Banks and non account holder checks

Factual Questions
1

My mom gave me a check and I tried to cash it today. Usually she writes me check from another bank, which I don’t have an account at, and they have no problem cashing the check, although they make me fingerprint it. This time she gave me a check from a different bank, which I also don’t have an account at, and they refused to cash it.

Back in civics class I had been taught that checks are bearer instruments, and banks are legally required to cash them even for non account holders.

So is this:

  1. Something that was never true, an urban legend of some kind?

  2. Something that used to be true but changed?

  3. Something that is or was only true in certain locations (I’m in Long Island, NY).

  4. Something that was and is still true, but banks are somehow flouting the law? If so, how can I remedy their noncompliance?

Yes, I realize I could just deposit the check at my own bank, but that takes days to clear and I needed the money right away. I ended up getting my Mom to just come to the bank with me but that was quite a hassle for both of us.

2

“The non-customer has no relationship and no right to claim a wrongful dishonor”

From here.

Best I could come up with.

3

High school civics classes don’t tend to know much about Section 4 of the Uniform Commercial Code.

(From here)

4

From the link, it seems that the person writing the check does have basis for complaint, although it would depends on their ‘deposit agreement’. I guess banks could put whatever the hell they want into the deposit agreement then.

Non-customer, but is check from the correct bank.

5

But the customer who wrote the check has the right to claim wrongful dishonor when the bank the check is from refuses to cash it for a non-customer. Otherwise, there would be no point to a checking system, nearly every check is presented to a bank by a non-customer - be it an individual that is the payee on the check or another bank who holds the check through a normal line of endorsement.

The short of it is that if your mom’s bank refused to cash a check drawn on them because you are not a customer of theirs, then your mom has legitimate grounds to walk into her local branch and rip the manager a new one. Somebody messed up, and in only slightly different circumstances, the bank could have caused your mom trouble.

6

I’ve had banks try this on me before and I’ve ripped them a new one, and ended up getting the cash. Next time stand your ground.

They don’t have to cash checks for any random schmoe that wanders by, but they do have to cash checks against accounts they hold.

7

I’ve noticed more and more banks that have signs saying they won’t cash checks drawn on their bank, unless the person trying to cash the check also has an account there.

I’ve also seen signs saying there would be a five or ten dollar surcharge for cashing checks drawn on banks if the person trying to cash the check has no account at said bank.

I recall when I was the asst controller of a hotel and I went to great pains to make sure that our payroll checks would be drawn on a bank that would agree to cash the checks even if the person who the check was made out to, didn’t have an account.

It was First Chicago or NBD (This was a long while back obviously) and they got me so mad as, they would cash the check, but not at the bank located two blocks from the hotel. They would only cash it at their main, downtown branch bank. Errrrr…Banks I tell you, they love to drive you nuts huh?

8

It’s their way of browbeating you into getting an account. When I lived in Arizona my employer had to threaten to pull all of his accounts to get the bank to cash his paychecks for me. I think they should be legally required to cash them. What is a check after all but instructions for your bank to “Pay to the order of” a person x amount of money? I thought that was what you had a checking account FOR.

9

I’m a bit torn (maybe it’s time to move this from GQ to GD) - on the one hand, I can justify needing a photo ID to protect the account holder, OTOH, I think fingerprinting is way too Orwellian, and requiring patronage is just plain greedy. And… requiring patronage to some bank, somewhere, also seems Orwellian or… something. I can’t completely illuminate my reasons for wanting people to be able to be “off the grid” if they desire, but the empathy for such people seems deeply, almost biological, empathetical.

Although, I might just be greedy myself, wanting instant check cashing and use of my credit cards for purchases under $10.

10

jackdavinci, is it possible that your mother lacked sufficient funds in this account?

11

First of all, What is this cheque you’re talking about? I haven’t seen one of those for the last 25 years or so.

That said, to my layman common sense a cheque is just a message from an account holder (read “a person whom the bank owes money”) to the bank stating “hand out so and so much money to the person holding this piece of paper” and it’s none of the bank’s business what said person wants to do with it.

12

My daughter had a couple of five-dollar checks from taking surveys at the mall. When she went to the bank they were drawn on to cash them, she was told there would be a six-dollar service charge per check and she would wind up owing the bank $2.

I ended up depositing them into my account for her.

13

Noticed the same thing over the last decade or so. When did this get (a) common and (b) legal (or was it always legal … and if so, why weren’t banks doing it years ago?)?

