How A $10 Overdraft Fee Spiraled Into $1,555 In Debt To Wells Fargo

Five years after a NJ man thought he’d closed his former business’s two lines of at Wachovia, he was hit with one heck of a surprise by the bank’s new owner Wells Fargo: He had somehow racked up more than $1,500 on one of those accounts, without ever having received a statement.

In 2006, the man shut down the bike shop he’d owned for 14 years. He tells the Newark Star-Ledger’s Bamboozled column he paid off the two lines of credit associated with the business and thought he’d had both those accounts closed.

He did leave the shop’s checking account open to pay off any remaining bills for the business.

So what he believes happened is this: Some bills were set up for monthly auto-pay from the checking account. But when that account got down to zero, rather than have that payment bounce, the bank paid it out of one of the credit lines that he’d been led to believe were closed, and hit him with a $10 overdraft fee.

That was back in 2007, and the man says he received no statements from Wachovia or Wells Fargo until this past December. That’s when Wells Fargo wrote to let him know that his line of credit was being closed for lack of payment and that he would be reported to the credit bureaus in March if the debt was not resolved.

“Wells Fargo was essentially using my line of credit to pay themselves for charging me fees for five years without my knowledge,” says the man.

He showed Bamboozled documents showing payments in 2006 that should have closed those credit lines. However, he admitted he could only find written proof that one of the two credit accounts had been closed.

The bank said it had attempted to send statements to the bike shop address but the last statement was sent in Dec. 2007. The man offered to pay the fees for the months during which the bank was sending statement, but Wells wouldn’t go for that.

After Bamboozled got involved, the bank decided to waive the $1,555 in fees, but let this be a reminder to anyone who closes a bank account or line of credit: Be sure to get — and keep — documentation showing that your account is no longer active.

Bamboozled: Customer seeks help with a closed Wells Fargo account, opened again [NJ.com]

Thanks to Alexa for the tip!

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  1. Cor Aquilonis says:

    Does anyone else get documentation that bank accounts such as checking are closed? I never have. I’ve only received letters that lines of credit/loans/credit cards are closed.

    I’m still getting statements for an E*TRADE account with no money in it that I had requested to be closed over a year ago. I would love for them to stop.

    • Hi_Hello says:

      When I closed my saving’s account. I had two options that will provide some sort of documentation.

      1. certified mail
      2. email

      I went with email, and printed their confirmation that the account is closed to a pdf file.

      hope that was enough

      • Cor Aquilonis says:

        I think an email .pdf print-out is sufficient. At least, I hope so, since that’s what I’m using as proof that I paid off Sallie Mae. *fingers crossed in hope*

        • Yomiko says:

          Hold onto that. Sallie Mae has been known to get their wires crossed regarding paid debt. There have been anecdotal reports on here about people who 1) had paid off debt reported to collections or 2) had paid off debt reported to the IRS as forgiven (and thereby as income).

          I am thanking my lucky stars than I have paid of about 20% of my debt with them with no problems so far. Congrats on getting to 100% with yours.

          • Cor Aquilonis says:

            Mucho thanks! I have a copy on my HD and paper copy in the perma-file I build for paid off debts. It’s an envelope with all debt documentation in reverse chronological order, with the payoff letter in front. It goes in my permanent archives (fancy term for a bankers box with a bunch of envelopes in it. It sounds cooler if I call it “permanent archives.”) I plan to get a new computer then use my current HD as backup then keep current HD in a safe deposit box. Your warnings are so heeded! Good luck paying off the Mean Old Lady!

          • kc2idf says:

            Oh, that’s grand! My wife has a student loan that was recently transferred to Sallie Mae.

            Well, the good news is that I am an anal record-keeper, and have files going back over 12 years, so I guess I’ll have that piece of paper when their system belches.

  2. Blueskylaw says:

    “The bank said it had attempted to send statements”

    Attempted? Well did they or didn’t they?

    This is a commom tactic banks use. It wouldn’t be worth it to go after him for $10 so they let it sit for a few years to rack up thousands of dollars in interest charges and penalties and then one day the bank “discovers” that thousands of dollars are owed and they will do you the favor of settling for X amount.

