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Are Safe Deposit Services Really Safe?
In looking over the products now being offered by financial institutions, one that makes the least money - and perhaps the least sense - is the service of offering safe deposit box rentals. Of all the areas of the bank, this is the one that is most vulnerable to lawsuits for improper or illegal entry and/or loss.
We don't know what goes into the boxes, though sometimes our box holders are more than willing to tell us. One renter, for instance, told the vault attendant he didn't trust their preparation for the year 2000, and so was gradually withdrawing all his balances and storing the cash in his safe deposit box! What the financial institution had was a customer who was structuring by withdrawing less than $10,000 in each transaction, and, as the conduct and actions were certainly beyond the normal for this individual, they felt required to fill out a Suspicious Activity Report.
We know, by a bank that tested by using drug sniffing dogs, that there are narcotics stored in our safe deposit boxes. Why not? It's a perfectly safe place to keep them!
All a box renter has to do is claim something missing from a box in a vault area that has less than perfect, consistent, access procedures and the financial institution, in order to protect its image and reputation, is going to pay up, rather than suffer the publicity that is sure to result from such a lawsuit.
We've referred to some particular lawsuits in past issues. The safe deposit clerk who claimed the boxes were waterproof, and the subsequent loss of a $315,000 violin stored in a box during a flood; the deputy who was permitted into the box the day after her name had been removed from the contract by the renter; the locksmith who broke into boxes because he was left alone in the vault while he worked; and the renter who copied the guard key are all prime examples of bad news for our industry.
Whenever a financial institution gets hit with a claim in the safe deposit area, the fear is that the information will get into the media, and be broadcast, and thereby damage the image and reputation of the bank. Therefore, in as many cases as possible, and as quickly as possible, the claims are settled. In the few cases that do reach the courtroom, the odds are greatly against the financial institution.
Most of the claims stem from inexperienced employees allowing access to boxes by unauthorized people, or accomplishing access in such a careless manner that it almost invites lawsuits. In our downsizing, cutbacks, and part-time employee staffed offices, in some cases access is provided by just anyone available. This is risky business.
With mail-box stores and other safe deposit providers entering the business, it might be time to re-evaluate offering of safe deposit services. With some boxes renting for $5 or $6 a year…even with "big city" boxes renting at $20 or $30, it certainly is not a money maker. And, it just may not be worth the risk.
Copyright © 1998 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 8, No. 5, 5/98
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