Check cashing fees gets attention of state Senate Banking Committee

David Lazarus has yet another update on the issue of payroll check cashing fees charged by California banks. David's 2nd column on this issue (Wed. 03/17) attracted the attention of Sen. Dean Florez, chairman of the state Senate Banking Committee:

"(S)tate legislators are alarmed by a sudden firestorm over bank check-cashing fees and the thousands of California firms believed to be breaking the law by allowing the fees to be charged."

A hearing has been scheduled for March 31, where representatives of all interested parties will be called upon to testify. Sen. Florez said, "Legislators will move quickly to ensure that California labor laws are enforced." One possible solution, according to Florez, is to amend existing statutes to require that employers pay any such fees on behalf of workers.

John Withers, who runs a chain of seven hair salons stretching from San Jose to Santa Rosa, is worried he's violating the law because Bank of America processes paychecks for his 65 employees. Withers said he contacted Bank of America after reading about the situation Wednesday and asked what the bank was doing to look after its business clients. "They basically said that they had no liability so it wasn't their problem," he recounted. "They said that this was their fee, and they plan to stick with it."

Bank of America currently handles the $1.2 billion annual payroll for the city of San Francisco's 27,000 employees. Bank of America told city treasurer Susan Leal that it wanted to impose the $5 fee on all city workers who did not have accounts at Bank of America before the fee was introduced in August of 2002. According to Leal, "I told them there was no way in hell I was going along with that. And they immediately backed down."

Similarly, Leal said Wells Fargo is bidding to take over San Francisco's payroll processing and that officials from the bank recently declared their intention to levy a $5 fee on all non-account holders working for the city. "I told them that if they did, it would be against our contract. And they backed down too."

In David's first article, Wells Fargo regional president Lisa Stevens said that "People are free to bank wherever they choose." While she was talking about individual customers, her statement applies equally to business customers. Business customers may soon have a huge financial incentive not to bank with Bank of America or Wells Fargo if the banks don't wake up, and it would serve them right if business customers took their business elsewhere.