    • CubeRat says:

      Per the CU that I used to belong to, they sent the stmt, but it was returned and they charged me $10 per month return fee. They only sent statements once a quarter, but charged the fee monthly.

      My question is this, if he closed the bike shop but left one account open to pay any outstanding bills- what address did he give? Didn’t he ever get a statement for the open account? Of course, if he never gave any other address, how would he expect to be notified of anything? And why did he never try to close that last account?

  3. longfeltwant says:

    Blah blah, some guy got ripped off for $1500. Okay, sure, but I bet we can all agree that EA is even worse, because they made a video game with an ending that game players didn’t like.

    • AlteredBeast (blaming the OP one article at a time.) says:

      To be fair…EA has done more than that…but yeah, screwing with people’s homes and bank accounts is worse than screwing with people’s gaming.

      • Yomiko says:

        HOW DARE YOU MOCK THE PAIN I FEEL WHEN SOMEONE MESSES WITH MY DISCRETIONARY SPENDING? The video games are all I have to escape from real life now that I’m homeless after Bank of America demolished my house :(

        • Cat says:

          Don’t you mean ” …after Bank of America demolished my MOMS house “

          • AlteredBeast (blaming the OP one article at a time.) says:

            Hey man, don’t ignore the “B” at the end of the house number, the basement is like a totally seperate place!

            • Cat says:

              To be fair, they didn’t demolish the basement, they just filled it in with the broken pieces of Mom’s house upstairs.

        • longfeltwant says:

          “video games are all I have to escape from real life”

          You could always try drugs.

    • chefboyardee says:

      i love you.

    • phonebem says:

      Too late, all the gamers have gone back to Kotaku and Wired. There’s no one left here except people who agree with you…

    • chiieddy says:

      You are made of awesome :-)

    • Fubish says: I don't know anything about it, but it seems to me... says:

      Heh heh heh. Good-o!

    • Herbz says:

      For those of you who still don’t get it, it wasn’t just the ending of Mass Effect that pissed everyone off.

      It was the crappy DRM in their games, like Spore.
      It was the killing of loved series that EA bought and decided to do nothing with.
      It was the move toward day 1 paid downloads and crazy micro-transactions.
      It was them treating their employees like garbage.
      It was them treating their customers like criminals.
      It was them banning people for no reason, and from that ban, it took away access to all the games that they had in their collection.

      The DLC/DRM crap is what really pissed me off. Think of it kind of like how BOA tried to institute their $5 checking account fee (why? because they can, thats why)

      While I agree that BOA definitely can cause a lot more damage; the poll wasn’t about “How shitty is this company?” or “How much damage can this company cause?”

      It was about the WORST company in america. Gamers took that as which company is causing the most damage to a particular industry. EA, by far, is the most evil gaming company out there.

      • longfeltwant says:

        Wait a second. I bought and played Spore, the only video game I bought in the last decade. I enjoyed it, and when I was done I gave it to a friend — like, I physically gave him the box, discs, and whatnot. He then played the game. I didn’t notice any DRM, certainly none that affected my enjoyment of the game. If I didn’t notice it, it’s hard to see how it could be worse than, oh, say decimating the world economy.

        Perhaps I wasn’t paying attention, but listen, I *HATE* DRM, both the idea of it and the actual inconvenience it causes. I have never bought even one DVD in my life, because I hate the DRM on DVDs so much. I have Netflix, and I rip 100% of discs I get just in order to skip past the unskippable b.s. warnings and ads. So if I, as an anti-DRM ideologue, didn’t even notice the DRM on Spore, then how bad could it be?

        At the end of the day I think it is fair to construe “Worst Company” as “Company Which Most Needs Shaming”. And seen that way, perhaps EA is a valid choice for many people. I’m fine with that, but I reserve the right to throw verbal tomatoes at those people, because I simply disagree.

        • GaijenSoft says:

          Wait, not only did you put Spore in your computer, but you also gave it to a friend to play? You, sir, are a shitty friend.

          You essentially gave your friend uninstallable spyware. Part of it’s installation goes to the same level that your BIOS is on, making it a part of your computer, even after reformatting.

          But surely when I uninstall Spore, I’ll also uninstall securom right? NOPE!

