The wealthy financier "is getting a taste of what the rest of us have to deal with all the time," said Gail Hillebrand, the senior staff lawyer for Consumers Union in San Francisco. That sour taste is called automated clearing house fraud, theft involving unauthorized electronic transfers through the automated networks of the circulatory systems that connect the world’s bank accounts.

Gail has a law review article that explains the need to update federal payments law so consumers are well-protected no matter how they pay their bills or receive their payments. She also points out that in some cases you don't have a choice (if, for example, you write a check and a store converts it into an electronic check, or if your employer decides to pay you with a stored value payroll card). These and some of the other flaws in the law known as the Electronic Fund Transfer Act, which governs electronic transfers (including electronic payroll and benefit deposits and ATM and debit card transactions as well as online banking transactions), and in other consumer banking laws governing payments are discussed in her recent Chicago-Kent Law Review article available here. Excerpt from the abstract:

U.S. consumers today have a broad range of choices about how to make payments. In addition to checks, credit cards and traditional debit cards, consumers may be offered prepaid cards, contactless cards, mobile payment devices, online payment sites, online credit payments, and other new ways to pay.

Federal payments law was developed before many of these methods existed, so it is no surprise that it has gaps in coverage. The variations in the law underlying the different payments methods place consumers in very different legal positions when something goes wrong. The gaps in the law mean that the particular payment method used, and how the payment is processed, can affect the consumer's ability to get his or her money back if the goods are not delivered as ordered, the payment information is stolen and misused, the payment was unauthorized, or the payment is processed for the wrong amount.

For more information, see my blog entries (criticizing Mastercard's Mr. Bill campaign and warning consumers Don't use dangerous debit cards) on why using debit cards is a big mistake.