Yesterday I got a check in the mail from a class action settlement (I used to own a car that was affected by the Takata airbag recall; it was related to that). The check contains the disclaimer in the title – “This check may not be cashed at a check cashing agency or money service business.” Why would they put this limitation on where a check can be cashed? I mean it doesn’t affect me – I just deposited it into my account at a local credit union, but why would they care where I cashed it? Something to do with preventing fraud? What would happen if I did try to cash it at one of those establishments?
My guess about the “why” is that it’s a lot easier to claim you never received/cashed the check if it was cashed at a check cashing service than if it was cashed at your bank /deposited in your bank account.
That’s a strong possibility.
Also checks are more likely to be fraudulently cashed at check cashing places. If word gets out that checks are coming today, mailbox thieves are likely to be on the lookout and will be more likely to cash them at a check cashing store than to deposit them in a bank account.
Thinking about it a little more: It may be a protection against the Holder-in-Due-Course doctrine.
If a check cashing place cashes a check, it has legal protection against many of the defenses that the issuer of the check could use against the payee. For example, if you pay a dishonest plumber to repipe your house, but the plumber disappears, you can put a stop-payment on the check (if the check hasn’t cleared your bank yet). But if the plumber then cashes the check at a check-cashing store that is not aware of the dispute, the check-cashing store can sue you for the value of the check and “the plumber didn’t do the work” will not be a defense you can use.
So a not-unheard-of scam is for someone to make a mobile deposit of the check and then take the same check to a check cashing store. When the check bounces, the store can make a claim against the issuer. An older scam is to report the original check stolen, ask for a replacement, and cash both checks.
The last paragraph is why i find it unfathomable that some banks will allow you to mobile deposit without writing “For Mobile Deposit Only” on it. I would think there is wide enough available technology to be able to support this requirement, and believed that the development of this technology to the point that it could be used for this purpose was a prerequisite of offering mobile deposit. But I was dissuaded of this opinion when I received in the source documents of a 1040 client an endorsed check from the US treasury for a whole shit ton of money. It obviously had been mobile deposited, or otherwise they’d be giving us a bunch of money for no reason, yet there was no indication (other than the circumstance) that it was. I remember thinking that if I was the criminal sort I might be able to get this eventually into the hands of someone who would become a Holder in Due Course, and cause a whole bunch of trouble.
Now that you mentioned it, my credit union’s app instructs you to write “For mobile deposit” under your signature when making a mobile deposit, but I have no idea if it will reject it if you don’t write those words. I’ve always just followed their instructions. This particular check actually had a checkbox under the endorsement line that said “Check if mobile deposit.” I actually did both – checked the box and wrote “for mobile deposit”.
There’s also the fact that those check cashing/money service places are often charging outrageous fees & service charges – real parasites, usually preying the poorest and most desperate people. (Which is why there are often attempts to ban or regulate them.)
So some organizations might want to prevent their clients from being cheated by these shady businesses, so they include such a disclaimer on the checks they write for that reason.
Does this prohibition have the force of law? Will the person at a check cashing establishment refuse to accept it? What if they failed to see the prohibition?
What are the alternatives for a poor person who has no bank account?
They will need to get a prepaid card, and those have sucky fees… but then so do check cashing places.
The bank that the check is drawn on must legally honor (cash) the check. I don’t know if there are any limits on the fees they can charge for that service.
The legend on the check probably has no force of law. If the check-cashing store accepts it anyway, it will probably go through.
But if the check bounces and the check-cashing place then makes a holder-in-due-course claim, the issuer of the check can use the legend as a defense because the check-cashing place had actual notice that the check was invalid on its face. Assuming that the legend was plain and conspicuous on the face of the check, that would be just too bad if they didn’t see it.
Googling around, I found that several companies have FAQs that state that if you return the original check to them, they will issue a replacement check without the restrictive legend.
One alternative is to sign the check over to somebody who does have a bank account. But in this century that is not a very viable alternative because many (most?) banks have placed restrictions on accepting third-party checks for deposit into personal accounts.
I stand corrected. Thanks.
I think part of the reason for the idea that banks must cash checks drawn on that bank is because they often do. The situation where this most often comes up is with a payroll check , simply because that’s the situation where someone without a bank account is most likely to receive a check*. And lots of banks make arrangements with their customer ( the employer) to cash payroll checks for the non-customer employees - but that doesn’t mean the bank will cash non-payroll checks for the same people.
- If I don’t have a bank account , I’m probably not going to accept a check from someone who owes me money and Grandma will probably put cash in my birthday card, not a check , if I don’t have a bank account.
My question about writing “for mobile deposit only” that on the check is what do you do if the check is not accepted during mobile deposit attempt.
There’s no federal law, but where payroll checks are concerned there likely is a state labor law. If there is no reasonable means by which employees can’t cash their checks, wages essentially are unpaid and that’s a violation of labor law. Most states have laws requiring that employers make arrangements by which employees may cash their paychecks “without discount,” which is the reason I find this original question surprising (I wouldn’t be surprised if the bank teller in this case was ignorant of actual bank policy). California and Florida actually require that employers print right on the check the address of a brick-and-mortar bank branch where employees may cash their checks, account relationship or not.
The only laws I’ve seen about check-cashing involve payroll checks - and the OP wasn’t about a payroll check.
Edit: sorry didn’t realise it was GQ, was thinking it it was IMHO, MPSIMS or the Pit.
California Labor Code Sec 212:
Note that Sec 212(a)(1) only requires that there be one place in the entire state where employees can cash their checks. I can’t find a reference to it now, but I recall reading that there was a check-cashing store in a small desert community that had a lot of contracts to cash California paychecks.
I hadn’t seen Section 212(c) before, but it sounds like it requires drawee banks to cash paychecks even at administrative or loan offices where they don’t keep cash or have tellers. I am thinking of places like Capital One Cafes where they only have coffee and snacks plus ATM machines. Plus I know there are Credit Union offices in California that are cashless, they must not have customers that issue paychecks.
Hopefully late enough in the GQ thread to speculate, but a manager at one of the cashless officers may have override capability (possibly a manager’s card) that allows them to process checks for non-customers by depositing them into a bank owned account.