          • longfeltwant says:

            BIOS? WTF are you talking about? Do you mean OpenFirmware?

            It’s hard to call it unintallable, then go on to describe its installation in the very next sentence. Actually it’s not hard — you just did it — but it is nonsense.

    • Conformist138 says:

      The problem with this line of thinking is that the contest would be over in 5 seconds every single year because it would be a company objectively selected by algorithm determining the worst financial harm and, no shit, financial institutions would be first every time.

      I personally don’t buy games from EA so I haven’t paid attention, but whining about the winner in unrelated post nearly a week after the fact is just getting silly. Let it go and move on- it’s just a blog and it’s just a stupid little contest, not a major declaration to be etched in stone for all mankind to bow before as some universal truth.

      • longfeltwant says:

        Ruining the economy isn’t the only terrible thing companies can do. They can also ruin the environment (BP), the food supply (Haliburton), international relations (Blackwater, Xi, whatever), health (an insurance company or a drug company), or any of many other very important things. Ruining video games is not in the same league as the economy, environment, food supply, world peace, or human health.

        Yes, it’s a silly poll on a backwater blog. Agreed. But it is the SUPERBOWL EVENT of that backwater blog, and fans have the prerogative to complain about the Superbowl all year long. Just as the Giants are sorry losers who lucked their way into both of their recent Superbowl wins, EA is a pathetic tertiary-level company hated by a bunch of crybabies who lack perspective.

        Settle in, Conformist, because you’re going to hear “worse than EA” comments all year long. See ya next March!

    • SJ says:

      The horse is a mutilated pile of mushed meat and pulverized bones: stop beating it.

    • Anne Noise says:

      EA didn’t make Mass Effect 3, they only published it. Bioware made Mass Effect 3.

      • WalterSinister2 says:

        Sorry to inform you, but EA bought Bioware a few years ago. Bioware is just a division of EA. The longer a previously separate company is a division of EA, the more of its original people they lose the more direct control EA takes of it and the more it morphs into just another undifferentiated EA division. Bioware is faring better than most in the quality of their games, but I think lots of their people have left.

    • superml says:

      Haven’t you heard? EA is the source of all evil in this world. It’s like Google owning everything, except EA owns all the bad stuff.

  4. Duke of URL says:

    Just HOW are you supposed to get this magical “documentation”? I’ve closed lots of bank accounts and have never gotten anything from any bank except a verbal “Okay, that’s done.”

    • George4478 says:

      When I closed my Wachovia/Wells Fargo checking and savings accounts, I got a form for each account confirming that the accounts were closed, the existing balance was being paid to me via check, and the new balance was zero.

      So I got the magical documentation when the bank guy said “here” and I opened my hand to take it.

      • winnabago says:

        No bank account I’ve closed has done this, even when pressed. For one old checking account, I have a bank check for $0.37 that has a memo on the bottom, “closing account”. But it doesn’t reference the account number, name or anything. These so called forms just don’t exist at most places.

        • George4478 says:

          I’ve never seen a survey about what “most” places do, so I can’t comment on your professed knowledge. I know that between my 2 sons and I, we have closed 4 accounts at Wachovia/Wells Fargo over the past 3 years — the same bank the OP used — and we all got closing documentation. I wasn’t going to leave without some kind of documentation and, as it turned out, they provided it without asking.

          Who would accept that a financial transaction is completed without some kind of document, statement, or receipt that it happened?

      • Fineous K. Douchenstein says:

        I got the documentation when I closed my old Wachovia account, and also whenever I’ve closed any existing account I’ve had at my CU (I had a market account that the interest rate sucked on so I moved it elsewhere). I thought such documentation was SOP.

    • BobOki says:

      I have never gotten a form, ticket, document stating my accounts were closed. When I closed my Walkallovaya account when I heard Well Fartgo was buying them out they only told me it was done. They lied. A lot. It is weird that I as well did not get any statements, any warnings, any calls, any.. well anything until a year after in which they informed me I owed around $650. Turns out a bill had hit that account (automated) and they were so kind to reopen my account, pay it then start charging me overdraft fees… then overdraft fees on that overdraft fee etcetc until it went from $16 bill (netflix) and $10 overdrafts up to $650.

