted 22 December 2012 - 04:05 PM

What I want to know is what would be the steps for getting a subpoena for obtaining those EFT requests from the bank. I assume that I would have to file a case first and then show cause.


You’d first need to sue the auto insurance company. From there, the process to issue the subpoena to the bank depends on the civil procedure rules that apply to the court in which the suit is filed. As you didn't indicate a state, no one can tell you exactly what you need to do.


Seems to me that all of this should be able to be done from my computer. Instead, I have to drive across town, pay for parking, pay filing fees, stand in lines. Thats why people get away with this type of stuff. Its like one big business.. downtown and the courts. Justice really has nothing to do with it.


Much of what is done in lawsuits today can be done by computer, at least by lawyers, though that varies by court. Nearly everything I file with the Tax Court and the courts of my state are done electronically, for example. Understand, though, that the rules are designed to have a certain degree of safeguards to ensure the process doesn't get abused. For example, we don't want people able to send out subpoenas all over the place when they have no real business sending them out — that’s a waste of the recipient’s time, and ultimately the court’s time as well. It has always been, true, too that the law and court rules lag behind technology. It takes time to see the impact of technology and how it can be used before it becomes clear what changes ought to be made.

#9 Assignor

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Posted 27 December 2012 - 05:09 PM

I went through similar with a few other companies. I too do NOT allow automatic debit, I individually pay each month online. and in some cases use my bank's billpay function to send recurring payments.

What I found with each instance of "decline" was that when, even in my manual pay process, I would click to pay using a card onfile on their website. Not manually enter full card info each time. But since at some point a credit/debit card reaches the expiration date it gets declined until I realize the problem and edit my registered card with the expiration date on the new card I've been sent. So each of those failures were 'my fault" for failing to have accurate payment information on file when I clicked "submit"

#10 disabled4life

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Posted 28 December 2012 - 09:38 AM

I think its a bit different in this instance. I have been working with customer support on both sides.. the bank and the insurance company to find out what is causing it to be declined. And still no one can figure it out. All the information has been confirmed several times. It sounds to me like they simply want the additional revenue that comes from paying with debit. Currently the fees from paying with debit over a 6 month policy equates to almost 30% of the price of the policy. If they don't want to allow me to pay with EFT, I don't have a problem with that. What I have a problem with is the insurance company submitting a blank EFT extraction request or not submitting one at all and then putting a declined by bank charge of $30 on my account and then acting like they don't know why it was declined. That, to me, equates to fraud. The bank has stated over and over again that the information is correct and that they aren't doing anything to prevent the extraction from going through.

#11 topenddave

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Posted 10 February 2013 - 07:02 PM

While I do not recall the specific "USC" or "section" numbers therein, the Board of Governors of the Federal Reserve Board administers the Electronic Funds Transfer Act which applies to cases such as yours. All you need do is contact your bank, mention the act, and request a claim form. So long as you act within 60 days of THE DATE OF THE STATEMENT (from the bank) which contained the error, the bank has ten (10) days to investigate, or should it need more time it may take up to 45 days BUT it must deposit the amount in question to your account pending conclusion of the investigation. Some people think this "law" covers only transactions conducted online, but in fact it also applies to ATM, direct deposit, and recuring (monthly) debits. So long as you talk to the vendor, in your case the insurance company and respond in writing to a written bank request for details, you can just get out of the middle of the dispute and let them fight it out. And if you demand it the bank must "reverse" any and all fees it charged you due to its or the insurance company's errors. I am NOT an expert in this field BUT I am seventeen and zereo (17&0) since 2009 in filing claims under this act.

#12 disabled4life

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Posted 14 February 2013 - 10:22 PM

Its currently being investigated by the California Dept of Insurance. My only problem is if someone in their billing department is in fact submitting blank EFT requests in order to make it come back declined to then force a customer into paying with Debit, thus causing the additional fees. The only way this could ever be proved is if we are able to get those EFT requests from the bank and compare them with ones that were not declined. Hopefully something will come of it, either increased regulation or actually finding out what was causing it to be declined. Its not right that a customer should have to go through what I and many others have gone through, especially if its someone in their billing department who is just rigging it so they can collect more fees thinking there is no way that they will be caught.




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