If a customer has an account that is overdrawn and wishes to cash a check that has been given to them by another customer drawn on-us, are we obligated to cash the check?

I don't know the regs on this one, but at our bank if the funds are collected in the account the check is written off of then yes, we do cash it. However, we let the customer know he is overdrawn and that the only reason we are giving him cash is because the check is drawn off us. That normally (but not always) prompts the customer to deposit part the cash into his overdrawn account.

I thought that even if the funds were available we didn't have to cash the item. We could ask them to bring the negative up or at least deposit part of the item before we would give monies back.

This would be according to each individual bank's procedures.

We would cash the item and remind them of their overdrawn account with us.

I don't think you can dishonor the check on another customer because the payee of the check is in overdraft. If I wrote a check to someone and my bank refused to cash it because they had an issue with this person, I would be furious.

Why not inform the customer you'd be happy to cash the item LESS the amount to cover the overdraft?

I also see a privacy issue here. You refuse the "good customer's" check because of a "bad customer" account. They go back to the good customer and complain. Goody wants to know why we wouldn't honor his check...what is wrong with my account??? Well,,, nothing is wrong with YOUR account.... Oh, Goody gets it now, their cousin, partner, lawn boy is in the hole. Explaining that it is none of goody's business why you won't honor his obligation is rather awquard.

Quite simply, if your account is overdrawn, or you owe us for a past account, we would require you to deposit the check into the account (which of course we quick kill on the account it is drawn off of, but it is not the customers business or need to know how we decide to clear the check) and we will provide you the difference in cash. If that solution is not acceptable, they are free to present the item to a local check casher.

We do not run an alms house, and we are not required to provide free services to customers who continue to abuse us.

I think this can be discussed, without violating privacy - it's just a coaching session with the staff, or the manager, in explaining, very simply, why a check wasn't cashed.

'Mr Jones, their are certain criteria that must be met in order for us to cash any checks that our customers write - unfortunately, in this instance, these criteria were not met and we were unable to cash the check for the presenter. These criteria are designed to manage the bank in a safe and sound manner, and to protect both our customers and the bank. Let me assure you that there was no problem with the check, or your account. As soon as the presenter can meet our criteria for check cashing, we are happy to handle the transaction for him/her. We did advise the presenter of alternatives in the event that they are unable/unwilling to meet those criteria.'

Doesn't seem too awkward to me.....they can make of it what they will - not my problem - I've said nothing that I can't say or defend to anyone who asks.

I have a responsibility to our investors, as well as our regulators, and taking a loss on a negative checking account is unacceptable when I have the opportunity to do something about it.

I would ask GP where the bank has 'dis-honored' the check - I see a condition of encashment, but not that we have totally refused to cash the check - I have often asked them to even put $25, $30 towards their negative balance - it works for everyone....why not?

According to the UCC (at least the Texas version) I agree that the above situation does not fit the definition of dishonor...

UCC 3.502: (b) (1) If a check is duly presented for payment to the payor bank otherwise than for immediate payment over the counter, the check is dishonored if the payor bank makes timely return of the check or sends timely notice of dishonor or nonpayment under Section 4.301 or 4.302, or becomes accountable for the amount of the check under Section 4.302.

Looking back at my post and the responses, I realize that I should not have rushed through my thought as I was headed out the door! My intention was to say that the situation required discretion, not that you would tell one customer about the other because they questioned why you took the action you did. Apologies for the foggy post.