      I on the other hand had some fun. I asked the rep when it shows my account was closed. They stated the date I closed it. I laughed long and hard on the phone and told the lady, “So, you want me to PAY $650 for a $16 bill that came in on a closed account, that you reopened without my express and written permission and then you charged tons of overdraft fees on? BWHAHAHAHA remind me again where you had my permission to reopen my account? Yeah, have a great day and enjoy your fees on YOUR account.” Never heard back from them, nothing ever hit my credit and a call back to them 2 years later confirmed it was all gone ;)

  5. loggg says:

    Like many ISPs (*cough* AOL *cough*), some banks make it unreasonably hard to quit them.

    We closed our BoA accounts last month. Spent months moving all the automatic deposits and payments away, and then watching to make sure we hadn’t missed anything. After a month of no activity, we closed them. Or we thought we did.

    BoA screwed it up. They left $0.05 in one account. This happened because they were incapable of determining exactly how much interest it had generated on the day we closed it. Then they charged us a $12 maintenance fee this month.

    Their policy is to “reopen” an account if there is any activity in the next 3 months after it has been “closed”. Even if the only activity is their own. We told them they could keep the nickel, but they said they couldn’t do that. So we waited in line and filled out a withdrawal slip and signed a receipt, all for 5 stinking cents.

    We’ve grown afraid of what scam BoA will think up next, and sick of running in to fix yet another problem. It is (or will be) such a relief to be away from those robbers, away from the constant worrying about the next “mistake” they will make, in their favor of course, and whether this time they won’t return the money they’re trying to steal. For this one, like all the others before, they put on a big act of contrition and returned the money.

    • icerabbit says:

      You confirmed my suspicion of how they keep a “closed” account open.

      We’ve been locked out of one estate account from a deceased family member; which should have been handed over to the state two years ago, but hasn’t.

      We were just stupidly honest, walking in a few days after the person passed away, saying x passed away. Small detail. When x had asked to have a secondary person placed on all accounts, they forgot one account. BoA claims they have their former valued client at heart etc. but of course won’t talk to the family.

      So, now for 4 years, BoA has been hitting that account with maintenance fees (free account to retirees) and sends statements to the deceased person. Oh and they charge for the free deposit box too, which was also free for retirees.

      We figured the account would be handed over to the state, but hasn’t.

      Unfortunately it hasn’t been worth trying to fight for it, because we’re not from the area and it would cost thousands in legal fees.

      So, BoA can suck the account dry and then start overdrafting it and whatever the heck they want.

  6. oldwiz65 says:

    Just goes to show that the big banks are a pain to deal with. Stick to the smaller ones.

    • kc2idf says:

      They’re not necessarily any better. The large multinational bank I used to use, for instance, was far superior to the small, local bank that my wife used for a while. I had some dealings with that small local bank, also, having been for two years the treasurer of a club that had an account there.

      They sucked very much bad. Phantom transactions happened very frequently, requiring you to keep an eagle eye on your accounts. Worse, once you found a problem, it was a pain in the neck to get them to do anything about it!

      Both my wife, and the club, did the most logical thing and moved accounts elsewhere. The club moved its accounts to another small local bank, and my wife moved hers to a credit union.

  7. MunkyBoi says:

    When you close your account, you get a FINAL STATEMENT. ‘Nuff said, right?

  8. SeanPatrick says:

    This is the type of story I hate on Consumerist.

    1. This person admitted that he left the account open to pay bills.
    2. He still owed people money that attempted to debit an account with no funds available.
    3. He previously had his line of credit to cover overdraft expenses.
    4. He has no proof of closing that overdraft account.
    5. When contacted, the bank waived the fees.

    People need to learn to MANAGE THEIR MONEY. If you don’t want this to happen then don’t try to pay people with “closed” bank accounts and expect the bank to know what you want them to do.

    Ultimately this man was writing “bad checks”. Shame on him.

    • loggg says:

      The bank does know what to do. Close the account. DON’T honor any more checks or process any other transactions on that account. This is not rocket science.

      Don’t excuse the banks on this, don’t buy their pretense that it’s all an innocent misunderstanding.

      • SeanPatrick says:

        Pay your bills. That is not rocket science.

