Banks are Charging Victims as well as Writers of Bad Checks
According to a recent survey by Rep. Anthony Weiner (D-Queens & Brooklyn), many banks are charging high fees of up to $40 to victims who are written bad checks.
If you write a check and it bounces, you should expect to be charged a high fee: you’ve wasted the time and money of both the bank and the person you’re supposed to pay. But receive a bad check, and that should be punishment enough, since you’ve done nothing wrong! But banks make a bundle charging the recipients of bad checks high fees, especially in New York.
HIGHLIGHTS OF THE WEINER BANK FEE SURVEY:
- Banks in New York City charge an average of $16.94 to the recipients of bad checks, an increase of nearly 27% over what the same banks charged in 2003 when the average fee was $13.34.
- Brooklyn Federal Savings bank charges recipients of bad checks a whopping $40 per check.
- Six other banks that charge over $35: Bank of America, Hudson Valley Bank, Sterling National Bank, Apple Bank, New York National Bank, and Flushing Savings Bank.
- Victory State Bank in Staten Island and Metropolitan National Bank were the only banks to not charge a fee for trying to deposit a bad check.
- Major New York City banks like Chase, Citibank, and HSBC charge $10 for every bad check received by a customer.
Imposing fees on people who write bad checks provides overdraft disincentive, and more than covers the cost to banks of processing what turn out to be worthless pieces of paper. So that’s what banks do. End of story right? Wrong.
That’s because banks have turned bounced checks into a cash cow by also charging fees to people who, through no fault of their own, receive bad checks. Called deposit items returned (DIR) fees, they put New Yorkers in potential double jeopardy every time they cash a check. If New Yorkers cash a bad check, they (1) lose out on money from the bounced check, and (2) the bank slams them with a high fee, even if it’s not their fault.
Rep. Weiner’s Innocent Check Depositor Protection Act will prohibit banks from unfairly profiting at the public’s expense by prohibiting them from charging DIR fees.
“Every time a New Yorker cashes or deposits a check that bounces, he or she is hit by a real double whammy,” said Rep. Weiner. “You don’t get the money you were counting on and the bank piles on with a high fee, even though it’s not your fault. It’s time for banks to stop charging DIR fees and cashing in on their customer’s misfortune.”
"So-called 'deposit item returned fees" are among the most frustrating of the hundreds of stealth charges that banks use to punish consumers and fatten their profits," said Russ Haven, Legislative Counsel for the New York Public Interest Research Group (NYPIRG). "When a consumer or a businessperson innocently deposits a check they have every reason to believe is good, they shouldn't get whacked with a big fee if it bounces. The reality is that the processing costs to the bank are minuscule."
To conduct the check fees survey, members of Rep. Weiner’s staff contacted 57 FDIC insured bank in New York City. Each bank was asked whether they provide personal checking accounts, and if so, what their deposit item returned and overdraft fees were. Recognizing the consolidation in the banking industry for purposes of comparison, banks that were in the 2003 study that have merged are listed under their new bank name.