The “Returned Check Fee” is a ridiculous and collusive fee that needs to be stopped.  It’s odd for me to say that considering I am an employee and shareholder of my bank, fee income like returned check fees help pay my salary and dividends.  But I’m a consumer above all else, and refuse to get screwed.

Of course it isn’t really all that odd.  I’ve long complained that banks need to head back to the income source of spread revenue.  Anyways, how about some back story?

My fiance, in her beautiful way of always proving her usefulness, found a $20 check in my car a couple of weeks ago.  The check was dated from back in January and was a reimbursement from my employer for an expense I’d incurred.  The check was still good so naturally I took it down to my local branch for a little deposit action.

Two days later, mint.com (which rocks my world) sends me an email telling me my bank had charged me a $10 fee.  I don’t get charged fees, mostly because I don’t do anything with my account but initiate transfers and make the occasional deposit.  I looked at the fee online, which of course provides so many details (“DEPOSITED ITEM RETURNED FEE”).  Thanks to some Sherlock Holmes style investigative work (calling customer service) I learned the fee was charged because my check had bounced.  My statement reflected this with a -$20 entry.

I asked the customer service rep to explain to me why I, the customer, was charged a fee for a bounced check.  The explanation is that by endorsing a check I then take ownership of anything that happens.  He went on to tell me it was my responsibility to make sure the person that wrote the check had the money in the account.  Scuse me?  What this means is that every time your friend writes you a check for that Wii you’re selling you have to make sure your deadbeat friend has money in his account?  How do you do that?  Perhaps you could ask.  He’s a deadbeat, and he’s not really your friend!  He’s not going to say “no”.  It gets worse though.  Someone might write me a check as a wedding present this fall, that means I have to call them and say, “Thanks for the $100 check, could you send me your bank statement so I know you have money in the account?”  Better still, if you’re like my fiance and don’t have direct deposit as an option you have to call the HR of your employer and make sure they have money every two weeks.  Why stop there?  Stimulus checks?  Tax returns?  Call the IRS mo-fracker and demand to make sure there’s money in the bank so your return doesn’t bounce.

-OR-

My bank is full of $#!+.  So is yours.  All banks charge this fee.

I know what you’re thinking.  It costs the bank money to process these returned checks and it’s not like they got any money out of the deposit either.  They need something for their troubles.  However charging me a fee for this would be like my car insurer charging me a fee because I was hit by a drunk driver.  It wasn’t my fault, I was doing everything right, and I didn’t do anything wrong.  What would my insurance company do?  They’d charge the drunk driver’s insurer, who would in turn charge the drunk.  In this case my bank would charge the check-writer’s bank a fee of $10.  The check-writer’s bank is already charging them $25 or more for bouncing a check and so they can pass on that fee.  Banks charge each other fees all the time so we know the infrastructure is already in place.

Another option, ever swipe your debit or credit card and it gets denied?  That mean in the flash of a second your bank determined whether or not you had clearance to make a purchase.  Why can’t a bank immediately determine if a check is good?  In my case the check was deposited, I got a receipt, and it showed up in my account.  Only after that did they learn the check was bad.  The only possible reason they would do it this way is the charge you a fee.

The justification for this fee is ridiculous.  All banks charge it because they can get away with it.  I asked customer service, a former teller, and Google for a decent justification for this fee and could not find one.

I wrote my reps in Congress expressing concern over this.  I favor punitive fees that discourage many from making mistakes, but there is nothing the customer can do to protect themselves from this fee.

Oh, and in the end I complained enough to get the fee dropped, so now I’m just pissed for the inconvenience.

Photo: Bethany King

By The Weakonomist

The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice.

categories: banking, business, personal finance