        Again, the man conveniently lacked proof that he closed the line of credit.

        • ovalseven says:

          I think we’ve all done plenty of things 5 years ago that we can no longer prove. And considering the hassle involved, I’d wouldn’t say losing the proof was “convenient”. Even if you meant that sarcastically, it still doesn’t make sense.

          • SeanPatrick says:

            I don’t mean it sarcastically. This man admits FREELY:
            1. He “closed” an account knowing that he still had pending transactions that would prevent it from closing.
            2. He is pretty sure he remembers closing the credit line but neither he, nor the bank has any proof. Perhaps I should walk into the bank and claim I remember they were going to hand me free bags of money.

            At the end of the day, he tried to pay for things with an account with no money in it. The bank followed the procedures outlined in his account agreement when handling those transactions.

            People need to stop being irresponsible and blaming banks for their mistakes. You can whine all you want, but being a good Consumerist in my opinion is owning your personal finances and not crying about how evils the bank is when you spend money you don’t have.

        • loggg says:

          “Pay your bills” is not the issue. It is not the bank’s business to step in and reopen a closed account, no matter what is going on between former account holders and their creditors. Part of the process of closing an account is zeroing out the balance. If the former account holder owes someone else, that is none of the bank’s concern. Creditors should not be going after a bank for refusing to honor any more transactions on a closed account. They should be going after the former account holder.

          In recent decades, some banks have unilaterally decided to make it their business, to try to keep more business against the express wishes of their customers. That’s not proper on the banks’ part. But there’s little risk in it for them, so some do it. And because the balance is $0, there’s all kinds of opportunity to charge those oh so lucrative fees for insufficient funds, maintenance fees for the balance being too low, etc. Deadbeats are easy to threaten, and beat up in court if it comes to that. Make banks eat the costs of reopening an account and honoring a debit, make them accept liability so creditors can go after them, and they’d stop this practice in a hurry.

          • SeanPatrick says:

            Pay your bills is EXACTLY the point.

            The terms of his account and the cancellation process are pretty well known. Who doesn’t know that an account must be dormant of transactions for a period of time before it is completely locked?

            He knew this as well. If you don’t like the terms of your account then don’t open one. But don’t cry that it is someone else’s fault you try to pay bills on an account that you know has a zero balance.

            If he took care of his finances and bills, this would not be an issue. It is his responsibility.

            • loggg says:

              Show where it says accounts can’t close until all activity has ceased. And if there is such a rule, who made it and why? How you stop scammers who somehow got hold of your bank account number? How do you deal with identity theft? You wrote a check for something that turned out to be a fraud, and you used the Stop Payment service. But Stop Payment expires after 6 months. What do you do? You close the accounts. If what you say is so, criminals could make sure no one could ever close an account. What if you are moving? You just got transferred, and you have 30 days to pack up and move. What if the account holder dies, what are the heirs to do, especially if they all live far away? Close the accounts. They may have no idea what all automatic payments, like for insurance, medicine, home Internet service, cable TV, home security monitoring, utility bills and what not the holder had set up. It is not reasonable to impose a reopening period. You just know one of those services will be overlooked, or will make an innocent mistake and help themselves to another payment.

              And understand, that banks change the rules all the time. You were in a local bank, and suddenly Bank of America buys them. You didn’t agree to any changes, they were imposed on you. So BoA can just come along and change the process you are supposed to use to close the account?

              I also think that Wells Fargo did not make a good faith effort to notify the account holder. They just piled on the fees. You’re all over the holder about “pay your bills”, but there’s plenty of dubious moves by the bank. The holder should not have been laboring under the idea that the account was closed if it was not in fact closed. And that’s entirely the bank’s fault.

              • SeanPatrick says:

                The dubious move was trying to pay your bills out of a closed account. Take care of your finances and there is no problem. Why do you continue to whine about how your personal responsibility is someone else’s fault?

              • SeanPatrick says:

                Are you really that naive? I suppose for those to lazy to read or understand their personal finances I could explain it to you.

                “Show where it says accounts can’t close until all activity has ceased. And if there is such a rule, who made it and why?” – It is in the terms of agreement on your account.

