I Know There Are A Lot Of Banking Regulations, But I'm Not Familiar With All Of Them

"I Know There Are A Lot Of Banking Regulations, But I'm Not Familiar With All Of Them.

This Is Just Our Policy."
A friend of mine called me the other day, "mad as a wet hen", as my Mom used to say. He had just come from the financial institution that he deals with and was so frustrated that he had to let it out on someone. He called me because he wanted to know "where I can report this type of stupidity where it will do the most good."

My friend is a former banking attorney, who is now co-owner of a new car broker business. He says he likes his new profession a lot more than his old one!

In the course of business, he received a cashier's check for $14,000 payable to the purchaser and to him for a car. He took the check to his bank, (which is a VERY large bank), with the purchaser in person. He wanted to have the purchaser identify himself, endorse the check there, he would also endorse it, and then deposit it into his account.

The bank refused it.

Their reason? The manager told him that on the endorsements the bank was the first endorser, the purchaser the second one, and my friend was the third one-and the following is a quote?"and that makes it a third party check, and we can't accept a third party check because it destroys the negotiability of a check when it is endorsed the third time."

The branch manager would not budge from this position, nor would he call the legal department of the bank to verify his incredibly incorrect statement.

So the purchaser of the check went back and got another cashier's check-this time payable only to my friend.

My friend went back and deposited the check into his account, but not until he was required by the manager to write on the back "Pay to the order of ______ Bank". Keep in mind this was an official bank check, payable to him! When he then tried to withdraw a small portion of the funds, they refused. He was told none of the money would be available for ten days! (He was given NO notice-then or later!) He said to the manager, "Have you ever heard of Regulation CC?"

The manager replied, "I know there are a lot of banking regulations, but I'm not familiar with all of them. This is just our policy."

It's not hard to imagine why regulators and lawmakers get so "riled up" as they do, when you hear stories such as this. No matter how hard training officers or compliance officers try, there are bound to be some individuals and offices that fall through the cracks. Maybe they were "out sick" the day that was covered!

My friend was concerned enough (and mad enough!) to call the compliance officer of this institution as I suggested and alert her as to what had occurred. If the situation can be "fixed" before the examiners get there, that financial institution may avoid some real bad publicity, some fancy writing up, and maybe even a possible fine!

The answer, I guess, is to just keep plugging. My lawyer friend even did one more thing to try help this situation. He came over and picked up several back issues of the HOTLINE from my office, dropped them on the Branch Manager's desk, and suggested he read them!

Copyright © 1995 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 5, No. 10, 7/95