Pay Or Return OD-Return Checks to "Cash Advance"

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Question:

When choosing to Pay or Return an overdraft, is it safe to have an unwritten procedure whereby the bank always returns checks written to "Cash Advance" institutions? As Compliance Officer I see this as discriminatory. The bank will choose to pay other checks written on the account. There is no Overdraft Program that affects these accounts.

Answer:

I think it's a poor business practice unless your depositor has explicitly told you he doesn't want such checks paid (in which case, you should have a stop order in file). If your customer is using payday lenders and other "cash advance" businesses to make ends meet, he is already paying some significant fees. If you bounce his checks to those businesses, you can be sure that he'll face some additional significant fees, and the potential for some nasty legal action if he doesn't pay off his loans. Instead, I recommend having an established, but flexible, procedure for determining which checks are paid and which are returned when there is a choice -- one that does not single out payday lender transactions as a group.

First published on BankersOnline.com 7/2/12