Due to an increase in fraudlent checks, we've recently started giving cash back on collected funds only.

At a recent meeting, someone said we were in wrong by telling a customer we would only give them their money back if the funds were collected. She stated in order for us to do this, we actually had to put a hold on the account? Is anyone familiar with this?

On our system, there's a Reg CC table put in place. When the checks post at night, the system reads the routing number to determine the float date. The tellers then, know when to fully release funds. Is there anything wrong with this practice?

What else is everybody doing?

Yes, there is something wrong with this - unless you have provided your customers EFAA disclosures that indicate that mandatory holds will be places on their deposits. The hold times that govern funds under the EFAA also have nothing to do with the time period to receive collected funds.

Also, just because the funds are collected does not indicate that funds are any good. Sounds like your bank needs to reassess it's processes.

This reminds me of the day I had to explain to our COO that "collected" did not actually mean "collected" - after he spent a chunk of change with the bank attorney revising wire transfer forms to ensure we never lost any money on wires. Never say never.

Call me dumb, I don't care . But this doesn't make sense to me. We are required to have collected funds at our bank for wires and cashier's checks - it shows as "current available balance." Are you saying this number really means nothing? Or, are you saying that these funds can ultimately be returned down the road by the other bank?

Someone else brought this up... they were saying funds show as available after a certain number of days regardless of whether checks is good (no hold placed).

"are you saying that these funds can ultimately be returned down the road by the other bank?"

That is what we are saying. It just means the bank has received "provision" credit for the item.

LC083 - When a customer deposits a check, let's say a non-local check for $15,000. You may receive provisional credit for that item in 2 days. The item may be returned to you 9 days later.

We use the "collected balance" field for interest accrual purposes. We are allowed to accrue interest from the day of a check deposit or from the day we receive provisional credit for the deposit of the check. It has nothing to do with the actual "clearing" of the check.

Going back to the original post and re-asking her question. When should funds be released to the customer after making a deposit - assuming no hold placed. I've heard other tellers tell customers "the funds haven't cleared your account yet and so I can't give you cash back" (or something similar) - is this allowed if no hold is placed originally?

Also, when do banks even know that funds have cleared? Aside from calling the paying bank and asking them to verify check has been paid.

Well, I found the answer to my first question. Our Funds availability disclosures state that all deposits have next day availability unless a hold has been placed.

And as for the second question, the system works on an exception report basis. Payment is assumed after a reasonable period unless told otherwise. Or you can call the bank and hope it will even talk to you.

When you ask a bank whether an item has been paid, you may be triggering them to take a second look at the transaction. They may tell you it has been paid. Once review is completed, they may decide to return if they are still within their return deadline (especially if they suspect kiting). Don't count on a call back to let you know they changed their mind. If amount warrants you should get Reg CC returned return notice (or at least your Operations area will get a notice).

This is something I have NEVER understood . . . why do the banks use terms like "cleared" and "verified" if the check has not been verified by anyone? Why do the banking terms need to be confusing?

If you look up the word clear in the dictionary it says "certain; positive; free from obstructions" . . . but when the bank tells you that a check is clear it really just means that nothing has come up as a problem . . . yet.

Now let's look at the word "verified" . . . the dictionary says "to prove to be true; confirm; to test the accuracy of". So when the bank tells a customer that "the check will be verified in 24 hours" the customer believes that there is a process in place to actually verify that the check is proven to be true . . . either by picking up a phone or electronically.

So, why in this day and age when so much can go wrong after the fact, do the banks still use these misleading terms? Why can't the bank just tell the customer in plain English that "It could take 7 - 10 business days for the check to be verified as legitimate"


Shawn Mosch
Co-Founder of ScamVictimsUnited.com
There is strength in numbers!

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The same reason why there appears to be a need for a group like ScamVictimsUnited. If the general public was more educated about conducting financial transactions, they would understand how the check clearing system works. When a customer presents a check, it is the customer's check that is being collected, not the bank's. The bank is just acting as the agent of the customer, attempting to collect the check for the customer. The party to this transaction that is ultimately responsibile for determining whether a check is any good is the customer. If they accept a check from an unknown source and want to rely on the funds from that check, it is a risk that the customer has undertaken and not the bank. If the customer wants to know with certainy that the funds are good, they should request that funds be wired to them. Most people that complain the loudest are the ones that thought they were going to get something for nothing.

Just as a CYA, we have started telling our customers that a check has been "made available," and trying not to use the word "clear." If they want to get into it, I'll give the (brief version) speech about late returns, but most people understand, or don't understand so much they don't want to keep asking...

Because that is ounce for ounce, pound for pound just as inacurate as the language you criticize. After 30+ years at this, if I was a teller and a customer asked me when there was no chance that a check could be returned I would say a) damned if I know or b) the only way it cannot be returned is if you cash it at the bank it was written on.

It's instructive that you believe the blame is with the bank where a bad check was deposited, not with the person who decided to accept it or even the person who wrote it.

Haha, I will begin using this!

Thanks everyone!

I agree with this. So, who's "job" is it to educate them? I would think that a great way to educate them is to make sure that the bank employees are giving them accurate information . . . as in telling them that the best way to verify the that the check is clear is for the customer to call the issuing bank themselves.

There was a survey done by the Consumer Federation of America just this year and it showed that 59% of the people in that survey believed that the BANK verifed the checks that go through it.

My question is this . . . why can't we work together to educate people?

Shawn Mosch
Co-Founder of ScamVictimsUnited.com
There is strength in numbers!

Find us on Twitter, Facebook and more through
http://www.retaggr.com/page/ShawnMosch

Okay, so I am not in the legal department and maybe my wording is not any better, but there has to be some wording that WOULD be better. Just like you said, telling them that the only way to know for sure would be to take it to the issuing bank.

The only thing I blame the bank for is telling me that the check was clear, good and legitimate when it was not. I had several people in the bank tell me that all was fine . . . no worries was the answer one of them gave me . . . that was the only reason that we went forward with the transation. If they had said that it could still come back as counterfeit a week later I would have NEVER touched it.

Shawn Mosch
Co-Founder of ScamVictimsUnited.com
There is strength in numbers!

Find us on Twitter, Facebook and more through
http://www.retaggr.com/page/ShawnMosch

When I was in Operations I always instructed my employees, if they were asked, to tell the depositor that the only way to 'guarantee' payment of a an item was to actually take the check to the bank it was drawn on (if local) or send it to the other bank for collection, a service we would provide if they chose the collection route.

It is not always the easy way that people are looking for, but for those people that are not looking to get something for nothing, it is worth the extra hassle or wait to ensure they receive their payment without the threat of return or fraudulent activity.

I think that is a perfect answer to give the customer.

Shawn