Missing check payment puts spotlight on banking industry’s dirty little secret

When you write a check to cover a bill, you probably watch the account to make sure the payment is cashed.

When the money is deducted, usually, consumers can forget about the payment.

But not Anthony Nardiello and Bernadette Theile.

For five months, they’ve been haunted by a check they wrote to pay their electric bill. While the money was deducted from their account, PSE&G keeps threatening to shut off their electricity for nonpayment.

“As a 67-year-old senior, I can ill afford to pay it twice,” Nardiello said.

Their experience with the mystery check shows a bigger issue about banking that affects every one of us. More on that in a moment.

The check in question was written on Dec. 11, 2023 for $323.80 and processed by Wells Fargo, Nardiello’s bank, on Jan. 8, 2024, bank records and copies of the check show.

Nardiello wasn’t worried when his next bill said the payment wasn’t received. He figured the new bill and the check crossed in the mail.

But the next bill didn’t reflect the cashed check. Instead, highlighted in red in the upper right-hand corner, it said: “Shut-off notice.” It showed the current charges and said the $323.80 payment was still due.

In the weeks that followed, PSE&G confirmed it never received the payment. Wells Fargo gave Nardiello proof the money was deducted from the account and that the check was cashed, but Nardiello noticed the check wasn’t endorsed by PSE&G. He shared the check copy with PSE&G, but it still insisted it didn’t get the payment.

Next, Nardiello sent a certified letter to Ralph LaRossa, PSE&G’s top executive, on Feb. 28.

“Please know on many occasions I submitted my proof of payment to customer service,” he wrote, asking for a resolution. “This is in addition to numerous phone calls totaling around three hours of wasted time on my part.”

When he didn’t receive a response, he sent it again, he said.

This time, he said, he got a call from the executive offices.

“She told me I was responsible for $323.80 and offered a payment plan,” he said. “She still claims PSE&G never received the check. Still, the funds were removed from my account by someone.”

He considered filing a complaint with the state Department of Banking and Insurance, but first, asked if Bamboozled could help.

THE MISSING CHECK MYSTERY

After reviewing the couple’s bills and the copies of the check and bank statements, we asked PSE&G and Wells Fargo to try to solve the mystery. PSE&G also said service would not be shut off during the investigation.

That was a good start.

We took a closer look at why Nardiello’s unendorsed check was paid. The answer is a dirty little secret in the banking world.

First, some background. The use of checks has been going down for years.

About 14.5 million checks are written each year, down by almost two-thirds over the past 20 years from nearly 43 billion checks a year, according to data from the Federal Reserve. More than 90% were written to pay bills, it said.

Most are deposited electronically, industry officials said. Think about when you receive a check. Do you take it to a teller or deposit it at an ATM or through mobile banking?

A 2023 survey by the American Bankers Association found only 9% of consumers prefer to use tellers.

The cost savings from electronic payments is a huge part of why no one in the industry wants to talk about why some checks are cashed even though they’re not endorsed by the recipient.

Really. No one wants to talk about it. We asked three federal agencies and four bank officials to discuss the issue, and they all declined.

But the Consumer Financial Protection Bureau (CFPB) referred us to a Q&A about unendorsed checks on its website that said: “Generally, the bank or credit union will likely either not accept the check or return it to you.”

But in reality — and the reason no one wants to talk about it — is that checks that are not endorsed are regularly honored, especially as they’re deposited using mobile banking or an ATM.

And it’s permitted by law, which basically says as long as there is no evidence of fraud, unendorsed checks are just fine.

It’s not that the banks don’t care about endorsements anymore. It’s about the money.

The cost of reimbursing customers for check fraud is far less than the banks would have to pay to have someone review each deposit, said two officials who declined to be identified.

Call it the cost of doing business.

The officials didn’t want to speak openly about the matter because rightly, they don’t want to spotlight the lack of oversight for…