Nonpayment Disclosure to Payee
Question: Recently a non-customer contacted me with two items drawn on my bank. The two checks were stamped "NSF" and "Do Not Redeposit." This person had in her hand a letter that had been inadvertently sent to our customer from a Customer Service Representative indicating the checks had cleared. We will, of course, notify our customer that this letter was sent in error and that the facts are different.
The non-customer also requested a letter from us stating that these two items were not paid as indicated. The customer and non-customer are involved in a law suit. These two items and other matters are part of the suit. I agreed to prepare a letter simply stating that the items we viewed were not paid. I was planning to include the account number and check numbers in the letter. Compliance advised me not to send the letter, based on customer privacy issues. My question is: how are we violating customer privacy regulations? The letter was not sent and I informed the non-customer that a Court Subpoena would be necessary for the bank to respond.
Answer: Seems as if we're all getting a bit paranoid with the privacy bit, doesn't it? The non-customer is the payee on the check. He has a right to know if the check was not paid, because he is a party to the transaction. You would not be in trouble if all you did was state the facts in a letter addressed to the payee. "Check Number ### in the amount of $$$, dated 0/0/00, payable to the order of XXX drawn on account number ### was never paid, according to bank records." You are not revealing this to a third party - only to one of the parties of the transaction. Our customer privacy regulations have to do with third party revelations. You probably would have been OK writing the letter, as all of the customer's information was already on the check in the non-customer's hand.
Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 8, 8/05
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