I see a regional trend here – seems that most familiar with banks refusing to cash payroll checks are in the Northeast. Specifically, in the New York City area.
All I know is that banks down here can’t get away with that (yet … and for all time, Og willing). This might explain why there are no Chases, Citibanks, etc. down here in Louisiana and Mississippi – they can’t compete with banks who don’t abide by these practices. There are large regional chains that are based in the Southern U.S. (Hibernia, Regions, and Amsouth are three biggies), and there are still slews of small banks with less than, say, 10 branches that work hard to take business away from the bigger guys.
Was there some kind of massive bank consolidation in the Northeast (or elsewhere) in recent history, or something? Adding all these fees and questionable check-paying protocols sounds like things that can only gain footholds in the market is competition is somehow quashed.
Doctor Jackson, I understand what you’re saying with regard to bank policies and fees, and I agree that they are (probably) legal. My argument is that they are ethically and morally reprehensible.
What the banks, especially the big ones, have lost sight of is the fact that the depositors have "hired’ the bank to act as their financial agent. This involves insuring the safety of the depositors’ money and handling transactions as directed by the depositor.
If the depositor issues a written directive to the bank to “Pay to the order of [payee]” a specified amount of money, how can the bank claim that they are not bound to honor that instruction to the letter (provided that the payee can provide suitable identification)?
Unfortunately the banks abide by the golden rule, “He who has the gold makes the rules.” They are in a position of power, so they exert that power and charge fees for everything they possibly can. If they feel it’s not worth their while to cash a check, they refuse to do it, even though their depositor has specifically instructed them in writing to do so.
Excuse me for not being able to understand how the banks justify this attitude.
FBG, the banks’ official justification is 3-fold - fiduciary responsibility, loss prevention, and revenue generation.
Banks have a fiduciary responsibility to their customers (account holders). That means the bank is legally required to verify, to the best of their ability, that each check is valid and that the funds go to the correct person or entity. Written policies and procedures concerning that verification must be in place.
That fiduciary responsibility extends to shareholders as well. Broadly speaking, if a bank cashes a forged check (signature or endorsement) and cannot recover the funds, then the bank eats the loss. That loss comes right off the bottom line, directly affecting profits and, therefore, shareholders. Written policies and procedures concerning fraud detection and prevention must be in place. BTW, monetary losses from robberies are a pittance compared to losses from fraud.
Aside from keeping the teller windows staffed and the bank open, it costs real money to maintain a cash inventory. Every $10,000 of cash on hand costs a bank $1.00 to $2.50 per day in lost investment income. Non-customers who come in to cash checks cause the bank to have to keep more cash on hand while adding nothing to the revenue stream.
That said, I too agree that some banks made “on-us” check cashing for non-customers far too cumbersome a process. I’m not sure I would use the word “reprehensible” (I much prefer “stupid”), but I would certainly vote with my feet.
Speaking about the Washington DC area, there have been quite a few buyouts and mergers. But there are still plenty of banks. And there has been a lot of consolidation in most other industries as well. Competition is present. It takes the form of ads, most atm’s, free checking terms, and more stuff like that. Interest rates are surprisingly low on list. But I won’t chase a better interest rate either, I like all those atm’s in the grocery stores. Also my bank, Chevy Chase, offers free coin counters in most branches And they advertise that this service is available to non account holders. Anyone can convert their change into a more convienent form for free.
I’m going to be honest here… If I write a check to someone, I don’t know if my bank would cash it. My payroll checks are direct deposited. This is why banks get away with it. Enough people like me don’t really care that much. (But God help them if another bank gets more atm’s!)
Many large companies run what is called a zero-balance payroll account. That is to say, that there is no money in the account. Ever. Not during the day, anyway. I went to cash a check from A.B.C. television, before they were owned by Disney. (At the time, Capitol Cities owned them).
I wasn’t allowed to cash it, even though it was drawn on the bank whose name was imprinted upon the face of said check. Why? Because, the check has to be presented for payment first. The check was drawn on a zero balance account. All checks presented for payment overnight on, say, Thursday night are paid out on by the company because it’s computers calculate the amount needed in that account.
The money, and only that much money, is put in automatically. The checks for Thursday are paid out, and the balance of that account ( by sunrise ) is zero again. Interesting way to do business, but it means that a large corporation does not park millions in a low-yielding checking account. They pay out on time, and only float cash through that zero-balance account long enough to pay out on all presented checks.
They won’t cash the check, because ( perhaps ) it is drawn upon a zero-balance account.
Ah. thanks. Now that you describe it, I remember that there is a difference. I wouldn’t have been able to describe it as well as you did. So a bank is in fact obligated to honor a draft against one of it’s accounts asssuming sufficient funds and sufficient ID. Good to know.
In all this discussion, don’t overlook the difference between Bank Policy and grumpy, dyspeptic bank tellers. Sometimes they just like to stick it to ya, because they can. As a civil servant myself… I would never do such a thing. Ever.
In Canada, the local bank branch holding the account from which the cheque is being drawn has three days to either honour or dishonour the cheque. A cheque must be honoured unless there is a valid reason to dishonour the cheque, and the person trying to cash the cheque not having a bank account is not such a valid reason. Check out Canada’s Bills of Exchange Act.
Diosa he should have given them his cell number when he opened the account. It probably wouldn’t have helped, but it would have been funny.
This happened to me at the bank down the street from where I worked (it was Chase). I went back to the office and said to my boss (owner of the company), “Bob, your check’s no good. They wouldn’t honor it at the bank.” He called the bank right away. I had only a little resistance after that. I woyld ask to see the manager, and sometimes remind him of the last time they had turnedme away.