Thursday, September 17, 2009


Can money be taken out of your checking account without your permission?

by Larry Geller

The answer may be “yes,” scary as that is.

WikiLeaks has posted what appears to be a portion of a trial transcript, along with a description and discussion, explaining how it works.

In a nutshell, it seems that a company providing brokerage, banking and checking services has a mechanism that might be used to transfer money electronically from a checking account. Of course, there are legitimate reasons for doing this. From the WikiLeaks article, the allegation is that:

If true, the importance of these court transcripts is that they show the US company ETrade allows their account holders to transfer money out of other people's accounts, held at other banks, without those account holders' knowledge, permission or verification.

How exactly can this happen?

I have some personal experience of how this might work. One of my credit cards allows electronic checking account withdrawal, and I use it sometimes, if I’m not sure there is enough time for a mailed check to get to them. It’s actually very convenient.

The website asks for the routing number for your bank, which is the first bunch of numbers on the bottom left of a check. It also asks for your checking account number, that’s the second bunch of numbers on the bottom of the check (the third bunch is the check number).  Given those two numbers, they snatch a payment from my checking account. That’s how the bill is paid.

Has my bank been told it’s ok to pay? No, I never told them. I did give permission to the credit card company. The credit card company just takes the money out.

A couple of lessons here—check your statements. Maybe don’t pay all your bills with a check. Why? Well, you’re giving the recipient your routing and account numbers. Why could they not use some website to take money out of your account?

Anyone can find the routing number for a particular bank either on line or just by asking them. The routing number is no secret.

Regardless of the authenticity of the WikiLeaks transcript or the allegation against this one company, if it is really that easy to move money out of a checking account, we need to know about it and think of possible protections.


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