Problem is, if you’re an honest customer seeking to do business with one of these merchants, there’s always the chance one of the merchant-protection services will incorrectly judge you a fraud risk, in addition to the standard risks of computer glitches, database breaches and other problems that can vex anybody in today’s computerized economy.
We mention this because of complaints from readers who’ve had bad experiences trying to buy from merchants who subscribe to Telecheck; the complaints boil down to, “I tried to pay by check and Telecheck declined it, even though I had more than sufficient funds in my account.”
Larry from Illinois told us on Dec. 17: “We were denied a check at Walgreens (where we have an account) due to TeleCheck's profile. We went to the bank and they called TeleCheck to tell them we had plenty of money in our account. TeleCheck said it didn't matter how much money we had in the bank, their statistical profile found something else. The something else was that we don't write many checks (true) and we were trying to write two in one day. The fact that the bank said there was money in the bank meant nothing to them. They said we shouldn't write checks for seven days (it's Christmas season!).”
Not normal
The previous week, Mary from California said “I went to the local Burlington Coat Factory to get a few stocking stuffers that totaled $33.65. When the clerk ran my check through, it was declined by TeleCheck, without an explanation. ... I have never written a bad check in my life and knew I had more than enough funds ($4,500+) in my checking account, so I asked the clerk to run it again, but it was again declined. You cannot imagine my embarrassment as the other shoppers standing in line stared at me, probably thinking the worst of me!
“I went home and immediately called the number on the declined receipt. … The reason given to me for the denial was that Burlington is not in my "normal" shopping pattern, so there was not a recent record of me writing a check there. TeleCheck declined my check to protect the merchant against possible fraud.”
That’s a genuine problem: on the one hand, when a checking account, credit card or similar financial instrument actually is stolen, “increased activity, especially in new places the account holder’s never visited before” is one of the biggest red flags anti-fraud people know to look for.
On the other hand, “increased activity, even in places the account holder’s never been before” can also mean “It’s December, when people go shopping more than usual because they have to buy gifts.”
We read Telecheck’s FAQ page in hope of determining why people like Larry and Mary had their purchases declined, and found this:
You have more than enough money in your account to cover the check. Why did you get a Code 3?
In most cases, TeleCheck did not perform a funds check on your account at the point-of-sale, and your account balance was not weighed into its risk decisioning. The transaction carried risk indicators independent of bank balance.
You've never written a bad check or do [not] write them very often. Why did you get a Code 3?
Evidence of prior bad check writing history is not determinative in how a risk model ultimately decisions on a check transaction. The transaction carried other risk indicators.
Also, when your transaction was analyzed, it probably had several characteristics that made it look risky. In fact, if the account number was rarely, or never seen by TeleCheck before, this in itself could be a factor in a decision to decline.
TeleCheck might decline checks it’s never seen before? So you can't write checks if you've never written checks? Sounds like a Catch-22 — and indeed, that’s exactly what Robert from Vermont complained about in November:
“At Walmart I attempted to buy an iPhone priced at over $500. I wrote the check for the purchase and TeleCheck declined the check. Calling TeleCheck was futile as they said I must develop a history with them. So here is what I learned from this experience. If you have shopped for years at a particular store successfully and they suddenly decide to use Telecheck's services they will decline your check that they consider 'high risk' because you have not established a history with them. This is circular reasoning which, somehow, makes sense to them. You cannot establish a history if they decline your transactions! … The account in question has thousands of dollars in it which, apparently, makes no difference to TeleCheck. Also, when I called them they requested driver's license number, SSN, date of birth, address, telephone number, checking account number, date of transaction, amount of the transaction and from that point on, I was stonewalled with incredibly stupid excuses and reasoning!
“My advice is to complain to store managers that they will continue to lose sales because of a service they are using to prevent losses from bad checks and that same service is preventing sales by those with good checks and plenty of money in their accounts. To sum it all up, TeleCheck sucks badly and there is no avenue of recourse on their site or via phone.”
We must admit: when we tried making sense of the answers on the FAQ page, it did sound as though TeleCheck were saying “If we reject your check despite sufficient funds, we can't tell you why but trust us: it was for a good reason.”
So: if a customer makes a good-faith attempt to cash a check, has sufficient funds and is denied anyway -- what recourse, if any, does that customer have? If you don't write checks very often, and have never written a check at a particular store before, should you simply expect difficulty when trying to shop with TeleCheck merchants?
Telecheck responds
We emailed TeleCheck to ask such questions, and got a prompt response from communications director Cara Crifasi:
In general, the Code 3 is a risk decline that is generated per transaction and is based on but not limited to the consumer’s check writing history, check writing activity, dollar amount and the parameters that TeleCheck has in place with the specific merchant. Unfortunately, the initial generation of the Code 3 is not related to how much money a person has in his or her account.
There is no way to provide a general answer in response to a Code 3 because that will differ from check writer to check writer. If a check writer’s check is declined at a TeleCheck merchant , they can call Customer Service @800-366-2425 to speak with a Representative regarding the check decline.
Here is a little more insight to consumers regarding the uses of the Code 3 as well:
The changing marketplace has brought new challenges to merchants, particularly in the area of payment risk. Greater losses from identity theft and fraud require heightened vigilance in the review and acceptance of payment transactions. TeleCheck’s services help merchants control fraud-related losses, and controlled loss translates into better pricing and payment options for consumers.
In other words: they can't tell you why your check was declined, but it was for a good reason.