A woman whose $1,000 state income-tax refund was misrouted has not been able to get the money back, and every institution involved has pointed at the others.
“The thing that concerns me even more than the loss of the money—which does concern me—is the indifference at MECU,” Darschell Washington says, speaking of the Municipal Employees Credit Union, where she has kept her accounts for the past year. “They didn’t ask me to even fill out a form. They don’t seem to care.”
Washington, an accounting assistant for the Baltimore City Fire Department, says she did her taxes online on Jan. 23 using the popular TaxAct software. She says she got her federal refund without a problem but when she looked in her account at MECU for the state refund, it did not appear. After about 11 days went by without the money coming into her account, she rechecked her return, and discovered an error.
“I made a huge mistake on my state return and put down an incorrect account number for my savings that happened to be an active account for someone else,” Washington wrote in an email to City Paper. “My state refund was deposited into the account and the money taken out by the account owner.”
Washington’s problem came with her state refund, which went to somebody else, who apparently then took the money out and disappeared. Doing this is a crime, and as Forbes magazine has reported in a story about such cases, “banks typically have a long time to correct such errors. The exact rules vary by state, but we’re talking years.”
Thinking she must have mistyped her account number, Washington approached the credit union for help. “They will not even write a letter to the other account owner advising them that money was mistakenly put into their account and should be returned,” she says.
City Paper called the manager Washington spoke with, Cynthia Moore. “There was a form we used to use, but it was based on if we made the error,” Moore says, adding that she directed Washington to speak with someone else in the office who she thought understood the procedure in more detail than she does. “We explained that she has to have this recalled,” Moore says.
That is, Washington has to go to the issuing agency—the Comptroller of Maryland—to get them to reverse the deposit.
City Paper called the State Comptroller’s Office, which at first seemed happy to help and asked for more detail. The newspaper provided that—including the text of an email Washington forwarded from TaxAct. Apparently, the software was supposed to use the same account number she had indicated for the federal account, but somehow that number got altered to the number of someone else’s account, possibly the result of a glitch in TaxAct’s software.
So Washington might not have been at fault at all.
After receiving the details, the comptroller’s office abruptly changed tack: “As I am sure you are aware, to protect taxpayer confidentiality, we cannot discuss individual taxpayer information,” spokeswoman Michelle Byrnie-Parker wrote. “We also cannot comment on information from a third party tax software company.”
This prompted a string of testy emails between the newspaper and the comptroller’s public information office. In the end, the state office said that they can’t recall Washington’s $1,000, because Washington did not inform them of the error within the five-day window prescribed by a federal regulation. “Technically, if the error was created by the taxpayer or the tax preparer, it is their responsibility to rectify the problem, however, we try to help in these cases as much as possible,” Byrnie-Parker wrote. “In most cases though federal banking regulations hinder our abilities to directly assist.”
The regulation in question is really a rule made by a nonprofit consortium of banks. Called NACHA (which used to stand for National Automated Clearing House Association, but now stands alone), the association sets the rules for electronic money transfers worldwide and, although the rules were never passed by Congress or any other elected official, they carry the weight of law. There would seem to be a disconnect between the “years,” as Forbes put it, that banks have to correct these errors and the five days that consumers have to identify and report them.
NACHA says the state may have a role to play here. “The case you are presenting is a complicated one with a number of variables,” Colleen Morrison, a NACHA spokeswoman, wrote in an email to City Paper. “In this case, the state’s bank, the [Originating Depository Financial Institution], should be heavily involved as the bank originating the transaction, warranting that the receiver’s account number is correct. The best scenario would be for the tax payer to request that the state involves its bank (ODFI) to attempt to recover the funds.”
The comptroller’s office says it’s really on MECU to do the right thing: “If the taxpayer presents a copy of the tax return showing the incorrect information to the bank, it is possible that the bank could correct it, but you would have to reach out to the bank to inquire about their protocols/procedures.”
TaxAct, for its part, also said the way forward was through MECU. “According to the IRS, you cannot request a deposit of your refund to an account that is not in your name,” the email from TaxAct that Washington shared with City Paper reads, in part. “Since the bank account number for the savings account you listed on the return was not in your name, your bank should not have allowed the transaction to take place. At this point this appears to be a legal issue with the bank authorizing the transaction to take place.”
Washington says she has been trying for three weeks to get the credit union to help her, but that Moore has stopped returning her phone messages and emails.
A follow-up call to Moore was not returned. A message left with MECU’s lawyers, James III and John Brown of Brown and Brown, was also not returned.
“MECU is not even showing me the courtesy of providing information that I have requested about their legal department,” Washington says. “My only course now is to sue.”.