Banks Should Fix Errors in Processing Checks

Q: Earlier this year I wrote a check for $19.79 to pay my telephone bill. But when I received my bank statement I was surprised to see that the check had been processed erroneously for $39.74. When I complained to the manager at my savings branch, I was told that they were required to honor the amount the utility company had encoded on the check, regardless of whether it was right or not. Is the savings and loan correct in refusing to adjust my account to reflect the amount that I actually wrote on the check? I should think so. --S. V. F.

A: Your question raises some interesting issues not only about how checks are processed in these days of automation, but also about customer relations.

Obviously, a telephone company data processing clerk made an error encoding your check for processing at its bank. By the way, a depositor’s bank typically is responsible for encoding checks, a process that adds a series of numbers across the back of the checks to be read by high-speed, electronic check sorting equipment. However, large corporations that make huge daily deposits--such as utilities--often have in-house clerks handling the task.

Back to the error, and the manner in which your institution handled your complaint. Pressure to maximize earnings and cut costs has put a crimp in the amount of customer service available at banks and thrifts these days. As you well know, many services that you once received free now come with a charge.

Still, the consumer relations managers we talked to generally agreed that your request is not out of line. According to Roger Repogle, manager of item processing at the Federal Reserve Bank, any bank or thrift should be able to help its customers unravel a simple error of this type. In fact, Repogle says your institution should initiate the process of tracking the error back to its source and making the necessary changes.

Repogle says many institutions, as a matter of customer courtesy, will simply credit a customer’s account for the amount of the error. Then, the institution will tackle the adjustment process on its own, or simply absorb the difference if it’s too small to be worth the time and trouble to recover.

“In no case does the customer have to absorb the error,” Repogle says. “And the customer shouldn’t have to unravel it himself. He’s simply not equipped to go through the process of decoding and making the adjustments throughout the banking system.”

As a final note, you might want to check whether the telephone company discovered the error on its books and already credited your telephone balance with the overpayment. You shouldn’t have to pay for the error, but you shouldn’t make money on it, either.

It’s Bondholder’s Job to Monitor Investment

Q: I purchased a California school district bond that paid interest semiannually in August and February. I put the bond in my safe deposit box, thinking that the trustee would notify me at maturity with redemption instructions. When my February interest check did not arrive I checked the bond and discovered that it had matured the previous August. I have since redeemed the bond. I have also demanded interest for the six months that I held it after its maturity. My reasoning is that the trustee should have notified me about redeeming it. Do I have a winnable case? --H. E. B.

A: Your best bet is to take all materials pertaining to your bond purchase and redemption to a qualified attorney for evaluation. It is possible that the trustee was remiss in failing to notify you of the bond’s pending maturity. If so, you may have a case.

However, according to our experts, bonds typically are not repaid until the bearer demands it, leaving the responsibility entirely with the holder. The lesson here for everyone--bondholders, stockholders and others--is to review your holdings regularly to keep track of such matters as maturity dates, dividend payments and option exercise deadlines.

The other course of action is to leave your holdings with a brokerage that would handle this responsibility. However, you will pay for this service.

Check Before You Buy an Annuity

Q: I have an annuity with Capital Life that has just begun paying off. The company has a relatively low rating (BBB+) with Standard & Poor’s. I am wondering whether my principal and the projected interest payments are at risk if the company becomes unable to meet its obligations. --M. L.

A: The simple answer is: Yes, you are at risk. And in California, there is no insurance fund to cover annuities that go into default. So, theoretically, you stand to lose both your initial investment as well as the potential payout.

None of this should be construed to mean that your annuity underwriter has a great likelihood of falling into difficulty. The S&P; rating of this company has not been at the highest levels in recent years. And if you had researched its ratings, or had your broker given you the information when you purchased the annuity, you could have discovered this. The larger moral is that you should thoroughly understand what you are buying when you invest.