Check Cashing Recourse

Scenario:

Customer comes in to cash check on his account at another bank. He has compensating funds so we cash check. Check is returned NSF twice. At all of the banks I've worked at before, we charge the item back to the customer's account. Employees here think this is not legal. They charge such items to a teller return account and leave it up to the teller/manager to collect. Any thoughts?

We've always charged it back to the account of the customer...

I would say it's possibly a state thing; but I noticed you're in Iowa, and the bank I worked for last had branches in Iowa and we did the same thing...

Did he:
A) deposit the check into his account and then withdraw the funds, or
B) simply cash the check?

If A, then charge the item back to the account. If B, then how do you charge the item back to an account it was never in to start with?

I recommend you require all such transactions be handled through use of a deposit ticket, rather than simply "cashed".

So you're saying your bank never cashes a check (drawn off of a different bank) for a customer of yours that has offsetting funds
in their account? You always make them deposit it and then withdraw it when it's available?

They can get cash back immediately, but they have to deposit the item. IE: Have them deposit the check using a deposit slip with the cash they want in the "less cash received" section. That way the check is a bounced deposit item - not an unsecured loan from the bank.

We too charge it back to the account of the customer since the availability of funds in that account helped us make our original determination to cash the check or not. It seems rather cumbersome to complete a deposit slip and perform a deposit with cashback tranaction each time a customer wishes to cash a check. I have worked for a credit union, a savings bank and a large multi-state bank, and all three have performed check cashing, and charge back to the accounts if the check came back bad.

This may even be in your account disclosures (this specific situation is disclosed in ours), maybe listed as a set off provison?

We too cash checks for our customers with compensating balances and if returned, we also charge back to the customer's account here.

We charge it back to the customer. If there are not enough funds in the account when the check is presented NSF, we send it to the cash items of the teller that cashed it. It is then up to that branch and teller to collect the funds from the customer.

Thanks for all of your responses. I re-read our right to set-off and I think that is what covers us.

Did you read the customer's account agreement? It might specifically allow for set off of the account for just such an occurrence.

________________________________________________
Aunt 'Em--
Hate the Farm.
Hate Kansas.
Hate You.
Took the Dog.
--Dorothy

The endorser's obligation when he signs the check is to pick it up if it is returned unpaid. The UCC does not provide that he must also pay you a fee. That doesn't mean you could not impose a fee, just that your right to do so is not a given. For the sake of conversation, I'll say that if you posted a sign saying such a fee would be imposed where it would be likely to be seen by payees cashing checks, it would be a reasonable thing to do.

The drawbacks are:
a) the signs will plant the idea in some other customers' minds that checks can be cashed, not just deposited and
b) if the payee is willing to pick up the $700 check, but unwilling to pay the $15 fee what is your bank going to do about it, refuse to accept payment for the check?

It does not make a lot of sense to use an account balance as the basis for making a decision, but yet fail to use the account as a source of repayment when the item bounces. Assuming the proper language is in the account agreement, I would charge the return item to the account and impose the fee already disclosed for return items under TISA.

We treat it the same as if they deposited to their account. it is charged back against the account which it was cashed against and a return deposit fee is assessed.

You should have something in your Terms & Conditions like the following:

"if any item you have deposited or cashed is charged back to us for any reason, you authorize us to charge any of your Accounts, without prior notice and at any time, for the amount of the returned item, our returned item fee, any interest paid on that item, and any other fee we pay or incur."

Ours is in the "Deposit Rules" section.

Do you disclose this fee separately than your returned deposit items on your fee schedule?

We charge the item back to their account with a description of "returned cashed item" and assess a returned cashed item fee. I have worked in banking for 30 years at 3 banks and this is how it was handled at each one. Also, the verbiage is listed on the terms and conditions that allow us to do this and the fee is disclosed on our handling fee schedule.

This is about "contract" not "custom."

Know what your contract says...