Imagine receiving a statement saying you owed more than $1,500 in fees and interest on an account you thought was closed more than five years ago.
Straus was the owner of Livingston Bicycle, which shut its doors in September 2006. Straus had gotten a job offer he couldn’t refuse.
“The store was becoming a little too seasonal for me,” the West Orange man said. “I would have loved for the business to carry on, but you have to pay the bills.”
The business had one checking account and two lines of credit with Wachovia, which later became Wells Fargo. Those credit lines were paid in full on Dec. 11, 2006, and both lines were supposed to be closed.
The checking account remained open so the company could liquidate its inventory and pay off the rest of its creditors.
All seemed well, and Straus went on with his new life.
“For 14 years my wife and I ran a successful bicycle and fitness business, and not once did we ever bounce a check,” Straus said. “That account was closed. Why have I never seen statements about this debt? Where did it come from?”
One small $10 overdraft fee, generated from a line of credit that was supposed to be closed, ballooned over five years to a debt of $1,555.61.
Straus said his attempts to discuss the debt with Wells Fargo yielded only negative responses, so he turned to Bamboozled for help.
THE PAPER TRAIL
Straus shared his copies of bank statements and his other correspondence with Wells Fargo with Bamboozled.
Receipts showed on Dec. 9, 2006, Straus made payments to his two business lines of credit. One was for $19,244.94 and the second was for $24,142.02. Those payments cleared on Dec. 11, 2006.
Both lines of credit were supposed to be closed at that time, Straus said. He shared documentation showing one was closed, but he couldn’t find paperwork for the other.
The checking statement dated Nov. 1, 2007, showed a balance of $22.59. That was the last statement Straus said he received.
Straus said his checking account was set up for some automatic payments, for example, to UPS. He admits he may not have canceled those auto-payments when the business was winding down, and the account could have been overdrawn.
“This is when the apparent trouble began, and the automated overdraft protection associated with the business checking and the line of credit apparently started its cycle,” he said.
Before the line of credit was closed, it was supposed to cover any overdrafts from the checking account. In theory, if both lines of credit were closed, any auto-payments should have bounced.
But instead, something very different happened.
“Bang! Overdraft protection charge of $10,” Straus said. “For some reason, Wells Fargo was able to access my line of credit for the fees.”
So every month since December 2007, Straus’ account has been accruing interest charges and additional fees — all based on that one $10 overdraft. The overdraft that never should have happened if the line of credit account was closed.
“Wells Fargo was essentially using my line of credit to pay themselves for charging me fees for five years without my knowledge,” he said.
Straus said once he became aware of the situation in late 2011, he immediately contacted the bank to “put an end to this absurd cycle of billing,” he said.
“Suddenly my situation was flagged by the bank and acknowledged, and the suspension of the account was activated,” he said. “They would’ve drained this account of the entire line of $20,000, and I would have never known about it.”
A series of letters between Straus and the bank showed Wells was going to hold Straus to the debt, even though he said he hadn’t been receiving statements. Additionally, Straus said, a bank rep said the lack of payment would be reported to the credit bureaus on March 26, once he surpassed the third delinquent billing cycle.
Straus said he told the rep he’d be willing to pay for any charges during the time he was actually receiving statements.
But apparently, no deals were to be made.
Straus said he’s now stuck in an everlasting loop: His line of credit, which was paid off and he said, closed in November 2006, is paying to sustain a $0 balance business checking account from a business that was closed in 2007.
Unsure of where to turn and worried about his credit, he asked Bamboozled for help.
WHY WASN’T THE LINE CLOSED?
While Straus has shown proof that he paid off both credit lines, he only has paperwork showing one line was closed.
But even if he didn’t properly close the credit line in question, he wants to know why he didn’t receive any statements for more than five years.
One letter he received in January said: “We periodically review all BUSINESS LINE OF CREDIT accounts in accordance with the terms of BUSINESS LINE OF CREDIT Customer Agreement. Based on the way your account has been handled, we are sorry to inform you that as of this date your line of credit has been closed.”
Straus found irony in that letter.
“Closed? Thank God! After five years I finally got my ‘periodic review,’ ” he said.
Straus said the bank said it had been sending statements to the business address, but no mail had been returned to the bank until December 2007.
So what’s been happening since December 2007?
We reached out to Wells Fargo.
After a few days of investigation, the bank said it had no documentation showing the line of credit in question was ever closed. Still, we received some good news.
Wells Fargo is waiving the $1,500-plus in fees, a spokesman said, and the bank said it would make sure Straus’ credit score is not negatively impacted.
“If it is temporarily impacted, we will take care of it,” he said.
The bank had no comment on Straus’ claim that he hasn’t received statements on the account for five years.
Straus received a phone call from a bank rep shortly thereafter.
“She didn’t say much. I was just thankful she gave me the answer I was looking for,” Straus said. “She said she’d send me a letter saying the debt was paid in full and send all the information to the credit reporting agencies.”
Whether or not you own a business, take Straus’ story to heart so you can save yourself a bureaucratic tangle. Make sure you’re meticulous in getting all the paperwork you need if you ever close an account.
“It feels unbelievable to get a little satisfaction against corporate monsters,” Straus said. “It’s just so frustrating and an endless cycle of nonsense. I am very relieved.”
We are, too.
Many thanks to Wells Fargo for taking care of this customer. And be sure that if there are any remaining credit problems for Straus, we’ll call on Wells again.
As always, we’ll let you know what happens.