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Policies and Guidelines For Handling Losses

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I am trying to write guidelines for our Branch Managers for handling losses or potential losses reulting from overdrafts, returned items, forgeries etc. For instance, send a letter certified and regular, if not paid in x days, contact x, when to file a police report, etc. Have you ever come across such guidelines or procedures?

In reviewing your question, I am assuming you are looking for procedures to handle checking account problems. Every financial institution handles these situations in the same manner normally using the right of offset, sending letters or making telephone calls to customers. The exact procedures they use depend on the corporate culture of the bank.

The best way to write procedures is to take the check and trace the operational route it takes in your bank for processing. Then you can eliminate any redundancy or wasted time in processing a check item. Next, determine the method you wish to use to dispose of the item:

  • Send it to your lawyer after a specified dollar amount.
  • Send it to law enforcement for prosecution.
  • Write it off to a specified account.

When you have determined whom you are going to send the item to have a meeting with them. Establish what information and items they need to accept the case. Law enforcement agencies generally will welcome you warmly if you are making life easier for them. This will help to obtain good cooperation in other areas of your security program.

Don’t forget to include in your procedure how to flag the account or close the customers accounts with your institution while reporting them to someone like chexsystems.

My recommendation is always to use the right of offset when items are returned to your financial institution. Some institutions want to be customer friendly and don’t use the right of offset as soon as a problem occurs, other institutions use the right of offset as soon as an item is returned. Write the procedure that fits your political situation and if you are not using right of offset immediately place a memo in file for the exact reasons you are not following this practice.

A sample procedure follows:
The customer has no money in any accounts and the right of offset can’t be exercised.

1. Upon return of a check call the customer immediately; if the customer doesn’t respond by 5 PM send form letter one.

Form letter one:
This letter would be sent regular mail giving the customer five days to resolve the problem.

2. After five days form letter two will be sent to customer threatening action, such as the item will be sent to security if no action taken within five days. This letter will be sent regular mail and certified mail.

3. After ten days all accounts for the customer will be closed and the customer is reported for nonpayment of an item. The item is sent to the Security Department for review. Security will than determine the next steps to follow.

Once you have established what your police or legal advisor need to start a case have these steps added to the procedure. The reason one sends a letter certified and regular mail is that many people who are in trouble will not accept a certified letter. By sending it both ways it informs them the situation is not going away and they will at least read your regular letter, even if they deny it latter.

First published on 2/11/02

First published on 02/11/2002

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