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The Long Shadow of Checks

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Re: The Long Shadow of Checks

#101

Post by toast0 »

lxgr wrote: post #90
e63f67dd-065b wrote: post #4

I'm continually surprised by the political influence held by the thousands of tiny banks in the country. I must applaud the people behind the Check 21 Act: it's the combination of a neat backwards compatibility trick (if you want paper, we'll print it and send it to you) and political maneuvering that I must admire it. > Since the standard U.S. bank account is a checking account, even if it cannot write checks, it is…

I also don't understand that part. Why is it not possible for a bank to just always decline payment for checks drawn on overdrawn accounts as a matter of policy? The other, and probably more relevant, credit aspect of checking accounts is depositing a check which might bounce (due to an overdrawn account) – but that also seems avoidable by just making checks available as late as legally allowed (i.e. on the second bu…

> but that also seems avoidable by just making checks available as late as legally allowed (i.e. on the second business day after deposit as far as I understand)?

But checks can bounce much later than that. When the originating bank demands the money back, you'll have to ask the customer for it back if they've already taken it out.

Re: The Long Shadow of Checks

#102

Post by toast0 »

drsopp wrote: post #99
astrange wrote: post #75

Earlier quoted context omitted.

You could sell a picture of it to someone in the US.

Don't you need an ID matching the payee to cash it? Anyway, it's expired now.

If you cash it, maybe. If it's deposited, probably not. Especially for a small dollar value.

When did it expire? Depending on the terms of the settlement, they may have forwarded it to a state's unclaimed property office... It's probably not worth your trouble for $50, but maybe you can still get it back.

Re: The Long Shadow of Checks

#103

Post by toast0 »

lxgr wrote: post #93
dqv wrote: post #17

It's interesting to see this discussion about speeding up check processing, because it seems that a lot of people use checks to slow payments down . It's a convenient way to make it inconvenient for the receiving party! It works like this: receive invoice, wait until due date, write a check dated for the due date, wait a few days, send it through regular mail, and complain about the past due notices because "I've alr…

If you prefer the user experience of cards over that of checks, imagine a world in which you can transfer money to anybody with a bank account by telling your bank to make a payment to their account number! That's been the reality in many countries other than the US for decades :) And maybe (hopefully!), the US will finally catch up with FedNow. Of course that model doesn't work for everything (it's usually a bad ide…

> Of course that model doesn't work for everything (it's usually a bad idea to pre-pay for goods or services with bank transfers since there is essentially no consumer protection in case the merchant goes bankrupt or turns out to be a fraudster), but I'm still fascinated by the US's lack of a "giro" system, i.e. an accountholder-initiated P2P and B2C push payment service.

We have wire transfers which work like this, through the FedWire system. They're instant, can't easily be reversed, and usually expensive and inconvenient to use.

Re: The Long Shadow of Checks

#104

Post by toast0 »

blacksmith_tb wrote: post #49
paulddraper wrote: post #40

Earlier quoted context omitted.

As an American, I am perplexed by the fill-now-pay-after European gas pumps. I suppose something like that can only exist in a high trust environment.

Not trying to wade into a continental dispute, but weren't gas pumps in the US also fill-then-pay until maybe 10-15 yr ago? I find it strange that you now have to basically guess about how much it will cost and then authorize a purchase up to that amount, instead of, you know, paying for however much actually got pumped (at today's price).

Depends on where you were. Growing up in orange county, CA, I only remember pay before you pump, even before card readers. Nobody used a credit card for gas back then, but if they did, it would be recorded on a carbon sales slip with an imprint machine and mailed into the processor.

When I went on long driving trips, gas station attendants would be confused when I went in to get $20 on pump three but hadn't pumped. I haven't been out on the road and paying cash for gas in a long time though, I think there's probably some stations where you can pay inside after you pump.

Re: The Long Shadow of Checks

#105

Post by lxgr »

toast0 wrote: post #103
lxgr wrote: post #93

Earlier quoted context omitted.

If you prefer the user experience of cards over that of checks, imagine a world in which you can transfer money to anybody with a bank account by telling your bank to make a payment to their account number! That's been the reality in many countries other than the US for decades :) And maybe (hopefully!), the US will finally catch up with FedNow. Of course that model doesn't work for everything (it's usually a bad ide…

> Of course that model doesn't work for everything (it's usually a bad idea to pre-pay for goods or services with bank transfers since there is essentially no consumer protection in case the merchant goes bankrupt or turns out to be a fraudster), but I'm still fascinated by the US's lack of a "giro" system, i.e. an accountholder-initiated P2P and B2C push payment service. We have wire transfers which work like this,…

Wires are not a mass payments system by any means, though.

The equivalent to SEPA credit and debit transfers would be ACH, just that in the US, it is generally not possible for individual/private account holders to initiate outbound ACH credit transfers.

FedNow might be just that, but I’m not sure yet US bank customers will become comfortable with sharing their account number freely in order to receive P2P payments that easily.

Re: The Long Shadow of Checks

#106

Post by detourdog »

ska wrote: post #77
blacksmith_tb wrote: post #49

Earlier quoted context omitted.

