Response to bank fee article

http://chicagobreakingbusiness.com/2011/04/citibank-to-pay-small-checks-first.html

The idea that a reason for processing checks from biggest to smallest is to make sure “important” things like mortgages are covered is ridiculous.

1) Typically ALL checks in a daily batch are covered REGARDLESS of the order they are processed in. Lets do an example: the balance is $100 and two checks come in and both are covered: one for $101 and the other for $25. If you process the $101 first there will be 2 bounce fees, if the $25 check is processed first there is only one fee. The consumer would only get a “benefit”, if the bank could ONLY cover one of the two and had to CHOOSE which one (and then correctly chose the most important one). But typically (like 99% of the time) ALL checks in a daily batch are covered, and the “biggest first” rule typically does nothing but give the bank extra fee income. The key thing is this: does the bank need/intend to CHOOSE which from a batch to cover and which to NOT cover: only then could there be a benefit to the consumer by CHOOSING the biggest.

If the bank was really concerned with the consumer’s welfare they would arrange the checks from SMALLEST to LARGEST if all were going to be covered, and ONLY in the case where a CHOICE had to be made, cover the biggest first. Well maybe….read on.

2) The notion that the biggest check is the “most important” to the consumer is suspect. What is “most important” is subjective and varies depending on circumstances. And it’s really none of the banks business, it’s the individual consumer’s business. Maybe a struggling person is 3 months behind on the electric bill and it’s about to be cut off but the check to cover that is not the biggest in the daily batch. Maybe a small check is a deposit for some very important purchase. Do any of the banks try to determine the nature of a check (such as is it for a mortgage or rent, or electricity) and take that into account when arranging the order? Of course not! Because this “biggest first” policy has nothing to do with protecting consumers and has everything to do with generating fee income for the banks.

In cases of fraud or identity theft the perpetrator typically writes out pretty big check(s) (or other big debits). Given the “biggest first” policy of most banks these would be the FIRST ONES HONORED. Not very consumer friendly.

Additionally, why not credit deposits first then look at checks and other debits. If the objective was consumer protection (as the banks absurdly claim) that is what they would do.

I actually wrote some of the software to do this kind of processing at a large bank so I know just how corrupt and rigged the whole game is. Everything is done to “maximize fee income” and s*c&^%%%ew the consumer. Especially those consumers who are hurting and on the edge already. Not that banks care about that – such people are just easy fodder for looting.

I agree with Lorenzo, the fair way to do it is to process in check number order. That way the consumer can write out his most important checks first and that will influence which get covered first. Also banks should credit deposits FIRST prior to processing checks.

But none of these changes will be widespread without a lot of pressure and hard work on the part of consumer advocates.

Remember that most bank accounts these days are in large public banks who exist fundamentally to make money for their shareholders. They do not exist for the benefit of their account holders, their mission is to make money for their shareholders.