The Wall Street Journal

October 17, 2002



Missed Payments and Glitches Drive Online Bill-Payers Batty

By MICHELLE HIGGINS
Staff Reporter of THE WALL STREET JOURNAL

When he signed up for service three years ago, Greg Judd thought paying
his bills online would mean no more late payments.

Then last week, a representative from the local water company knocked on
Mr. Judd's door holding a receipt book of missed payments and a work
order to shut off his water. Turns out the company wasn't getting its
money even though Mr. Judd pays the bill online automatically. "I quickly
wrote a check," says the Fairfield, Conn., benefits consultant.

The Internet was supposed to make paying bills as easy as a click of the
mouse. But more than a decade after the ability to pay bills online was
introduced, consumers still are running into maddening glitches, from
erroneous account numbers to payments that get lost in cyberspace. In
some cases, businesses don't realize which customer a check is coming
from when it arrives and as a result don't credit your account.

Such problems are one reason that online bill-paying hasn't caught on as
fast as banks would like. Banks have been pushing this service, in part
because of research showing that customers who pay online are much less
likely to switch banks. Nearly 17 million households will pay bills
online this year, up 41% from 2001, according to Forrester Research.

But that represents only a tenth of U.S. households. Even as more people
sign up to pay online, a lot are dropping out. Gartner, a research firm,
early this year surveyed 30 large banks and found 17% of their online
customers had dropped online bill payment in 2001. Of those customers, a
quarter cited payment problems as a reason.

Many companies simply aren't equipped to receive electronic payments. In
fact, according to research firm Celent Communications, 32% of all online
payments aren't electronic at all, but rather an electronic order to the
bank to cut and mail a check on your behalf. As a result, even if you
think you're paying a bill in plenty of time, sometimes it arrives late
and you can wind up paying a late fee.

PLAYING IT SAFE

Here are some ways to minimize glitches when you pay
bills online.

. Pay bills only at the site of the biller instead of through a bank or
bill-pay service.

. Use a bank that takes responsibility for late or lost payments that
aren't your fault.

. Make sure addresses and account numbers are kept current so that
electronic payments aren't misdirected.

Most banks and online bill-pay services say if they make a mistake they
will fix it, adding that consumer complaints are rare. CheckFree, the
biggest online bill-pay provider, says out of all the transactions it
handles, consumers have problems with fewer than 1%. Some of those may be
the consumer's fault -- from typos in the account number to hitting the
payment button twice. Even so, when problems occur, getting them resolved
can be a nightmare.

When Will Geiger of Mendham, N.J., missed a decimal point and paid
$27,556 to his gas company instead of $275.56 earlier this year, it took
several calls to mutual-fund giant Fidelity, which handles his online
bill-pay account, and to his gas company to resolve the discrepancy. It
took over two weeks before he was reimbursed. "I ended up going around in
circles," says the 54-year-old retired chemical engineer, who eventually
got a letter from Fidelity that explained the blunder to the gas company.

There are other potential glitches as well. Electronically cut checks can
look like junk mail to some businesses, which in rare cases have even
been known to throw them out. Another problem: People who pay online have
to pay close attention to any changes in a payee's address, or the bill
could go to the wrong place. When you pay by check, address changes are
usually pre-printed on the return envelope.

Some consumers try to avoid such mishaps by signing up for automatic
withdrawals from their credit-card accounts. That way, the biller
automatically deducts the due amount from your account. But this method
has its own drawbacks. Customers forfeit some control over making the
payments. In addition, it can be more difficult to dispute a charge if
the company already has your money.

Some banks and bill-pay services say they work hard to help customers
sort things out. CheckFree says it tries to prevent missed payments by
verifying the correct billing account and address information with the
biller. The company also will bear the responsibility for any
late-payment charges up to $50 as long as you schedule the payment on
time. Commerce Bank of New Jersey says its representatives will get on
the phone with the customer and biller to help resolve disputes.

Contrast that to Sash Erkskine's experience when she found out her cable
company had changed billing addresses and wasn't getting the payment from
her bank, FleetBoston. She immediately sent a new check to the correct
address and stopped payment on the old check. At the same time, the cable
company found the old check, which then bounced.

"Fleet was of no help," says the technical consultant from Plymouth,
Mass. "It essentially fell on my shoulders to convince the cable company
that I didn't owe them, that they had the money and to get the
returned-check fee reversed." A Fleet spokesman called the problem an
"anomaly" and that Fleet would reverse any fees.

Last week, Glenn Runyan was charged a $28 overdraft fee for insufficient
funds on his mortgage payment even though the loan was paid off when he
refinanced 10 days before. The bank, Hibernia, said the authorization he
signed five years ago required a two- to three-week notice to stop any
automatic payments. The mortgage company said initially it wouldn't
reimburse the $28 overdraft fee.

After a lot of time spent on the phone, Mr. Runyan eventually was
reimbursed. "The thing that bothered me the most is their attitude," says
the health-insurance administrator from Baton Rouge, La. "Nobody says,
'I'm sorry. I made a mistake.'"

Paul Peters, president of Hibernia's mortgage-banking division, says the
bank corrects these types of problems and refunds any fees incurred.

One way to avoid problems is to pay your bill directly on the biller's
site, if available, bypassing third-party providers completely. The
problem with this approach is you have to switch from site to site as you
pay each bill.

Online bill payment should get easier in the future. Part of the reason
there are foul-ups now is that customers typically receive their bills
through the mail and then attempt to pay them online. Eventually, banks
will be able to show you the bill online. That way, the electronic
payment will get attached right to the bill, just like in the paper
world.

For now, consumers often just have to cross their fingers. Mr. Judd, the
benefits consultant, nearly had his water cut off because Paytrust, which
both receives and pays his bills remotely, moved and wasn't getting the
bill from the water company. Even though the bills went unpaid for
months, neither the bill-pay service nor the water company contacted Mr.
Judd.

Paytrust, of Lawrenceville, N.J., called Mr. Judd's experience unusual.

Write to Michelle Higgins at
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Updated October 17, 2002


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