There has long been industry grumbling about the high interest rates and finance charges check cashers charge. Many feel that the fees are exorbitant and that these companies are taking advantage of consumers who lack a checking account or other banking relationship. While banks are famous for their fees, including teller fees, ATM fees, and even fees if a payee cashes the check at the payorís bank (see issue 990401) they had not found a way to tap into the check approval market- until now.
First Union is now charging merchants or others who call to verify the validity of a customerís check. The 900-number call costs $2.50 and is limited to inquiries of two checks per call. For those merchants that use the "call the bank to see if funds are available" approach to check approval, this may make the old "free" method more costly than guarantee.
While a First Union spokesperson says the fee represents the cost the bank must incur to supply the information and that other banks are doing the same, we know of no other banks initiating such a practice. Huntington Bank and NationsBank both report that they have no plans for such action.
It may be, and this is pure speculation, that banks are observing the successes of check cashers and are hoping to cash in on some of the funds generated from the high interest rates and transaction fees of check cashers. Time will tell if merchants will prove this theory or simply choose to decline First Union checks. One thing is for certain: neither the banks nor the check cashers will absorb the loss; the fee will be passed on to the consumer.
