AutoWithdrawals – A corporate theft scheme unmasked

 

(Part 6 of my UnCommon Sense Series of rarely offered information, opinions, and articles.)

 

My busy lifestyle takes huge advantage of auto-withdrawal for bill payments.  Little did I realise how much those corporations manipulate their systems to take advantage of me.

 

On the face of it, the system seems quite convenient, saving you time and postage (and possible interest charges).  You send a void cheque or credit card information to a large corporation that would be sending you a monthly bill for some service, and instead of you paying your bill every month, the corporation is authorized by you to automatically withdraw the amount owing from your bank account (or bill it to your credit card) on the bill due date.  No postage, no remembering to pay, no interest (if the system is set to pay the balance in full).  There are typically two caveats for most people who choose this convenience:

  1. You have to check your bill at some point to ensure that the charges are correct for your usage (or whatever).
     

  2. If it's coming out of your bank account, you have to track your balance well enough to be sure that sufficient funds are available.

Since the corporation is guaranteed payment on-time in-full, all kinds of companies encourage the use of auto-withdrawals, including utilities (hydro, cable, natural gas), telecommunications, alarm services, and more.  But there is another more insidious reason that they love it when you sign up.  It's called THEFT.

 

WHAT THEY REALLY DO

 

The real payoff for them is when you close your account, end the service, or terminate that relationship in some way. The basic concept is that AFTER you close your account, they continue to bill you.  (How they do this varies from company to company - I'll get into more details below.)  To keep things technically legal, they then credit you on their system for the amount that you were overcharged.  Their profit comes from either (a) holding on to these funds for an inordinate amount of time before sending you a cheque (the old 6 to 8 weeks ploy), or (b) simply keeping the credit on file until you specifically ask for it.  If you don't know you have to do that, they simply pocket it after a legal waiting time.  Theft, pure and simple.

 

HOW IT WORKS

 

I have experienced this in person with two companies: a phone service supplier and a hydroelectric utility.  I have also spoken with a former executive of an alarm service provider who was shocked to learn of this scam deliberately perpetrated on a large scale himself while working for the perpetrator.  Each of the three illustrate a different style of corporate theft:

 

The Two-different-systems Scam

 

Knowing that I was going to be moving, I cancelled my account with Bell Canada, my residential phone service provider.  They assured me that the line would be disconnected on the date of my move, as requested.  They also requested a forwarding address for the final bill, which I supplied.

 

A week or two after my move, I received a final bill for the portion of the month that my service was active (about half the usual, since I moved mid-month).  It showed that my service had been terminated.  I noted that the usual place where it indicated the date and amount of the auto-withdrawal was not there.  In other words, the clear implication was: We have also ended your auto withdrawal plan - please send your final balance in the envelope provided.

 

Fortunately, before I sent in the amount requested, I happened to look at my bank balance on-line.  Imagine my surprise when I saw that the phone company had withdrawn the amount for a full month (double what I owed), and had done so before the due date!

 

A few weeks later, I received yet another final bill, showing that they had made an automatic withdrawal in excess of what I owed, and showing a negative balance (credit) on my account.  When I called to inquire about this questionable behaviour, I was told that when they had terminated my service, they had not terminated my auto-withdrawal.  "That's in another system, so it might not get closed until much later", I was told.  "Bull shit", say I.  "When you close my account, your computer can also close my auto-withdrawal, unless your policy and procedures specifically keep it open in order to extract my money."

 

The end result is that I was informed that their accounting department would cut me a cheque for the difference but that it might take 4-6 weeks.  (I have no idea if this would have happened, had I not called - see below).  The old 4-to-6-weeks scam in itself is a long recognized chestnut of corporate theft, used for mail-in rebates and the like.  It is based on the maximum time they figure they can have the gall to quote you, as well as the amount of time in which we might forget about it altogether.

 

 

The Rushed-Inflated-Estimate Scam

 

In regards to the same move described above, I cancelled my two accounts (double meters) with Toronto Hydro, my electric utility service provider.  They assured me that the meter would be read on the closing date of my sold house, as requested.  They also requested a forwarding address for the final bill, which I supplied.

 

A week or two after my move, I received a final bill for the portion of the month that my service was active (about half the usual, since I moved mid-month).  The bill was higher than I would have expected, but the bill clearly indicated that the reading was Actual, not Estimated, and was performed on the date of my house closing.  As expected, the full amount was automatically withdrawn on the due date.

 

A month later, I received an intriguing bill from Toronto Hydro.  It showed a much lower meter reading for the same date as the previous bill, also clearly marked as Actual.  In other words, I have two 'Actual' readings for the same date with two widely different results.  A duplicate situation was indicated for my other meter, the end result being a large credit on both accounts.  Needless to say, I was curious to hear their explanation for this.  After several phone calls, I got a number of interesting quotes from three different representatives:

"If we feel we have enough data on your account, we will do an estimate but we label it on your bill as 'Actual'."

 

"We are only issuing this credit because the difference was so much.  Normally we would not bother to even let you know of any discrepancy."  [Unless it was an amount owing, I'm willing to bet.]

 

"We did a reading a few weeks later and noted that it was dramatically lower, so we did another estimate back to your closing date, and also labelled that one as an 'Actual' reading."

The bottom line:  Often when we do an Estimate of your usage, we lie (in writing) and tell you that your bill is for an "Actual Reading".  You have no indication on your bill as to when the amount is legitimate or fabricated by us from our 'data'.

 

But wait - it gets better.  The utility company had another ploy up its sleeve...

 

The You-Never-Asked-Us-For-What-We-Stole Scam

 

The end result of the above debacle with my utility was that there was a credit balance on my account.  They owed me money.  Money that their system withdrew knowing that I did not owe it in the first place.  Their last correspondence with me indicated that this credit would be applied to my next bill.  What next bill?  I have moved cities; I have no account with them anymore.  I called the utility...

Representative: "Would you like us to send you a cheque?  I can request that one be sent to you."

 

Poor sucker: "Yes, absolutely.  You have to request this?  What if I hadn't called you?"

 

Representative: "Then it would remain as a credit in your account."  [Until sufficient time passes that we may legally pocket it, no doubt!]

 

Poor sucker: "Why is a cheque not simply sent to my forwarding address which is not in Toronto?"

 

Representative: "We don't always get a forwarding address"  [Even though in this case they obviously did, since the bill was sent there.  Would they have left an amount owing just sitting on my account?  I think not.]

I was later told by my former alarm service management colleague that this scam of "keep it until they ask for it, and if they don't, it's ours" is quite common and intentionally set up to increase cash reserves and revenue.  Theft.

 

 

HOW YOU CAN KEEP YOUR MONEY SAFE

 

The solution is simple.  When you know you are moving or wish to terminate your service, CANCEL the auto-withdrawal plan FIRST - a month or more in advance if possible.  Then don't pay a cent until you have what you KNOW to be the correct or final bill for the services you actually used.

 

 

The foregoing is my opinion.  You can send me yours by clicking here.

 

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