Used to cut lawns for money in my teen years (mid-80s). It was mostly a cash business, but some patrons paid me with checks. I never had a hint of trouble cashing their checks at their banks while I was a non-account-holder. Obviously, this wouldn’t fly in 2010.

14

Bullshit business practices like this are what causes some fed-up yahoo (who was unable to cash a check that someone wrote him) to get all liquored up one night and go down to the bank at 3 am and toss a brick thru the plate glass window…

15

The thing about this is you have to look at it from all angles and sides.

First of all let me say from a personal standpoint, I think that a person ought to be able to walk into a bank and cash a check drawn on that bank, for free, providing he/she has proper identification.

But my opinion means nothing :slight_smile:

Here’s what I learned when I worked as an Asst Controller, and was looking to find a bank to manage our payroll and allow our employees to cash the check for free.

Understand banks operate under several rules. First of all some banks are national chartered and some are state chartered. Different banking regulations apply.

Under the UCC (Universal Commercial Code) banks indeed are required to cash a check free of charge. Under the UCC if a non customer complies with the requirement for identification and has a properly drawn check the bank is required to cash it.

The UCC says that it is wrong not to honor the check and if the bank doesn’t it may be liable for damanges.

Now here is where it gets funny. Under the UCC the person presenting the check to be cashed is NOT a customer. The person who wrote the check is the customer. So the person who tried to cash the check has no standing to bring suit and therefore can’t do anything about it. The person who wrote the check would have to bring suit.

OK fair enough, but if the person who wrote the check sued, he/she would have to prove that there were actual damages TO HIM, not to the person he wrote the check to.

The UCC also says the bank may require the person trying to cash the check to present reasonable identification, but leaves that wide open. What is reasonable? That’s up to the bank and a judge. :slight_smile:

Now you’re thinking OK I understand…No you don’t it gets even stranger.

Awhile back Texas tried to pass a law requiring banks to cash their own checks to non account holders for free.

The banks sued in federal court and the federal appeals court came up with this:

They said that that in fact the person trying to cash the check WAS a customer. OK this is in conflict with the UCC. And the federal appeals court said, that banks are allowed to charge fees to their customers who hold accounts. Makes sense right. If you open a checking account there are always tons of fees right?

But since the court said that a non-account holder tries to cash a check, is actually a customer (though not a customer + account holder), the bank CAN charge him a fee, because banks can charge fees for their customers.

Of course that ruling applied to federal charted banks only.

So now you know…No not quite…

State charted banks operate under rules from states, and those vary from state to state.

In Illinois where I live for example there’s a law that states banks are required to pay checks at par value. But it later goes on to say “when transmitted with a cash letter.”

This confuses many who don’t read it fully. A cash letter is a group of checks and a paper listing of them sent to a clearinghouse for negotiable instruments. Since an cashing a check for an individual isn’t the same as cashing with a cash letter, the law (in full) doesn’t apply.

So that is that right? Nope…

I went with Bank Of America (which I personally hate, but had a good banking program), which allowed our employees to cash their payroll checks for free. But get this, NO OTHER CHECK for free.

So if you went with a payroll check from Markxxx Hotel and it was drawn on Bank of America, and you didn’t have an account at BoA and tried to cash it, as long as you could prove you were an employee, (you had to show your employee ID and give a fingerprint and state ID or DL), BoA would cash your check for free.

BUT

If I gave you a personal check from my BoA checking account and you, as a non-account holder at BoA tried to cash it, you would be charged for it.

So as you can see it’s really complex.

And I’m sure there are tons of other regulations that come into play. So good luck trying to figure out the maze of banking laws :smiley:

16

OK, Marxxx … but do we know why banks weren’t doing business this way, say, in the 1950s & 1960s? Or even in the 1980s (though I bet this stuff was creeping in by then)?

Is the UCC of more recent vintage than that?

17

No, the bank teller specifically stated that the bank’s policy was to never cash a check to someone who doesn’t have an account there, even though the check itself is from an account holder. When my Mom got to the bank, she was able to cash the check with no problems.

18

I wonder if this isn’t a method of building a paper trail. Banks can and do reverse checks, occasionally months after they have cleared. Obviously that isn’t possible if the check is just cashed. The policies and practices described upthread all seem to have something to do with cashing a check, not depositing it. Once the bank turns over cash, there is no way to reverse the payment. If the check is deposited in an active account, then they always have the option of recovering the money.