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#260 - 12/19/00 09:34 PM CHECK VERIFICATION BY BANKS FOR RETAIL MERCHANTS
Anonymous
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I need to know if banks are required under any law to provide check verification information to retail merchants?

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#261 - 12/19/00 10:06 PM Re: CHECK VERIFICATION BY BANKS FOR RETAIL MERCHANTS
Andy_Z Offline
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I know of no law requiring this. Similiarly, there is no law that they have to accept checks from any particular bank.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

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#262 - 12/21/00 07:30 PM Re: CHECK VERIFICATION BY BANKS FOR RETAIL MERCHANTS
Jeffery A. Schmid Offline
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Joined: Nov 2000
Posts: 60
Hales Corners, WI 53149
I have also heard this question posed in the opposite direction. Is it permissable, in light of Privacy Provisions under GLBA to perform check verifications for retail merchants. We have been advised by legal counsel that it is acceptable as one of the permitted "exceptions" for sharing information. However, we were cautioned to express our response as "There is/is not enough funds to cover the check at this time" instead of "The check is good/bad".
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#263 - 12/21/00 07:39 PM Re: CHECK VERIFICATION BY BANKS FOR RETAIL MERCHANTS
tsorbe Offline
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tsorbe
Joined: Dec 2000
Posts: 55
Brookings, SD
Why the distinction between "Is there sufficient funds...?" and "Is the check good/bad..."?
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Trent Sorbe President First Community Financial, Inc. Brookings, SD

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#264 - 12/21/00 08:38 PM Re: CHECK VERIFICATION BY BANKS FOR RETAIL MERCHANTS
deppfan Offline
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Posts: 5,184
All over the map.
216.15(a)(1)(iv) Execeptions to opt out requirements says..."To persons holding a legal or beneficial interest relating to the consumer;" Wouldn't a merchant have a beneficial interest in the acceptance of a check?
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#265 - 12/21/00 09:24 PM Re: CHECK VERIFICATION BY BANKS FOR RETAIL MERCHANTS
Anonymous
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The key to the "Is there sufficient funds..." line is "at this time" so a merchant understands the funds are available right now, and may not be tomorrow, or when the check finally comes through.

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#266 - 12/21/00 10:24 PM Re: CHECK VERIFICATION BY BANKS FOR RETAIL MERCHANTS
Andy_Z Offline
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I too have been involved in this discussion several times. It is my opinion that this falls under an exception rule and you may verify if a check will or won't clear at that time.

The conservative point of view is that the exception won't allow it because you can't necessarily verify the request is authorized.

Some folks are simply going to have to make some business decisions until we have experience and resulting guidance on these issues. Hopefully we'll get more of that than mixed interpretations based on agency or location.

------------------
Andy Zavoina
Opinions stated are not necessarily that of my employer.

_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#267 - 12/23/00 05:22 AM Re: CHECK VERIFICATION BY BANKS FOR RETAIL MERCHANTS
Jeffery A. Schmid Offline
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Joined: Nov 2000
Posts: 60
Hales Corners, WI 53149
I believe the distinction between the two reponses is this; the first statement is factual while the other may imply information about your customer that might be protected under privacy provisions.
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The opinions expressed are mine and do not reflect those of my employer.

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#268 - 12/28/00 10:58 PM Re: CHECK VERIFICATION BY BANKS FOR RETAIL MERCHANTS
tsorbe Offline
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tsorbe
Joined: Dec 2000
Posts: 55
Brookings, SD
Kirchman has issued an executive alert on this subject. Check it out at:
http://www.kirchman.com/compliance/alerts/ea0101-2.html

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Trent Sorbe President First Community Financial, Inc. Brookings, SD

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#269 - 12/29/00 04:45 PM Re: CHECK VERIFICATION BY BANKS FOR RETAIL MERCHANTS
Andy_Z Offline
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Thanks Trent. Good update. Here is a part of that text.

"The federal regulatory agencies have taken the position that verifying a check given to a merchant, whether it is contemporaneous with a purchase of merchandise by a customer or afterward, is within the exceptions and not subject to opt out by the customer. Accordingly, if a bank wishes to verify checks to merchants, it may do so without giving the customer the right to opt out of those verifications."

Read the entire document for additional cautions where this exception may not apply.

------------------
Andy Zavoina
Opinions stated are not necessarily that of my employer.

_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#270 - 12/29/00 08:13 PM Re: CHECK VERIFICATION BY BANKS FOR RETAIL MERCHANTS
John Burnett Offline
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John Burnett
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Cape Cod
Now let me get this straight. The purveyors of the Big Orange Book say --

  • if my bank receives a call from a merchant to verify a check drawn by a consumer on his account with my bank, I can advise the merchant whether the check is good at the time
  • if the same merchant calls to inquire about my customer's handling of his account because the consumer has applied to the merchant for a credit account, I can neither confirm not deny whether the customer has an account with my bank, unless the consumer has opted in or specifically given permission for the credit reference.
  • if another lender contacts my bank to obtain a payoff figure on my consumer customer's mortgage loan, because he is refinancing with the other lender, I cannot provide the payoff figure without an opt-in or specific authorization.

Is this a great world, or what? Or do you think that Kirchmann and company will recant their latest opinion?

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John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
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#271 - 12/29/00 08:30 PM Re: CHECK VERIFICATION BY BANKS FOR RETAIL MERCHANTS
Tonya Schomaker Offline
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Tonya Schomaker
Joined: Oct 2000
Posts: 46
Sioux Falls, SD 57104
This Kirchman article was also recently discussed in a thread entitled "Privacy Reg and Loan Payoff Requests".
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The opinions expressed are my own and do not reflect the views of my employer.

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#272 - 12/29/00 08:30 PM Re: CHECK VERIFICATION BY BANKS FOR RETAIL MERCHANTS
Tonya Schomaker Offline
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Tonya Schomaker
Joined: Oct 2000
Posts: 46
Sioux Falls, SD 57104
This Kirchman article was also recently discussed in a thread entitled "Privacy Reg and Loan Payoff Requests".
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The opinions expressed are my own and do not reflect the views of my employer.

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#273 - 01/02/01 02:40 PM Re: CHECK VERIFICATION BY BANKS FOR RETAIL MERCHANTS
tsorbe Offline
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tsorbe
Joined: Dec 2000
Posts: 55
Brookings, SD
John. I think you summarize Kirchman's understanding of the privacy regulation well. But, that doesn't mean you have to accept their opinion. I believe that the legislative history and the preamble to the proposed privacy rule and the final regulation allow for a more expansive reading of the exceptions than Kirchman appear's comfortable with.

Obviously, it comes down to each bank's reading and interpretation of the rule, as well as information or interpretation from the regulators. And, it doesn't help that the regulator's have been nearly invisible to the private sector over the last few months when it comes to privacy.

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Trent Sorbe President First Community Financial, Inc. Brookings, SD

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