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Charlie Webb didn't think he had anything to worry about.
Although he was out of a job at Gateway Blood Association, a Maryland Heights blood bank that ceased operations on July 26, Webb still had his final paycheck that was electronically deposited in his Bank of America checking account on July 31. On August 1, he withdrew $730. Three days later, his ex-wife cashed a child-support check, leaving Webb with a balance of less than $10. He deposited $114 to pay gas and electric bills on August 5.
Then Paychex, the payroll company that deposited Webb's $805 paycheck into his account, asked Bank of America to return the money. And the bank did, even though Webb didn't have nearly that much money in his account. His checks to AmerenUE and Laclede Gas bounced, although the bank eventually waived overdraft fees and honored at least one of the checks. But Webb remains more than $800 in the red, and Bank of America says he must come up with the money.
The bank has offered to set up a payment plan, but that's not good enough for Webb, who wonders how he can be forced to repay wages that were taken out of his account without his knowledge or permission. He says bank officials have told him that he could be referred to a collection agency if he doesn't pay.
"What pisses me off is, I gave them my money to protect my money," Webb says. "That's why we have banks: To protect money. I think someone made a bad decision and they don't want to take responsibility."
Diane Wagner, Bank of America spokeswoman, says she sympathizes, but the bank has no choice. If Webb doesn't pay, the bank will be out the $805 it returned to Paychex.
"Unfortunately, he is responsible for the cost of those outstanding payments," Wagner says. "The bank would love to be able to pick that up, but we can't because we'd have to do it for everybody."
Webb had less than $125 in his account when Bank of America gave the money back to Paychex, leaving him with a negative balance of nearly $700. Wagner says Bank of America doesn't usually go that far in the hole for a customer who lives paycheck-to-paycheck, and she can't explain why it did in this case.
"We don't typically do that," she says. "So that's why we're trying to work out an amenable means to make sure this gets corrected, both for him and the bank. Obviously, we do have to recoup those overdrafts on the account. I don't think it's a matter of going after him. I think we want to work with him."
Paychex, which paid employees on the premise that it would be reimbursed from Gateway accounts, rescinded direct deposits after Commercial Bank, Gateway's bank, seized the blood bank's accounts, leaving no money for the payroll company, says Dr. William V. Miller, Gateway's chief executive officer. Gateway was heavily in debt to Commercial Bank, Miller says, and the bank had liens against the accounts.
"The liens are a normal way that banks cover themselves should the person to whom they're loaning money default," Miller says. "We had not defaulted, but because we gave notice that we were suspending operations -- and at that point, we were really intending to suspend operations until we could find additional capital -- we went ahead and authorized the payroll. We authorized the payroll based on the fact that we had sufficient funds to pay the employees. We did not expect the bank to seize our accounts. They [Commercial Bank] indicated to us that their entire net profit last year was around $70,000, which was the amount of the payroll. They felt, as a very small bank, that they were putting their owners or shareholders or whoever they are at that particular bank at risk by not seizing every nickel they could get. I don't happen to agree with that, but that's the choice they made."
Commercial Bank officials refused comment. Paychex did not return a phone call.
A spokesman for the National Automated Clearing House Association, a group of banks and credit unions that sets rules for direct-deposit transactions, says it doesn't appear that reversals of direct deposits were appropriate in this case.
"Essentially, direct deposits can be reversed only under very limited circumstances and only to correct errors that have been made," Michael Herd says. For example, issuing two paychecks instead of one or misplacing a decimal point are legitimate grounds for rescinding a direct deposit.
"They cannot be reversed simply because someone is low or someone is running out of money," Herd says. "If you actually receive funds by direct deposit, the rules that I'm describing to you prevent the money from being taken out of your account, whereas, if you attempt to cash a paycheck, the company can put a stop-payment on that check just as you can put a stop-payment on a check that you write. We had almost four billion direct deposits last year. We hear about a situation like this about once a year."
NACHA has a system to enforce the rules, but the organization can't do anything unless it receives a formal complaint. In Webb's case, Herd suggests that Bank of America file a complaint against the bank that requested the reversal.