I am back to random subjects. This one happens to be on finance and I have discussed it before. Apparently not everyone was listening.
My favorite daughter Debs had auto insurance with American Family back in 2002 when she owned that prestigious Dodge Ram that was always in the garage with transmission problems. She fought the Dodge dealership armed with the "lemon law" argument. She won her case! The Dodge was returned and Debs cancelled her auto (truck) insurance. Insurance payments had been on a month to month basis.
It is now 2005 and Debs went to insure a new vehicle, again with American Family Insurance. Again, she agreed to a monthly insurance premium with authorization to deduct the payment electronically from her checking account. You can almost see this one coming!
Debs got her monthly statement for her checking account and she was $300 short. It was not an error in addition or subtraction. What could it be?
It turns out that American Family never cancelled Debs insurance back in 2002 and kept it on their books as bad debt. When Debs authorized direct electronic access to her account, American Family not only deducted the one month payment for the new car but 4-5 months of payments that should have been cancelled in 2002. Scary!
I have discussed the electronic world in the past. Everyone wants direct access to your money with claims of benefits. Save stamps! Get to use your money right up to the date of payment! Never any late fee! It is the electric company, the gas company, the telephone company, insurance agents and mortgage companies all reassuring you that your life will be better if you authorized automatic payment. My position on direct access to your checking account or savings account is an unabashed, "don't do it". I know there are exceptions but why would you open you wallet and say "take whatever you need". It is your money and you should decide when they get paid and how much.
So the Debs saga continued after she consulted her financial consultant (me). She contacted her friendly bank and retold the story. The bank said she had 60 days to file a form indicating that the money deducted was not authorized. They immediately redeposited the $300 into her account electronically reversing the American Family charge. In addition, she was asked to file "fraud" charges back against American Family.
Apparently there are laws protecting consumers against unauthorized charges made electronically against your account.
So far the story ends happily and Debs is busy spending her returned $300. I think American Family has up to 60 days to pull off some legal manipulation to challenge the "fraud" charge but my guess is that the whole matter will be forgotten.
In case you haven't got the message - "Don't give automatic electronic access to your money".
Love,
Dad