WHAT YOUR BANKER HAS NOT SHARED WITH YOU
The longer title to the within article/presentation is ‘What your banker has not shared with you regarding your signature card in either your personal bank account or your business bank account’
General Rule is that when you open a checking account (business or personal) as part of the opening process, you as the owner of the account sign a ‘signature card’.
(1) So, what is the general understanding of most persons when asked ?
(1a) what is it that the bank uses those signature cards for?
ANSWER: In a very random sampling (which might be different depending upon the group being sampled, but we guess not much different) it is not only the author of this articles understanding, but nearly one hundred percent of the people asked believed that the bank seeks the signature card in order to ‘have it on file – to use it to check random samplings of checks that are being processed through either your personal or business checking account”;
(2) Agree, or disagree?
If you disagree, then please tell me what you understand is the reason the banks have you sign the signature card;
There might be some bankers in the reading crowd on this blog, and if so, then of course as a banker they would know that your signing of the ‘signature card, is not only for use in cross comparing signatures on checks processed through your account, but also to confirm the contract for services on your bank account.
Well, also in probably 99% of the cases you have agreed by signing the signature card to use the banks services subject to their disclosure statements which you agree were given to you even if they never were given to you; (pretty standard contract of adhesion) ;
Unquestionably, the ‘disclosure statement’ , discloses to you (assuming you received one and assuming you read it) that you understand that the bank no longer processes the checks through your account or anyone else’s who does business with the bank , by hand, and that the bank uses a bulk processing system either internally or externally.
Q- Most likely, the term ‘bulk processing’ is not defined in the signature card;
Q- but you have agreed to that type of processing of your checks which essentially means what?
A- That there is no hand processing but rather the checks and or their digital images are sent to a processing company , who processes the checks and confirms the
debits and credits to the particular account;
Further, most banks have some type of ‘filtering system’ on their ‘bulk processing’, but depending upon the size of the checks, i.e. the amount they are written for, and assuming that your checks on your account are for more than your bank’s filter setting, it is highly unlikely that there will be any review whatsoever of the checks processed through your account.
Smaller Community Banks , might have a ‘filter’ regarding all checks written for an amount over $2500.; however larger banks such as Bank of America or Wells Fargo will very likely have a ‘filter’ at a much higher level of say for instance $25,000.
SO WHO REALLY CARES? AND WHAT IS THIS ALL ABOUT ANYWAY?
Well , you will care when and if there are fraudulent endorsements and or other fraud through unauthorized signings of checks by unauthorized persons, eg. Embezzlement, impacting your personal or business account and now you are missing , several hundred, several thousand , or several hundreds of thousands from your personal and or banking account; further, this is especially heinous when you consider that the bulk of forgeries, embezzlements and fraudulent endorsements could be detected and eradicated by use of one of these ‘positive pay’ systems.
Again, there is absolutely no uniformity according to my banking sources in what determines what level of check dollar amount will be subject to possible individualized review.
So, the banks as a whole don’t have a standard amount, or standard criteria which will set off the alerts on the filtering systems that are used either by the banks internally , if they ‘bulk process’ internally, or any standard criteria which are used by these bulk processing companies who service all of the various banks in the United States on an outsourcing basis. In sum, without one of these programs in place the consumer (all of us out there in the public) will be subject to the vagaries of the dollar limits that each bank individually crafts for its’ customers- and to the degree the fraud/ embezzlement, unauthorized signatures, forgeries occur under those arbitrary dollar amounts, you are SOL—that is a legally term many (sorry out of luck- or something like that).
POSITIVE PAY SYSTEMS AND WHY YOU SHOULD USE ONE—
On the same subject, and something that should be disclosed and offered by customer banks to their customers, is a concept known by different names, but among one name in particular a, ‘positive pay’ program.
Banks in general, at least customer banks (according to my sources) have a concept that the bank personnel are to ‘know their customer’;
The problem of course is that although most banks have a ‘know your customer’rule and software program meeting the ‘positive pay’ criteria, the banks, do not as a general rule actively solicit the customers to use it.
Why is that ?
Well , although the banks charge a small bit extra for this service, it involves a great deal of time and service, and the banks are not , apparently, that interested in calling this item to the attention of the customers, as it creates more work and not a proportionate amount of profit ( this dogma is according to our sources).
