Recently in Paycheck Fees Category

State banking bill in jeopardy

From David Lazarus' Jul 16 SF Chronicle column:

Under the amended SB1904, employers would not be subject to penalties under Section 212 if they offer workers the option of receiving payments via direct deposit. The onus would be on workers to either accept or decline the offer.

However, the revised bill also would allow employers to avoid penalties simply if they "discuss avoidance of the transaction fee" with their bank. In theory, a single phone call would suffice.

This approach was supported by the California Chamber of Commerce, which is insisting on a "safe harbor" for employers so they're not left holding the bag for the banks' fees. [Ed. - That's exactly who should be left "holding the bag"!]

But unions (other than the UFW) and consumer advocates say the chat-with-your-bank remedy is nothing but a loophole that subverts the intention of Section 212 by denying workers their right to have paychecks cashed "without discount."

They also say the amended legislation does nothing to address the plight of workers who, for whatever reason, are not creditworthy enough for checking accounts. They'd still be stuck paying the banks' fees even as their employers get off scot-free.

"It's a terrible bill," said Gail Hillebrand, senior attorney for Consumers Union in San Francisco. "The amendments make the bill worse than current law."

The current bill may die in committee, but there still may yet be hope, though far off in the future:

California employers have filed class-action lawsuits against Bank of America and Wells Fargo challenging their right to levy the fees. It's still possible that a solution will come from the courts.

Yesterday's David Lazarus column has an update on the issue of Wells Fargo and Bank of America banks charging fees to cash paychecks (see bottom half of column):

[T]he state Senate approved a bill last week that would prevent banks from charging a fee for people to cash their paychecks.

The state Senate voted 27-10 to approve SB1904, introduced by Sen. Dean Florez, a Central Valley Democrat and chairman of the Senate Banking Committee. The bill now goes to the Assembly.

As David notes, even if this bill becomes law, the banks will almost certainly challenge the law in court by claiming that federal law trumps and preempts state law on this issue. But it is progress!

David Lazarus' column in yesterday's SF Chronicle reveals that last Monday night's Senate Banking Committee hearing (to be held in San Francisco) was a non-event - neither Wells Fargo nor Bank of America would agree to show up and the hearing was postponed at the last minute. Now they face subpoenas if they don't come to a rescheduled session next month.

State Sen. Dean Florez, chairman of the banking committee, said he was told by both Wells Fargo and Bank of America that they wouldn't attend Monday's hearing because of lawsuits filed against the two companies last week.

He added: "The banks' boycott of the public hearing now forces me to seek answers in another way. They've just invited me to use all of the powers available to me in the Legislature, including the power of subpoena of critical documents."

My quick take on this: 1) I don't see the banks being able to stall forever (or even for very long), and 2) It doesn't seem wise to me to piss off the government, especially the branch that regulates your industry.

David Lazarus has another update on the controversy surrounding Bank of America's and Wells Fargo's charging non-account holders fees to cash their paychecks here in California.

Class action lawsuits are scheduled to be filed against Bank of America and Wells Fargo by California businesses who now find themselves between a rock and a hard place. Attorneys and consumer advocates have observed that class-action suits were all but inevitable - once the violation of the state labor code came to light, thousands of California employers were immediately subject to fines of more than $100 for every paycheck reduced by a fee.

Employers were left holding the bag because the banks insisted that they're beyond the reach of state regulations on this matter. The suits seek injunctions barring the banks from charging the paycheck-cashing fees and a refund of all such fees already paid.

A Visalia (Tulare County) nonprofit called Karis House, which runs six homes for troubled teens, was expected to file suit against Bank of America yesterday. The organization has 60 employees, about a dozen of whom do not have personal bank accounts.

A suit against Wells Fargo is being brought by a Bakersfield firm called Ability Answering-Paging Service, which has 65 employees, about 10 of whom do not have personal bank accounts. The suit is expected to be filed by the end of the week.

Both plaintiffs are being represented by Nick Roxborough, a Los Angeles attorney specializing in unfair trade practices.

The state Senate Banking Committee is holding a special hearing on the paycheck-cashing fees in San Francisco City Hall on Monday, April 26, at 6 p.m. All interested parties are invited to attend.

SF Chronicle's David Lazarus has written 3 more columns this past week on the issue of Bank of America and Wells Fargo charging non-account holders fees to cash paychecks drawn against their banks:

Last Monday, Sen. Florez unvelied two new bills: SB1917, prohibiting banks from charging paycheck-cashing fees to non-account holders, and SB1916, to specifically exempt state workers from such fees.

At last Wednesday's CA Senate Banking Committee hearing, Bank of America and Wells Fargo offered the following 4 reasons as justification for the fees:

  • There's a cost involved in cashing checks, and someone has to pay it.
  • Non-account holders take up tellers' time that might otherwise go to serving those who do have accounts at the bank.
  • Honest-to-goodness account holders shouldn't be inconvenienced by long lines resulting from the presence of non-account holders.
  • The chance of fraud is greater when a non-account holder brings in a check because the bank doesn't necessarily know this person.

The banks did not answer other committee questions. After the hearing, banking committee chairman Sen. Dean Florez said, "It was the worst form of stonewalling I've experienced chairing committees in the Legislature."

Future hearing are planned, one in San Francisco and possibly one in Los Angeles. In the meantime, Sen. Florez plans to ask state treasurer Phil Angelides to consider pulling out all state funds on deposit with Bank of America and Wells Fargo until there is a resolution to the fee dispute.

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.

In my last post regarding Wells Fargo and Bank of America charging non-customers $5 to cash their paychecks, I said, "This is one of those things that some banks do that should be illegal...". Well, come to find out, it is. David Lazarus has a follow-up to his previous column, which got the attention of the state's Department of Industrial Relations.

According to Dean Fryer, a spokesman for the Department of Industrial Relations, the charges violate Section 212 of the California Labor Code, which requires that payroll checks "be negotiable and payable in cash, on demand, without discount."

"It is clear that every employer who has allowed a fee to be charged for cashing a paycheck is in violation of the labor code."

It's not clear whether the banks can be forced to comply with state law, as they are somewhat shielded from state regulation by federal law. But even if the banks cannot be forced to comply, the employer can be held liable for the fees.

It should be interesting to see how this plays out.

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 screw 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.