Your money does not belong to you

Posted: Monday, October 19, 2009

In September, I was on a long road trip. I was also pretty low on funds, but as evening came in Virginia, I was getting drowsy. No way I'd make it to Connecticut that night. I made some quick calculations and decided I could just afford a cheap motel room. I pulled off the highway.

What happened in the following days will be familiar to many readers. I paid for my room with my debit card. When I returned home, despite the fact that the room was paid for and I had a balance in my account, I found that my account had been charged insufficient funds fees for a bunch of subsequent transactions and a couple of checks.

When I called my credit union, I was told that the motel had put a hold on my account -- in an amount larger than the charge for the room -- that would not be lifted for 10 days.

What amazed me even more: The motel wasn't the only merchant that had reached into my account in this way. There were several holds on the account from gas stations, and even from a supermarket where I'd bought some food along the way. The result: $175 in fees. Ouch.

Sen. Chris Dodd, D-Conn., has written legislation that would stop these fees from being assessed if they're associated with holds on accounts. Thank you, senator. But after I discovered that any merchant could put a hold on my bank account (a Kroger store, for crying out loud), I started to wonder: Who sets the rules for this practice?

Guess what? No government agency controls it. There are no laws governing it.

When you hand over your debit card to any merchant, they can reach into your bank account and freeze your funds. How much? For how long? However much they like. As long as they like. Who decides? The card networks. That means the folks at Visa and MasterCard.

It's kind of understandable, perhaps, that car rental companies and hotels might put very short-term holds on credit cards and debit card holders' bank accounts to protect themselves in case someone overstays their reservation or drives farther than they predicted. But for 10 days after they've already been paid? For twice the amount of the bill?

I talked to people on Dodd's Senate banking committee staff, and they directed me to the Federal Reserve. The Federal Reserve did not want to talk about it. The best answer I could get, from an aide on the banking committee, was that there is no government regulation of this practice.

Are you listening? Any merchant can reach into your bank account and deny you access to your own money, and no government agency can stop them.

Banks don't necessarily have to go along with this. But then again the banks, faced with lean times, are finding a great way to make those lean times pay for them: insufficient funds fees they can charge when there's a hold on your account.

Once again, poor people - or just-getting-by people - are keeping the banks afloat. Perhaps we should feel grateful that we're playing such a crucial role in this wonky economy.

One young woman I know, who can ill afford it, told me her family had lost more than $1,000 this way over the past year. She has to travel for her job. She has to rent cars and stay in hotels.

And now that I find that even grocery stores can do this, where are the limits?

It's the Wild West out there, folks. You thought that money in your bank account belonged to you? Not so fast.

Essentially, unsuspecting account holders are being coerced into making millions of no-interest loans every day: Your money is not available to you, though it is still available to the bank and to the merchant.

If Dodd's legislation succeeds, at least the banks will be stopped from charging those nasty fees when the hold on your account sends it into the red. But the bigger question remains: Why do merchants have the power to do as they please with your account? Why is this activity totally unregulated?

The banking committee aide I spoke to promised me that Dodd would be looking into this.

Look hard, senator. Look hard.

• Susanna Rodell is a journalist, consultant and a former member of The Courant's editorial board.



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