                “How you stop scammers who somehow got hold of your bank account number? How do you deal with identity theft?” – You contact fraud prevention and have your account frozen, not closed. Again, this information is readily available for anyone with an 8th grade education.

                In those other situations you can try to close the accounts, but that would be fraud. Closing a bank account to get out of honoring financial commitments is wrong. People would open and close accounts all day to avoid the penalties associated with bad checks. (much like the man in this story)

                “You were in a local bank, and suddenly Bank of America buys them. You didn’t agree to any changes, they were imposed on you. So BoA can just come along and change the process you are supposed to use to close the account?” – Banks don’t “suddenly” acquire one another. There is quite a process. You have ample time to change accounts if you don’t like the new policies.

                “I also think that Wells Fargo did not make a good faith effort to notify the account holder. They just piled on the fees.” – The account holder didn’t make a good faith effort to take care of his bills. Did he just think the magic money fairy paid for his services? Come on.

                “The holder should not have been laboring under the idea that the account was closed if it was not in fact closed. And that’s entirely the bank’s fault.” – The account holder had been receiving services charged against his account. It is his responsibility to manage his finances.

    • ovalseven says:

      Is that why you waited 5 years to inform him of the debt?

    • dognose says:

      #5 was not as simple as you said. He asked to have some fees waived, but they wouldn’t budge. He had to contact the press to get the matter resolved.

  9. dks64 says:

    “Be sure to get ‚Äî and keep ‚Äî documentation showing that your account is no longer active. “

    How long should I hold onto this documentation, if I even get it in the first place? 2 years? 5 years? 10? Am I supposed to keep every single paper I get associated with accounts? I’d have to get a storage unit just for junk like that. Why can’t the bank just keep adequate records and be responsible? Oh wait, that’s asking too much.

    • SeanPatrick says:

      Responsible is not trying to pay your bills with a “closed” account.

      People are like infants these days. Blame everyone but themselves.

      • Coleoptera Girl says:

        The lines of credit were closed. The money in the account got to zero.. The bill should have bounced or the overdraft fee should have been added to the account rather than come out of a closed line of credit. If this had happened, then OP would have noting to complain about except his own stupidity when it comes to money.

    • kelcema says:

      I have most of my paperwork for the last 15 years– although some of my really old WaMu statements I have misplaced somewhere… all in only two filing cabinets, one 2-drawer and one 4-drawer. This includes four apartment rentals/associated paperwork, a purchase (and sale) of a condo, a purchase of mu current house, and a small home-operated business.

      I don’t think holding on to paperwork stemming from an account closure is too much to ask for, especially when you’re already running a business. I’ve got canceled business checks from 2002 still, for crying out loud!

  10. iesika says:

    I had something similar happen on a smaller scale (though I was in college at the time, so the few hundred dollars involved was a FORTUNE). I closed an account at Hibernia when they were being bought by BoA. The bank gave me my money, but never actually closed the account, so I was charged a $25 fee for having under $5 in my checking account.

    And then I was charged an overdraft fee. And a monthly negative balance fee. And overdraft fees on the under-$5 and negative balance fees. Three hundred and some-odd dollars later, they sent me a letter.

    If you close an account, ANYWHERE, ask for documentation. I’ve never had it offered to me as a matter of course, but after the first time, I learned my lesson.

  11. SeanPatrick says:

    I can see the flip side to this story. Banks cannot win with irresponsible people.

    So he thinks the charge was from UPS. So let’s say the bank denied that charge.

    The headline would then be that his daughter didn’t get into college because even though he closed the account the bank should have process the UPS charge to courier the letter containing her college application. After all the agreement requires a certain amount of inactivity.

    New Headline “Wells Fargo Destroys Girls College Dream”.

    Clearly he has proof showing he only closed one line of credit and not the other.

    The system is clearly laid out for everyone. People who are irresponsible with their finances have financial trouble. Simple.

    • Coleoptera Girl says:

      And the vast majority of the commenters on the article would be rolling their eyes and calling the man an idiot.

  12. makoto says:

    Just curious… not that the complainant was wrong or at fault, but why would he not cancel all accounts associated with the business, such as anything on automatic bill pay such as electric or phone lines. I’m confused on how he was still accruing charges after the business was closed.