Check verification & privacy

What does privacy have to do with a check verification? I must be missing something big, because I do not understand what privacy has to do with verifying information already given to my by any person who writes a check to our bank. I've spent all morning trying to talk to a REAL person at a large bank. (no, I'm not kidding, I really tried!!) Finally, after calling about five different numbers, I talked to a gal who says "I can only verify that the account is legitimate due to privacy". Why????? This person wrote me a check, with all of his personal information, including account number. Basically, by writing the check to me, he is saying that there is money in his account. Why can't I verify it?

Seriously, am I missing something? I'm so frustrated I could blow a gasket. This 'Privacy' policy only hurts us, the small community bank. And it certainly doesn't help the consumer, (who is also my customer), who wrote me the check. Now he gets to wait 11 days to get his money. (non-local check, account repeatedly overdrawn)

OK, I think my therapy session is over. Still, if anyone can enlighten me, I'd appreciate it. So would the gal I talked to this morning, LOL.

Fraud has really occurred thru check verification. How does the bank KNOW that you are another bank? You could just as easily be joe criminal who stole the checks from the mailbox calling to find out how much is in the account. GLBA does not prohibit check verification, however, it does provide that the bank make a reasonable effort to verify the party to whom they are speaking prior to providing that info.

The reasoning is that, while the person wrote the check, they did not give you balance information, which you theoretically could obtain. The balance information could be considered nonpublic personal information under GLBA and Reg P.

That is the reason so many institutions have stopped verifying funds.

Just for the record, I disagree with this stance.

When I was a teller, eons ago, we were able to call another bank to verify that the funds were available. We had a special code that we had to give that allowed the bank we called to know that we were actually who we said we were. They were not allowed to give us any information due to privacy. We were able to tell them the account number and the amount of the check and they would then say "yes, the funds are available" or "no, the funds are not available". This may have changed since I was a teller/on that side.

I really don't think that it is a privacy issue. Most large banks choose not to do it because it's too time consuming and expensive and they use privacy as an excuse. They are also guarding against pretext calling. But the real fact of the matter is, calling the bank and verfying funds doesn't buy you a thing anyway. There is no guarantee that the funds are going to still be there when the check shows up. You're the one who apparently thinks "your customer" is a risk. Verifying the balance over the phone doesn't change that and never has. It was always a poor banking practice.

Not to be coy, but how did the "gal" at the bank know for sure you were who you said you were and did not find or steal the check and trying to find out how much you could alter or forge the check for? At least they verified it was a "legitimate" account which is more than a lot of the larger banks are doing today.

It started with privacy but really became a security concern. Here is a question from privacy headquarters at the time, now Compliance Headquarters
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Question: When a merchant calls to verify funds, and the account has been closed or a stop payment has been placed, can we inform them of such an event?

Answer: There are three concerns here. The first is whether you may answer such an inquiry at all, without having to provide an opt out right to your customer. It appears that responding to a legitimate merchant inquiry relating to a check written to the merchant by your customer would fall within the opt out exception in __.14 as being a disclosure necessary to enforce or effect a transaction initiated by your customer. The second concern is under the information security guidelines. You have a duty to safeguard the confidentiality of your customer's information. Only if you have taken appropriate steps to verify that the request is a legitimate one (and not a pretext call) should you give out funds verification information. The third consideration is that if you do undertake to respond to such a call, your response should be accurate and complete, but should not give any more information than is necessary. In our view, it is appropriate to reveal that the account is closed or that a stop payment is in place, but revealing more than that may be going too far. (posted 05/02/01)
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OCC Bulletin 2001-51 states the same thing on page 42. Check verification is technically OK but there needs to be caution that you know who you are talking to. That is where many banks have steared clear of this. Many banks have decided that they do not have sufficient resources to determine that the call is actually legitimate.

Many of us out here sympathize with you!

Here's something even more troubling - our telephone banking software vendor offers a feature by which a merchant can enter account information from a check and verify funds. No human interaction at the bank is necessary. I hit our IT department with just about all of the risk issues outlined in the posts above, including fraud potential, ability to determine a customer's balance by repeated calls, security of the system, audit reporting...

Needless to say, we aren't turning this particular feature on.

I totally agree with all of the posts, but bottom line, why should the bank care if I'm a banker. I already have balance information, my customer is telling me there is $the check amount in his account. I realize that there may not be money tomorrow, and I would still use the protection of Reg CC in some capacity. Bart pointed out that some banks have electronic verification services. We're not asking for a balance, just verification of honesty.

Anyway, I'll try not to get mad at the next big bank that will not help. And I'll thank my lucky stars that real people still answer our phones. Thanks for letting me vent and lending your opinions.

The point of knowing who you are giving the information to is not make sure you are a banker but to make sure that you are not a pretext caller or a theft. Technically I could steal your checkbook or get your account number through other means and then I could call your bank pretending to be a legitimate person to whom you issued a check. In the course of "verifying" whether or not you have funds. I now know to some extent what you balance is. And therefore how large of a check I could cash at the bank down the road.

The idea is to stop the bad guy but in the process they have stopped a lot of good guys from getting the information that they need.

Send it for collection (overnight), wire fate, and you will know the result in a few days. Why even call? They are not going to put a hold on the item! It's not the response that is in question, it's the frustration you get for trying something that lacks a result that compliments your situation or assists the customer.

Hopefully, you would not give the customer immediate credit if the other bank verified the check as good (good at that time), correct?

Check out this previous thread:

Privacy and check verification

It caught us by surprise a few months back. Now we know not to even bother with "Wells" or "BofA". If in doubt, we put the longest hold on that we can justify under Reg CC.

The way I have seen this is pretty much what Randy and some others indicated. Call it privacy, call it security, but what it is, is a cost savings by NOT verifying balances.

By not doing this they save people, time, resources and liability. Nothing says they have to do this. It used to be done as a courtesy. We also used to provide loan payoffs for free. Many no longer do this either.