Automatic billing glitch overcharges woman by $142,000: How to prevent it from happening to you

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Automatic billing glitch overcharges woman by $142,000: How to prevent it from happening to you
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Customers of Blue Cross and Blue Shield of Florida, known as Florida Blue, are facing some serious financial damage after a glitch in the system caused people’s accounts to get drafted multiple times for what was supposed to be their one-time monthly payment for May.

Payment glitch causes thousands of dollars in overdraft charges

In one case, a woman was billed 71 times (instead of just once) — which led to a total charge of $142,000 and sent her account into overdraft.

According to Florida Blue, the glitch was caused by a vendor and the company says it’s working to fix the issue:

We are very sorry for the problems this is causing our members. We are addressing the situation as quickly as possible.

One overdraft alone can cost you big bucks in bank fees. In this case, considering how many times some people were billed, we’re talking about massive overdraft charges — and there’s nothing these Florida Blue customers can really do about it until the company cancels the pending payments.

How Florida Blue plans to fix the problem

According a statement on the company’s website, here’s how the health care provider plans to resolve the issue:

  • We are working to identify all overpayments proactively and refund them promptly. We will ensure that only the appropriate amount is deducted and excess deductions are refunded. In fact, we have already begun processing refunds for some customers.
  • We will reimburse members for any bank fees incurred due to overdrafts caused by this issue. We will work on an individual basis with any member who has concerns about adverse impact on their credit.   
  • We have stopped taking electronic fund transfer payments for the time being and have delayed ongoing automatic payments scheduled for this month until we understand the issue and ensure it is corrected.   
  • Since members currently will not be able to make payments, we will not cancel a policy for nonpayment until the issue is resolved.
  • During this time, we will ensure that people who need care are able to get it, even if they are unable to make premium payments as a result of this issue.

How to protect yourself from potential overdraft damage

While Florida Blue says it is taking steps to resolve the issue and any financial damage it has caused for customers, the reality is, repairing situations like this can take time — sometimes a long time.

And until things are straightened out — by Florida Blue and any banks involved — that money is gone. So depending on how many times a person was billed and how much was in that account, customers could be in some serious financial trouble for the unforeseeable future. For example, if your was account was drained and you have no other cash that’s easily accessible, you’re out of luck.

Most of the companies you do business with probably encourage you to sign up for automatic bill pay.

Paying bills online is super easy, which is why so many people do it these days. And you can pay pretty much any bill online — utilities, cell phone, tuition, cable, mortgage — you get the idea.

But if you aren’t always on top of things (and even if you are), you need to know which methods are safe and which ones are not! Otherwise, you could easily find yourself in this situation.

Setting up recurring payments is a great way to not forget about a bill that’s due. However, there are safe ways — and unsafe ways — to do it, in order to protect yourself.

Read more: Debit vs. credit: Pros, cons and differences to know about

The dangers of automatic billing from a checking or savings account

The Florida Blue situation is a great example of why setting up automatic payments from a checking or savings account can be very dangerous.

Here’s how automated debit transactions work: you allow the company to deduct money from your checking or savings account each month by providing your routing and account numbers. The problem is, when you give authorization to regularly draft from an account, it is an open-ended arrangement, regardless of your contract.

In this case, customers’ accounts were drafted up to dozens of times when only one payment was supposed to go through. But on top of that, when you authorize automatic debits transactions, a company could continue pulling money from your account even after your contract for the service has ended. And they have the information they need to do so.

Another problem with automatic payments is that regardless of how much money is in your account, that charge is going through no matter what. And if you don’t have the funds in there, you’ll end up owing even more due to expensive overdraft fees.

Bottom line: automatic debit transactions, especially recurring ones, can easily cause unexpected withdrawals to be made from your account, which in some cases can cause major financial damage.

So let’s look at some safer alternatives.

Safe ways to automate & stay on top of monthly bills

1. Online bill pay

This is different from authorizing companies to make automatic debit transactions from your account. Online bill pay is instead set up through your bank, which makes it a safer way to pay your bills electronically.

