Monday, February 09, 2009

An ACH Tale of Woe

My so-called friends Vlad and Erick have been poking me with a stick to go public regarding an incident that happened last week.

You may have heard that a small bank called Alliance went belly-up last week and was taken over by the FDIC.

Oddly enough, I'd never heard of this bank until the day before. And I didn't hear about them on the news.

If you have direct deposit for you employees' paychecks, take heed.

We ran our regular payroll to pay our people on the 5th (Thursday). As scheduled, the funds were withdrawn from our account on the 4th. All good so far.

This was done via an ACH - Automated Clearing House - electronic transaction.

But the funds were never deposited into our employees' bank accounts.

The official word from our payroll company is that their service provider (Alliance) was having a dispute with Bank of America. That didn't involve us. We weren't a party. So, to be honest, we didn't care. Except that we wanted our money back!

I personally spent almost four hours at our bank, and running back and forth between my office and the bank, trying to get them to reverse the ACH transfer.

Terminology terminology terminology.

Turns out we couldn't reverse the transfer because we had previously authorized these folks to take money from our account and they had done so without question or dispute.

"Okay, we can't reverse. Please insert whatever words you need right here so I can get my money back."

So we then attempted to un-authorize the transfer. That's a very time sensitive activity. If you successfully un-authorize a transaction before a certain batch time, you get your money back within 24-48 hours. If you are not successful, then they have 60 days to settle the transaction.

I don't know about you, but I don't keep that much cash in the bank waiting for quick withdrawal. (I keep it in the stock market where it's totally safe and secure. :-0 )

For us, success meant paying our employees in a timely manner. Failure meant that we would have to liquidate an investment, wait for it to settle, and then transfer funds. In other words, we would have to delay payday by about ten days.

What we didn't know is that failure meant something much worse.

The Loser Bank that was having a "dispute" was actually Alliance. And they weren't have a dispute. That was a bald-faced lie in order to accumulate as much money as possible before going out of business.

Failure to get the transaction un-authorized would mean that our funds would be tied up in a bank take-over. FDIC insurance? No good: We're not a customer of Alliance bank. We don't have funds on deposit to be insured. In fact, I'd never heard of them before.

That means money like ours will just sit in banker purgatory until hell freezes over.

Luckily, we successfully un-authorized the transfer. I actually got a call from my bank agent at 5:50 PM.

The next day, we hand-wrote payroll checks for our employees. We still have to settle the tax payments.

We dodged a bullet, and I lost half a day of work.

- - - - -

Are there lessons to be learned? Of course.

Lesson One: No one is immune. We deal with a big Bank. We had money in the bank. We didn't do anything wrong.

Lesson Two: You need to know who is handling your money. If you send or receive payments for anything via ACH, you should check into the solvency of every organization that touches that money.

We've all seen what happens when companies go bankrupt. They'll take orders -- and money -- up to the minute they file for bankruptcy, knowing that they're stealing someone's money.

If someone is moving money to or from your bank account, and that money suddenly disappears, you need a plan.

Better yet, find another way to pay or receive payment if you find a troubled bank in the middle.

You COULD write them a letter and ask what would happen if they were holding your money when their company went belly-up, but they would lie to your face.

Lesson Three: We are either AT the bottom of the economic turnmoil, or VERY CLOSE to the bottom. How do I know that? Well, Erick and Vlad give me a bad time because I'm always looking on the bright side. And if an optimist like me begins to lose faith in the fundamental system for moving money around between institutions in our economy, it better be the bottom.

We were lucky this time.

We've already changed payroll services.

Yeah, Bank of America is in trouble. But the business man in me is happy to report that they're "Too big to fail."

Unfortunately, the tax payer in me doesn't want to pay for that AND lose my next payroll.



  1. We've moved to Pechanga payroll service - wampum is insulated from economic upheaval...;-)

  2. Welcome to the recession...

  3. I was under the impression that we're transitioning to the fisting compensation plan?


  4. Why is it so hard to find an official press release on this topic?
    ...Smoke and Mirrors....


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