Thursday, February 12, 2009
Why You Maybe Shouldn't Take That Brochure The Bank Has Sitting Out.
Here's a question for you: What rules apply to your bank accounts?
Do you know?
Do you need to know?
Would you be better off if you didn't know?
Ask Sandra Roney about that. Sandra Roney is a wedding photographer who in 2006 received an email hiring her. The customer sent Roney a check for $7,400 -- which was more than double the actual $3,159 fee that Roney was going to charge for the package. The customer then told Roney that the check had been erroneously sent and asked that she refund the difference to her.
That, by the way, was a scam. It's the "419" scam that's so popular: Someone sends a cashier's check for more than you were expecting, and then asks you to refund the difference. The cashier's check is, in the scam, bogus, and if you try to deposit it, it will bounce -- by which time you'll have sent the money to the scammer and you'll be out the money, plus probably overdrawn.
Roney wasn't so dumb, though. She took the check to her bank, Associated Banc-Corp., and asked them whether it was good, and they said it was. In fact, they told her three times it was good. So Roney deposited the check in her business account and sent the requested refund to her scam-artist/customer.
The check was not good, and Roney's account became overdrawn when the check was dishonored. That left Roney unable to run her business adequately-- specifically, she couldn't pay for some of the advertising that she'd had in the past, and she lost profits. Associated Bank began bouncing Roney's other checks and charging her overdraft fees.
Then the Bank sued Roney -- remember that, when you think about whether you should be loyal to your bank-- for the overdrafts and fees.
Roney countersued the Bank, claiming that she'd been the victim of their misrepresentations. (Misrepresentations are what laypeople call "lies.")
Associated Bank's theory was that Roney had breached the Bank's account rules by depositing the check (even though they told Roney the check was valid.) Roney said she didn't know about the rules the Bank was claiming applied, and the Bank pointed out that the rules were freely available to her.
Roney was right, and the Bank was wrong. The law says that a contract, including a contract between a Bank and a depositor setting up a bank account, includes only those terms that both parties agree on, and for both parties to agree on terms to a contract, it has to be shown that both knew about the terms. Put more simply, the law says that the Bank had to prove it told Roney about the rules it claimed she violated, and the Bank didn't do that.
That meant that Roney's path was cleared to continue suing the Bank for the losses she incurred as the victim of the 419 scam, as well as losses to her business when checks began bouncing.
There's a whole lot more to the case than that. (There usually is.) If you'd like to read the entire Court of Appeals' decision, you can do so here. (Keep in mind that this decision is unpublished. In Wisconsin, that means that you can talk about it anywhere but in Court.)
But there are a couple of lessons to be learned here:
First, it would probably still be better to know the rules of your bank account. Those brochures and mailings they send you (and the same kinds of things sent to you by your mortgage lender and credit card companies) are boring and in small type but they're important. Knowing is always better than not knowing.
Second, ask for advice. In my opinion, one thing that helped Roney was that she first asked the Bank if the check was any good.
Third, wait for the check to clear next time.
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