We have a customer who is apparently writing checks on his account just because he has checks. We have charged off his account and closed it. On a daily basis, we have a merchant who calls to see if funds will clear on this account (apparently he has taken several checks on this customer!). If the merchant asks, can we tell him that the account is closed? Our bookkeeper has been told that we cannot give out this information - only whether the check will clear. She is getting 4-5 calls a day from this merchant on this customer.

While I would agree I would not share information such as balance, available funds, OD or not, I do not see why I wouldn't tell a merchant that such an account number is no longer a valid account.

Why allow this individual to continue to conduct fraud? Simply state "this account number is no longer a valid account number," and say no more. Let them figure it out and handle it from there.

Time for whomever told your bookkeeper this to get into the real world. Of course you can state that the account is no longer open. You are not providing anything other than stating fact.

I would be careful telling a merchant that the account is close. Saying the funds are not good at this time is about all you can say. He would have to put the check thru the clearing process or present it himself, then the check would be return to him with a closed account stamp. Just my experience.

beg to differ Kitty...if the same person came in to the bank and asked to cash the check, you would state the account is closed. Providing this info on the phone is no different.

I also beg to differ.

I would hate to lead a fellow local merchant on like that. You are not violating any privacy issues....you truly do not have an active account for that individual...nothing wrong with saying that, you would not tell a non-customer walking into the bank any different.

Now, they may still well choose to send the item through the clearing process for legal purposes, but that is their call.

I agree - what's the difference between sending the check back stamped "account closed" or just telling them on the phone? If it was a privacy issue to tell them the account was closed, then wouldn't it also be considered a privacy issue to return a check as "account closed"?

Granted, you're not going to tell them WHY the account is closed - that would be a privacy issue.

further, if you were getting called daily and just telling the merchant that there are not funds in the account, you are implying that the account is still open, just with no balance to cover the check. I'd hate to be the bank having to defend this action in court, especially with our litigous society.

The difference is that when a check is actually presented, you know the merchant has a right to know that the check is not being honored, and why. Over the phone, it is much harder to be certain of the identity of your caller, and of the fact that he or she is the payee of a check from your customer.

Granted, in this situation, you may feel like you and these poor merchants practically know each other well enough to attend one another's family reunions, but that's an exception. You may decide to make an exception in a given situation, but as an overall policy, I think it is better to require the check to be presented before divulging that the account is closed. There are just too many impersonators out there digging for information for me to feel comfortable giving out much. (My bank no longer verifies funds under most circumstances anymore, for similar reasons.)

We always ask for a check number and verify that that number is in the range of checks being used. That way we know they have a check from the account holder. If someone called to verify funds and they said the check number was 354 and the checks being written on the account were in the 700's, we would decline verifying funds.

There are no federal laws or regulations that suggest you cannot tell someone the account is closed. We have got to stop running from our shadows...

well said Ken, banks are often in the best position to stop fraud, yet are so scared of providing this information. Telling a merchant that an account is closed allows the merchant to move forward with any action he should choose to take. I wonder how long the bank would continue to tell the merchant their are no funds in the account. Common sense applies here, especailly since the account is closed, and the bank is not in a position to suffer a loss

We have procedures we follow to identify the person to whom we are verifing funds. Once that is accomplished, our folks have been instruction to state: "the check is good at this time", "the check is not good at this time", or "the account is closed". No further information is given. This seems to work well and helps our good customers and legitimate merchants. If they cannot provide the identifying info we request - they get nothing. the fraudsters and "diggers" - i.e. collection agencies or other semi-legit parties - get nothing.

Well said Ken.

Although I respect the opinions of the other professionals who've weighed in, and although my bank's policy was adopted several years before I came aboard, I must say after due reflection that I agree with my bank's decision not to divulge the open/closed status of accounts to third parties on the telephone.

I believe that the concern that led to this decision is not so much that a fraudster can make any use of the fact that an account is closed, but that it is useful for criminals to know that one is open. You can't tell callers that certain accounts are closed (or that the account number is invalid) without also giving away that certain accounts are open, and thus infinitely more likely to contain funds that may be snatched.

Is it far-fetched to think that a criminal might take every account number they can get their hands on (by dumpster-diving, phishing, whatever) and call banks to narrow them down to the ones worth the most attention? Not really. The bad guys spend as much time and energy finding ways to steal money as everyone else spends earning it. (So why don't they put that time and energy into honest work? Don't we all ask ourselves that?)

Yeah, I know I'm paranoid. My bank pays me to be paranoid, because the world is a scary place. Ultimately, I'm paid to protect the bank, not the merchants. I wish I could do both, but when push comes to shove, a small risk to my bank outweighs even a very large risk to the merchant.

I totally agree with you Fraudbuster, in my 25 years of banking we never gave that kind of information over the phone.

Do you disclose whether funds are available? I guess I'd rather someone know whether an account is open or not than how much is available. If someone calls up to verify a $10,000 check and I say "yes, the funds are available at this time", they now know that not only is it open, but there is over $10,000 in the account.

While I too completely respect every banks decision to provide or not provide information, I don't understand why you would say whether or not funds are available, but not say that the account is closed. I'm not criticizing anyone, just trying to find out why you would do one and not the other.

We have implemented a procedure that requires all funds available requests to fax a copy of the check on letterhead or official paper from the business to the bank. We will then either call them back or fax the check back saying whether or not it will pay with a date and time. This way we make certain that the caller has a check that is trying to clear and we can verify who it is made out to and whether or not the check has already cleared the account.