Answer:
With some exceptions, a refusal to cash an on-us check could result in a suit by the drawer for wrongful dishonor. That can be pretty expensive, and bring with it some really negative PR.Exceptions?
- Branch cash constraints and demands. In most cases, a delay to allow the bank to obtain the needed cash is the solution. When security and cash levels are both involved, a dollar cap on check cashing amounts may be found reasonable, at least at some locations.
- Failure of payee to provide acceptable ID. Of course, you're expected to know for whom you're cashing a check, and your depositor can't really fault you for protecting him/her/it by insisting on adequate identification. But be sure you have a working, current policy on this question, or you'll lose credibility if your depositor drags you into court.
- Checks payable to entities. It's doubtful that an entity payee will have provided the individual attempting to present a check for cashing with an acceptable authorization to cash checks for the entity. Without it, your bank needlessly exposes itself to increased risk if it agrees to cash a check payable to the entity.
In the final analysis, the only party that would have standing to sue the bank for wrongful dishonor is the college, as issuer of the checks. In your case, the college has agreed to the $1,000 limit, so it could not complain if you refused to cash a check it writes for more than that amount.
First published on BankersOnline.com 1/9/12
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