Here’s why: you don’t need to give your routing number and account number to anyone, because your bank initiates the transaction. So your information is never provided to anyone else and isn’t at risk. You are also in control of when the payments are made, since they’re done through your bank.

So you choose the amount to pay (based on the recurring the monthly bill) and the date the payment is made.

Make sure you have the funds available if the bill pay is set up through a checking account!

If you’re using a checking account to make the payments, set up an alert for before the date the payment is supposed to go through, that way you can be sure you have the funds available and avoid any overdraft charges.

2. Use a credit card

Many companies now accept credit card payments online (instead of only allowing debit transactions) — which a much safer alternative for automating your bills.

Credit cards offer much better protections for you as a consumer, which is why you should always use a credit card (instead of a debit card or drafts from a savings account) for any payments that could potentially cause you problems.

You can set up automatic payments through your credit card to pay each bill before the due date each month.

Then if you see a suspicious charge, you can dispute it immediately — and the process of getting your money back is a lot easier than when you’re hit with false charges on a debit card. If the charge pulls money directly from your checking, you could be out of a lot of cash — temporarily or even forever.

And if you don’t have extra cash on hand, that’s a big problem.

Here’s a guide on your protections with debit vs. credit cards.

With a credit card, if you’re hit by over-billing issues, fraudulent charges or other charges you did not authorize, no money leaves your hands. Once you report the error to the credit card company, the process of fixing the problem begins immediately.

When mistakes occur with checking and savings accounts, money does leave your hands — and it can take a while to get it back, and in some cases, you don’t get it back.

Plus, by using a credit card, you also get the added benefits of racking up more rewards!

Bonus tip: Even when automatic payments are set up on a credit card, it’s crucial that you review your statements for any potential errors or false charges. That way you can report it immediately.

Read more: 10 places to never use a debit card

3. Set reminders for when bill are due

Automatic payments can be convenient, but if you’re worried about the possibility of your accounts being overdrafted or false charges going through, there’s another way to help you stay on top of monthly bills.

Set reminders for yourself for when each bill is due, and then right when that alert pops up, pay the bill online with a credit card at that moment! If you wait, you risk forgetting, which can lead to extra charges and damage to your credit score.

You can set alerts using your calendar on your phone, the reminders app or any other app you use to track your finances.

If you have to use a debit card, you can at least check your account to make sure you have enough funds to cover the payment — and then be sure to regularly check the account for any potential errors.

Bonus tip: For reminders/alerts to work, you need to pay the bill, check your account or do whatever else the alert is for, immediately when it pops up! That’s the best way to keep yourself on track and avoid any potential overdrafts, fees etc.

To help you track all of your bills, expenses and overall financial life, we have a list of great apps to try in our Budgeting Guide.

Read more: 6 money tips for people who are unorganized or forgetful

Tips to secure your online bill payments

Doing a monthly, or even weekly, check-in on all of your finances is a great way to help you stay on track of everything. Here are a few ways to protect your money:

  • Go through your statements: Find any automatic drafts that are coming out of your checking or savings accounts and discontinue them!
  • Paying bills on companies’ websites: Use a credit card, not a debit card, so you can dispute any potential false charges.
  • When you sign up for a new company: Only provide your credit card number for payments. That way you can dispute any bogus transactions that may pop up down the road.

You should also set up a daily alert that reminds you to check your bank accounts — to keep an eye on money coming in, money going out and to spot any other false charges that may pop up. If that’s too much for you, then stick with that once-a-week time.

If you haven’t quite gotten in the habit of checking your accounts daily (which you should work on), then charges could be going through without you even realizing it!

Read more: How to create a budget, track spending and reach your goals

How to increase your income by reducing expenses

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Alex Thomas Sadler About the author:
Alex Thomas Sadler is the Managing Editor of Clark.com and Clark Howard Digital Products. Alex is also the host of Common Cents, a new Clark.com series that makes money simple, so you can better understand and take control of your own financial life. Alex graduated from the University of Georgia with bachelor's degrees in ...Read more
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