The Bank is Not Your Friend

Digital signatures sound cool -- imagine being able to sign a check using a digital signature to guarantee the check's authenticity and irrevocability. Unfortunately, there's a little difference proposed by most banks when dealing with digital signatures. Irrevocable means that if anything gets signed with your digital signature, the burden of proof is on you the consumer to prove it wasn't you. Currently, when you sign a check, the burden of proof is on the bank. If it's not your signature, you don't pay. It won't be that way using a digital signature.

Banks may say they protect you from fraud, but they really protect themselves. If your identity gets stolen, the burden of proof is yours to prove it's not you that owes all that money. When ATMs were first introduced, banks argued they were infallible and anyone claiming losses from wrongful ATM withdrawals must be trying to defraud the bank of money. It lasted until the banks went after criminals who stole from the "infallible" ATMs.

As banks and consumers go further into online transactions in the digital age, be wary. The banks are placing more and more liabilities on the consumer. When you engage in online banking, the terms of service you click "yes" to agree to generally state that all bank records are definitive. If the bank says you withdrew it, you withdrew it and that's that.

A couple of years ago, I sent my online credit card payment to the cable company by mistake. I tried in vain to get a refund and settled for having a credit on my account that would cover a year of cable. At the end of that year, the fraud investigator decided that she couldn't find the money in the cable company's accounting system, and removed the credit from my account. After I found my bank statement from a year earlier, faxed it to her, and got my bank to call, we cleared things up, but the burden of proof was on me. And my bank wasn't that helpful, either, insisting that I find the bank statements from a year ago or pay for a copy from them.

What was shocking was that a year after crediting the money into my account, the cable company couldn't track its own cash, and assumed it must have been some fraud. The burden of proof was on me, and I really didn't enjoy tracking down a bank statement from the year before.