We are trying to determine how we will handle overdrafts in deposit accounts that receive government benefits by direct deposit. One suggestion was to give the customer an open-end LOC to cover overdrafts and have an automatic payment from the deposit account on the day of or next day after the benefit ACH is deposited to cover any draws on the line. I think we might be stretching and am concerned that interest charged on the LOC might get us an even hard kick in the behind. Comments?

I've posted a similar question under the state specific forum, "Oklahoma". We are discussing the issue. Our additional twist is we just implemented an "overdraft protection" program, which includes many accounts that have direct deposit of SS & VA (et al) benefits.

Has anyone out there actually moved past the discussion phase? If so, what was your solution?

A degree of difficulty can be factored into this if you are not in the 9th Circuit and hear all these rumblings about friend of the court briefs, the 9th may look at this again, and organizations in DC want it changed from inside the beltway, as in a revised or clarified law.

So it may or may not apply to you directly, and it may or may not change. Those can be difficult variables to address.

I don't recommend any change. The bank has filed a request for the court to reconsider their decision (with the Social Security Administration involved in trying to get the case reconsidered). Also, the case itself is limited somewhat to the facts submitted. Read the case and decide for yourself--or better yet, have your attorney read it and advise you. If your attorney is not in the discussions, you are making a HUGE mistake.

We have read both the 9th circuit case and the 10th circuit case. My file of research material is about 2" thick. Our attorney is sifting through to render an opinion. The more you read and discuss the more the slope gets slippery. I have read that an amicus brief has been filed in the 9th circuit case. It would be great if the industry input makes a difference.

If you are in the 9th or 10th Circuits, I would have your attorney review the case from your Circuit, and make changes only if your attorney advises. If you are outside these Circuits, I would hold tight for now.

I am not an attorney, but I (dare I admit it) agree completely with zaibatsu on this.

To review and make changes now could be costly and tie up programmers from other pressing jobs. You could confuse customers who don't know or care about the ruling. You could negatively impact the bank's bottom line only to discover when it is done, that the ruling is reversed in some way and what was done yesterday, is fine. That doesn't earn attaboy points. It is an aw-shucks, and one aw-shucks wipes out 100 attaboys.

It seems to me that the government will have to address this. I totally agree that we should give these guys a chance to work this out. Can you imagine what would happen if we all suddenly wanted paper checks instead of direct deposits? Count me in on the "watching and waiting" sidelines for this one.

To add to the festivities out here in California, a privacy/identity theft law was passed last year that takes effect on July 1st. Among other things, the law prohibits the disclosure of the social security number on material sent to the customer in the mail, unless the social security number is required by law (Otherwise what would we do about 1099 and W-2 forms!)

So the wrinkle that develops here is for Direct Deposit of SSI, the ACH information from the Treasury Dept. contains.... the Social Security Number! Many data processing systems take the ACH addenda info and transfers it directly to the statement since it is the identifying information for the deposit.

So - along with deciding whether or not to bounce Grandma's rent check, we are scrambling with our data processors to figure out a way to remove this information before July 1st. Oh yeah - the prohibition was passed along to the Treasury Dept., and I guess they are looking into the issue of what information will be sent on the ACH.

Final thought for this thread - Do you think Treasury checks the OFAC list for SSI recipients?

Sure, they check OFAC at the same time Fedline checks it!

I wasn't aware that Fedline checks OFAC - or was your post made in a sarcastic mode? Pass the extra strength....

Extreme sarcasm.

Ahh... along the lines of "We're from the Government. We're here to help...."

Speaking of government benefit checks, does anyone know whether banks HAVE TO cash social security and other benefit checks? If yes, what source document can you point me to?

Thanks for all the help. I have turned this over to our attorney's and beleive that we will just sit on it and keep our fingers crossed.

DebbieS. We are not required to cash government checks. This has been hashed around in the system several times, but so far there is no requirement. I don't really see that happening any time in the future. But you just never know.

DebbieC and DebbieS - While there may not be a federal law requiring banks to negotiate Social Security checks for non-customers, there are laws in some states requiring it. For instance, banks doing business in Massachusetts are required to cash them, up to $2,500 (MGL167.46). You may want to check your state laws before deciding on a policy around this.

Here is the latest on Lopez v WaMu from the ABA:

The bank filed a petition for rehearing en banc; California Bankers Association, ABA and other co-sponsors filed supporting amici brief on April 11, arguing that the court's interpretation of the law would be so disruptive of normal bank operations that Congress could not have intended the result. The U.S. Treasury, Social Security Administration and Office of Thrift Supervision also filed briefs supporting rehearing. The court has directed the plaintiffs to file a response to the petition. Under the Federal Rules of Appellate Procedure, an opposing party is not permitted to file such a response unless the court directs the party to do so, but the court will ordinarily not grant such a petition unless it has given the opposing side an opportunity to be heard.

So it looks like they are very likely to rehear the case, and some pretty heavy hitters are weighing in on the bank's side of things. I am in full agreement with Zaibatsu - I would wait and see what happens when the case is likely reheard before making any major changes.

While listening to the story on the Pledge of Allegiance on National Public Radio this morning, my ears perked up when I heard them say it was the 9th Circuit court that had made the decision. (Where have we heard about them before?)

The reporter went on to quote Senator Don Nichols as saying that the 9th Circuit's decisions have been overturned 86% of the time.

Perhaps there is hope..........

The really sad part is that if someone told me I was making the wrong decisions in my job 86% of the time - I'd be fired.

Forgetting that, I'd at least try to improve my decision making.

Never let it be said that I defended Sen. Nichols, but surely the honorable court does better than that. Perhaps it's 86% of APPEALS, but even then, that is a dismal record. I'd be interested to know the source and full context of the Senator's information.

Can you say "appointed for life" boys and girls. We have judges like this on the bench while highly qualified nominations for our federal courts cannot even get hearings before Congress merely because the nominations were made by a Republican. These decisions are exactly what you get when we play politics with our judicial appointments.

I hope sombody remember's the word "impeachment" when it comes to these judges in the 9th circuit.

The Oklahoma Attorney General was quoted in the Daily Oklahoman this morning as saying, "It is the most reversed circuit court in the United States. In the last Supreme Court term there were several cases out of that court that were reversed 9 to nothing."

I'm not from CA, however, I am fed-up with some of the decisions our "leaders" are making. Ever heard the term "gone to ---- in a handbasket"? Well we are headed that way fast thanks to our "leaders" in this country.(That's my opinion anyway) Can't use the term "under god" and next it will be "in god we trust" taken off our currency. Why do we allow this to happen? Looks like if everyone would just ignore such stupid laws enforcement would be impossible...can't put us all in jail you know.
Our rights are being taken away from us on a daily basis. The USA Patriot Act is adding to that.

Recently a speaker at a training session said "some major banks had dropped the ball" (refering to terrorist money) Well, if you ask me, the government has dropped the ball more than a few times on this terrorist issue and now taking away our right to say "under god"! Good grief!

The explanation for the 86% figure is that it is 86% of the cases accepted by the Supreme Court for review. The Supreme Court only accepts a small proportion of cases for review, and then usually when there is a problem or a major constitutional issue.