We've all heard about — and many of us have experienced — unexpected charges showing up on phone bills. But what about fees siphoned from your bank account? What about those fees being taken by an affiliate of your bank?
And what can you do when your bank won't help because it claims you gave "phone authorization" for something like accidental death insurance, even though you never signed any paperwork?
That's the situation Sumati Rao, 62, of Rancho Palos Verdes found herself in after discovering she'd been charged $20 a month for about two years for accidental death coverage provided by a company called Level AD Insurance.
Her bank, Bank of America, said it would investigate the matter. It determined that because Rao gave phone authorization for the coverage, the charges would stand.
"I never authorized anything," Rao told me. "I have never spoken to this insurance company. I have never signed anything."
What happened to her serves as a cautionary tale for others who find themselves similarly on the financial hook for a service they may not have signed up for. You need to know your rights — and be able to recognize when a fast one is being pulled.
In Rao's case, it was her more financially savvy sister, Gauri, who spotted the insurance charges. She helped sign up her sister for online banking in May to eliminate a monthly checking fee imposed by BofA.
"I saw that there was $20 being taken out every month," said Gauri Rao, 56. "It had been going on since 2009."
The sisters immediately contacted BofA and asked what was happening. The bank said it would investigate and, if things were amiss, would refund at least a portion of the approximately $500 that had been withdrawn by Level AD.
They got their answer the other day. BofA said in a letter that it had contacted the insurer's bank, and the bank "informed us that the merchant has proof that you authorized the charges."
Now think about that for a sec: BofA said it never contacted Level AD. It contacted Level AD's bank (which presumably was not BofA). And the bank said that Level AD says it has proof that the insurance charges were on the up and up.
And that, apparently, was good enough for BofA. "We are denying your claim," the bank told the Raos. It said that if they wanted to pursue this further, they'd have to contact Level AD themselves.
The Raos did just that, and got nowhere.
"They said they had a phone authorization for the charges," Gauri Rao said. "They said they would not refund anything."
So the sisters contacted me. The first thing I found was that the Internet is dripping with identical complaints about Level AD imposing charges on BofA accounts that customers say they neither authorized nor recognized.
The next thing I discovered was that Level AD doesn't pass the smell test. It also does business as SmartStep Insurance, but that's not its real name either. The company is actually called Intersections Insurance Services, based in Arlington Heights, Ill.
According to the Illinois secretary of state's office, Intersections Insurance Services did business until a few years ago as Chartered Marketing Services, and before that as Chartered Benefit Services.
It's also passed itself off as Mortgage Insurance Services, Advantage Care, Financial Insider Network, Preferred Home Network, Chartered Customer Access and — my favorite for sheer chutzpah — the Illinois Lending Commission.
No one at Intersections returned calls for comment. In fact, good luck to any customer trying to reach someone at the head office: The company has one of those phone systems that won't let you get anywhere near a human being.
But I eventually managed to get through to an Intersections service rep, who confirmed that the company is also Level AD and SmartStep. She said Intersections is an affiliate of BofA, handling insurance products for bank customers.
Betty Riess, a BofA spokeswoman, said that's not exactly accurate. She said Intersections had been authorized to market accidental death insurance to BofA customers, but the bank ended the marketing relationship in May 2010.
Riess declined to say why BofA parted ways with Intersections. But she acknowledged that the two companies are still affiliated because Intersections continues to service policies sold to BofA customers.
People would indeed receive offers for insurance over the phone, Riess said. Then they'd receive a "welcome kit" in the mail. In the kit they'd be informed that they had 30 days in which to opt out of the insurance policy. Otherwise, deductions automatically would be made from their BofA account.
Riess said the bank looked into Sumati Rao's situation and determined that she had indeed given authorization by phone for accidental death insurance. Rao, whose primary language is not English, told me she had no recollection of this happening.
She said something may have arrived in the mail about the insurance plan, but neither she nor her sister, who assists with most financial matters, saw a notice requiring an opt-out within 30 days.
There are a number of issues that arise here. First, it's remarkable that a product as sophisticated as accidental death insurance can be sold on the basis of a telephone handshake.
Moreover, because a bank has a marketing relationship with an insurer, payments can be automatically withdrawn from one's checking account without your having to provide an account number, thus making it much easier for people to end up paying for something they never intended to buy.
Finally, no signature is apparently required to seal the deal. If you don't opt out from the insurance coverage, the default setting is that you must want it. That's neither a fair nor a realistic standard for a business transaction.
At the very least, BofA should do the stand-up thing for a customer and refund Rao's money. Judging from the volume of complaints online about Intersections Insurance Services, the bank can hardly be in the dark about its former partner's business practices.
Beyond that, Rao and all other consumers shouldn't hesitate to assert their rights. The Federal Trade Commission requires telemarketers to disclose clearly all costs and conditions prior to a sale. They also must disclose whether they have a no-refund policy.