How do you handle accounts that are classified as consumer checking accounts, but the customer is clearly conducting a business out of the account?

Tell them to open a business account or you will close their personal account. What other options are there?

The loan officer or account officer - telling me that's not happening.

One thing you can point out to those people are that when you disclose to a consumer account- you disclose Reg E, and that you are thereby extending Reg E protections, so when these corporate ACH transactions post, you could take a loss. Beyond that, anyone in your "chain of command" that could help? Another issue is accepting for deposit business checks into a personal account- there are many issues here.

It is important for banks to get these accounts into the proper categories (consumer or business) so that they are handled properly for AML (risk ratings, monitoring, risk assessments (how many accounts in what category) etc.)

Also, the "loan officer" should not be making bank policy. As Kathleen suggested - take this to a higher authority.

Also, let the Officer know you could be losing some fee income. With the daily max on NSF fees in consumer DDAs, you may not be getting the opportunity to charge for the full number of presented NSFs that you could on a commercial account.

One of the banks where I worked had a great policy: If an officer wanted to give instructions to someone who was not a direct report she had to talk to her peer in that area. If I was a VP of lending I would have to go to the VP of operations to give an "instruction" like that. It stopped this kind of garbage...