Since this partially resulted in a $100,000 CMP, I guess that question has been finally answered.


The FDIC considered the matter and determined that the Bank
violated the prohibition against unfair and deceptive acts or
practices found in section 5 of the Federal Trade Commission
Act, 15 U.S.C. § 45(a)(l), in that the Bank’s practice of
collecting putative debts from non-deposit holding
consumers, who attempted to cash checks with the Bank,
through the confiscation of check proceeds without the
consumer’s consent and without proper legal process was both
unfair and deceptive.

Thanks for posting this. Do you have a link to the case it pertains to?

My response to the question was always that what the bank was actually saying when it did this was: "Sue me."

It turns out, that wasn't necessary at all. The consumer just had to put his case before the all knowing FDIC.

Thanks.

I can only say, it's about time! There are going to be a lot of banks doing a review of their tellers' practices. I honestly wonder how many bank management groups out there don't even realize they have tellers trying to do the "right thing by the bank," but actually exposing their banks to UDAP allegations like the ones resulting in this $100K penalty. We will be featuring this particular CMP order in next Tuesday's Tops Stories and Compliance Briefing not to point fingers at this particular bank (we won't even mention its name in our story), but to give the rest of our reading audience the "heads up" on this practice.

I agree, about time. This definitely needs to be shared.

So does this mean we shouldn't be charging a check cashing fee for non-customers even if it's disclosed before we cash the check?

This has nothing to do with check cashing fees. This has to do, for example, that if you close an account that had a $100 overdraft and sometime down the road the person showed up and attempted to cash a $200 check, you would only hand them back $100 without telling them a ahead of time that was what you were going to do. Or you would confiscate the check until they agreed to pay you.

Ah, I see. Thanks for clearing that up for me!

I'd really be curious to find out how some of these scenarios played out at the affected bank.

We've refused to cash checks for former customers with outstanding chargeoffs unless they repay the chargeoffs. Sometimes they pay, sometimes they walk, but we never surprise them with an undisclosed deduction, and we never confiscate their checks. We also don't apply this to payroll checks (we'll still ask for payment, but we won't refue to cash a payroll check if the payee declines to pay up).