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Example Of An Overdraft Gotcha

Monday, September 13, 2010 - 4:50 AM
If you keep a low balance in an active checking account, it's very easy to overdraft due to how holds can be placed on your account. A Clark Howard forum member describes how she was hit with $245 in NSF fees due to a $150 hold by Verizon.

This reply from member Mom of one provides a good overview of how holds can be placed on your checking account:
While Verizon may claim to have deducted the amount immediately, that's not really true. They actually ping your account to make sure the funds are there - that creates the hold. They can place the hold for more money than you owe - at their discretion, not the bank's. That hold is not removed until after the debit is actually processed. Sometimes, the vendor does not have the hold removed immediately since they send those to the banks in batches. NONE of this is controlled by the banks.

Ken TuminKen Tumin5,471 posts since
Nov 29, 2009
Rep Points: 125,634
1. Monday, September 13, 2010 - 10:12 AM
Well, this certainly is something we need to enact a specific law to bar. 

Actually, though, I would think there already is legal protection against this. Usually this is done for something like bill paying. Under such an agreement, YOU give the creditor authority to access your account to take out a specific amount of money -- and that is all that you authorize. I have never seen any agreement in which you authorize them to put a hold on your account for more than the amount agreed to be paid; that would go beyond the authority granted. I know of no law allowing them to do anything with your account other than what you agreed to, and if you did not agree that they can put a hold on your account for more than the agreed payment, then they are acting outside the authority they have and I would think are liable accordingly. But of course, you would have to pay a lawyer a lot of money to enforce this.

I do not now how widespread this practice is, but I have been using automatic bill paying for many, many years and have never had such a problem. Of course, I have no business dealings with Verizon.

Verizon seems to be the problem here, not the bank. 
me1004me1004373 posts since
Jan 16, 2010
Rep Points: 2,597
2. Monday, September 13, 2010 - 12:02 PM
Remember that you can always "OPT OUT" from overdraft protection. Call your bank and request that this "benefit" be removed.
TicoTico2 posts since
Sep 13, 2010
Rep Points: 4
3. Tuesday, September 14, 2010 - 9:53 AM
Tico: that wasn't the issue here. The issue was that checks were bounced because Verizon took action that put a hold on funds to which it was not entitled.
me1004me1004373 posts since
Jan 16, 2010
Rep Points: 2,597