The upshot of a ‘positive pay’ system, ( and there are many different types) , is that the customer can designate a list of vendors/ payees of checks that occur monthly , the likely amounts and such; and then the program will not process checks that fall outside of those designations;
Or similarly , as checks come in the bank can send the customer a listing of the checks/ payees and the amounts, and then ask the customer to clear them or deny them, as part of the same type of clearance system/software.
Obviously, this takes time on both the customers part as well as the banks.
So, at a minimum all banks ought to be required to have these systems and to offer them to their customers, eventhough it will be at a cost to the customer, and take time of the bank personnel, as it will be an incredible stop gap measure that more often than not will block most type of ‘fraudulent endorsement’ and or ‘unauthorized signing’ of checks, as with the lists at hand, either before or after , there must be a cognitive review and cross check as checks are clearing the system.
If the bank has this system, and they offer it to their customer who refuses it, then the customer is on their own and has ASSUMED THE RISK.
The biggest problem is that most of the time , from what we understand from our banking sources, because of the extra cost and the extra time it takes the bank, without the bank making an appreciable profit, the program is not offered, or if offered not appropriately recommended.
And if you have it offered, and then somehow, or for some reason you have happened to not check your monthly statement for a few months-But you have implemented and followed through on a ‘positive pay’ software program, regardless of the reason, then with this system in place you will most likely be protected from these fraudulent activities.
Of course, regardless of whether you have the system or not, most banking documents (disclosure statements/ agreements) tell you , in the small print, that if you don’t report irregularities within 30 days you are of luck and have no recourse- BUT if you have ‘positive pay’ in place, and properly use it, most ‘FOUL’ activity will be alerted and caught.
Thus , generally regardless of your circumstances , ill, out of the country, if you have not used ‘positive pay’ to help identify these different forms of fraud, and then coupled with that you have inadvertently failed to check your monthly bank statements, you will simply be OUT OF LUCK AGAINST THE BANK AND WITH NO RECOURSE !!!!!!
(regardless of the amount in your account, etc. you should without question talk to your business banker and or your personal banker to explore the possibility of having his type of system coupled with your electronic banking system.
CONCLUSION— Banks should be required to offer these types of system to every customer no matter how large or small of an account; BANKS should be held accountable to a REAL DISCLOSURE AND EXPLANATION OF THE SAME;
FURTHER BASED UPON THE ‘KNOW YOUR CUSTOMER’ DOCTRINE BANKS SHOULD BE HELD ACCOUNTABLE AS HAVING VIOLATED THE DUTY OF DUE CARE IF THESE SYSTEMS ARE NOT OFFERED TO THEIR CUSTOMERS—
IN FACT, GIVEN THE CURRENT STATE OF IDENTITY THEFT AND ALL OF THE HACKING PROBLEMS WITH MANY DIFFERENT TYPE OF COMPUTER ACCOUNTS- /BANKING AND OTHERWISE-A QUESTION ARISES AS TO WHETHER OR NOT THESE TYPE OF SYSTEMS OUGHT TO SIMPLY BE MANDATORY?
WHEN BANKS BECOME AWARE OF PARTICULAR VULNERABILITIES OF CERTAIN CUSTOMERS- THROUGH ‘KNOW YOUR CUSTOMER RULES’ ; AGE/ SICKNESS/ SMALL STAFF/ LARGE VOLUME OF CHECKS AND OR FUNDS/ THERE SHOULD BE A HEIGHTENED DUTY OF DUE CARE—
Although the banks cannot be forced by law to have their customers implement these systems and pay for it, their failure to disclose the same to customers and either have them sign off or WAIVE ANY POSSIBLE CLAIM THAT COULD HAVE BEEN DISCOVERED BY THE POSIVE PAY SYSTEM–
AND FAILING THE SAME , THE BANKS—(see below) –
SHOULD BE SHARING RESPONSIBILITY FOR A MAJOR PORTION OF THE DAMAGES THAT COULD HAVE BEEN AVOIDED BY THE IMPLEMENTATION OF SUCH A PROGRAM,//
Steven H Wilhelm
© Steven H. Wilhelm APC 2015