Not trying to wade into a continental dispute, but weren't gas pumps in the US also fill-then-pay until maybe 10-15 yr ago? I find it strange that you now have to basically guess about how much it will cost and then authorize a purchase up to that amount, instead of, you know, paying for however much actually got pumped (at today's price).

Really you are authorizing some amount above what you will need, but only getting charged what you pump. I guess they consider that anyone who is actually going to overrun their card limit isn't too worrisome to annoy. Not so long ago it was common enough in some places to have to go inside, give them X cash, then pump, then come back inside to get change - they would set the pump to only dispense up to X. It's basic…

The best old gas pump system I have seen is in the Alfred Hitchcock Movie Young and Innocent.

https://en.wikipedia.org/wiki/Young_and_Innocent

The car is a Morris and the gas pump is a pole coming out of the ground and rotary hand pump at the top of the pole to dispense petrol.

I love old movies for these at glimpses of early technology.

Re: The Long Shadow of Checks

#107

Post by lxgr »

toast0 wrote: post #101
lxgr wrote: post #90

Earlier quoted context omitted.

I also don't understand that part. Why is it not possible for a bank to just always decline payment for checks drawn on overdrawn accounts as a matter of policy? The other, and probably more relevant, credit aspect of checking accounts is depositing a check which might bounce (due to an overdrawn account) – but that also seems avoidable by just making checks available as late as legally allowed (i.e. on the second bu…

> but that also seems avoidable by just making checks available as late as legally allowed (i.e. on the second business day after deposit as far as I understand)? But checks can bounce much later than that. When the originating bank demands the money back, you'll have to ask the customer for it back if they've already taken it out.

Ah, good point – I was only thinking about non-sufficient funds; I suppose a check can bounce for fraud much later than that, and as far as I know, the depositary bank is liable for at least some fraudulent checks.

Re: The Long Shadow of Checks

#108

Post by lxgr »

rkeene2 wrote: post #72
nradov wrote: post #69

Earlier quoted context omitted.

No, banks aren't required to honor bad checks. They reject checks all the time for insufficient funds (bouncing). Some banks offer overdraft protection to checking account holders so that checks won't bounce (within some limit) but that's a separate feature.

A bit off-topic from the original thread, but if you use a Debit card (only validated on the Visa network) it's possible for a merchant to issue an "Advice" without any kind of Authorization (or even after a failed Authorization) in which they will debit your account even if you lack the funds. Your only option there (as a banking provider) is to debit the account (even if it causes the balance to go negative) or eat…

That's possible on most payment card networks that have their historical roots in credit or "dual message" processing.

Historically, the default assumption was that a credit card was always good for payment; the issuer took the credit risk for the cases where that was not the case. Ubiquitous electronic/real-time authorizations (a concept also known as "zero floor limit") have changed that default assumption and liability, but are a relatively new feature for credit cards.

Since debit cards in the US usually feature at least one international "credit" scheme/brand (credit in the historical and processing sense, not in terms of actually being funded that way), there can accordingly also be force-posts.

The issuer can trivially charge back any such charge in case of insufficient funds, though, just like they can with checks.

This is mostly true for credit cards as well, by the way! For historical reasons, some merchants (like hotels or car rental agencies) treat the two differently, but there is no formal basis for the distinction anymore. There is still a practical difference though: Opening and maintaining a credit card usually requires having a non-disastrous credit score; the fact that somebody can present one that still allows authorizations by the bank to go through can therefore serve as a weak proxy for that customer's credit.

tl;dr: The merchant (or their bank) is almost always liable for this, not the issuing bank, with very few exceptions.

Re: The Long Shadow of Checks

#109

Post by peter_l_downs »

coldtea wrote: post #83
peter_l_downs wrote: post #2

> One control which we made for checks to reduce systemic risk continues to have consequences more than a century later. Most disagreements between you and a grocery store are beneath the notice of the law. If you and your grocery store have a disagreement about a check specifically, you can go to jail. The crime is sometimes called “uttering”, for charming historical reasons. patio11: you write a lot, and have taugh…

I really dislike this obsession with citations, as if every post is meant as a paper for a journal. I even dislike it in scientific papers (especially in the humanities, where most of the time it just lends false credibility "see, someone else said this too", and in some cases a paragraph ends up like a mashup of 5-6 excepts cited from others, complete with a footnote mark). If we're interested in such a trivial matt…

I looked it up and could not find the answer.

Re: The Long Shadow of Checks

#110

Post by rkeene2 »

lxgr wrote: post #108
rkeene2 wrote: post #72

Earlier quoted context omitted.

A bit off-topic from the original thread, but if you use a Debit card (only validated on the Visa network) it's possible for a merchant to issue an "Advice" without any kind of Authorization (or even after a failed Authorization) in which they will debit your account even if you lack the funds. Your only option there (as a banking provider) is to debit the account (even if it causes the balance to go negative) or eat…

That's possible on most payment card networks that have their historical roots in credit or "dual message" processing. Historically, the default assumption was that a credit card was always good for payment; the issuer took the credit risk for the cases where that was not the case. Ubiquitous electronic/real-time authorizations (a concept also known as "zero floor limit") have changed that default assumption and liab…

We asked our network representative and they said we could not automatically dispute these transactions, so because of this we have to add overdraft fees to our product which otherwise never allows your balance to go negative.
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