David Lazarus has a column
in the SF Chronicle about banks that charge non-customers $5 to cash payroll checks
drawn against that bank. The offenders: Wells Fargo (beginning April 1st) and
Bank of America. Wells Fargo's reasoning for the fee:
"We're providing a service so we're going to charge for it," said Lisa Stevens,
the bank's Bay Area regional president. "The employer (with the business account)
is not paying for the employee checks to be cashed."
Why aren't business customers paying for this cost? If a 100 employee business was
charged $500 every payroll period to cash its payroll checks, how long do you think
that business would remain a bank customer? And what does Wells Fargo think employees
are going to do with their payroll checks - frame them?
Wells Fargo does allow these employees to open a free account, which would then allow
them to cash their payroll checks without paying the $5 fee. Personally, I don't think
that shafting your non-customers is the best way to convince them to open an account
at your bank - I'm not a believer in rewarding bad behavior.
This fee is wrong on a number of levels: 1) Wells Fargo and Bank of America are requiring
non-customers to pay them extra fees just for doing their regular job - it is not
something they deserve extra money for; 2) If the costs of cashing checks are really
that burdensome, the business account holder should be charged for those costs, or
perhaps Wells Fargo and Bank of America should stop offering business payroll accounts
due to their unprofitability; 3) Wells Fargo and Bank of America are shifting costs
that should be born by the business account holder onto the banks' non-customers and
other banks; 4) A person should not have to pay a fee to get their own money being
held at that bank.
This is one of those things that some banks do that should be illegal - the bank is
abusing its non-customers only because the bank is in possession of the non-customer's
funds and the non-customer has little if any recourse. It is along the same line as
banking rules that allow banks to process a checking account's daily deposits and
checks in any order they want without liability. (I think that should be illegal too.)
Wells Fargo and Bank of America are banks that I will never do business with. Two other
banks were cited in the article that do not charge non-customers a fee to cash checks
drawn against their own bank - Citibank and Washington Mutual. I have no knowledge or
experience with Citibank, but I can say that I've been a happy Washington Mutual customer
for the last few years.
Seeing this story about Wells Fargo reminded me of my experience with them some
years ago. I had an account at Wells Fargo and got into some trouble with it during
an extended period of unemployment - the account ended up being overdrawn and I had
no funds immediately available to cover the overdraft. Wells Fargo closed the account,
which I fully expected them to do.
I had a Visa check card issued on that account, which I had used to pay for internet
access (AOL). I did not cancel the AOL right away - I figured that when the next monthly
payment was due, the payment would be rejected and AOL would then cut off my access. Boy,
was I wrong.
Wells Fargo re-opened the account (multiple times), processed the charge, charged the
account insufficient funds and excessive overdraft (over-limit) fees, then re-closed
the account. Wells Fargo saw nothing inherently wrong in re-opening a closed (and
overdrawn) account, solely to maximize the amount of fees they could get from me.
They turned the account over to a collection agency and reported me to ChexSystems
(the equivalent of a credit bureau for banks to check records of potential new
customers wanting to open new checking and savings accounts), making it almost
impossible for me to get a checking account at another bank.
I ended up having to pay 1/2 of the total overdraft to settle the account - Wells
Fargo decided that the account maybe should not have been re-opened. They also
told me that I would never be able to have an account with them again, which was
fine by me - I never wanted to do business again with a bank that would
treat its customers that way. The new fee that Wells Fargo will charge is even more
reason for me to avoid them like the plague.