By Dan Trudeau
New Yorkers who unknowingly cash bad checks face some of the largest penalty fees in the nation and in some cases pay as much or more than those who actually wrote the check, a survey released by U.S. Rep. Anthony Weiner (D-Kew Gardens) found last week.
“Every time a New Yorker cashes or deposits a check that bounces, he or she is hit by a real double whammy,” Weiner said in a statement. “You don’t get the money you were counting on and the bank piles on with a high fee, even though it’s not your fault.”
Weiner said members of his staff contacted every FDIC-insured bank in New York City and asked them the amount charged for overdraft fees and the amount charged for Deposit Item Returned fees, or fees incurred for depositing or cashing a bad check.
Out of 76 banks surveyed, Weiner said that 18 charged as much or more for DIR fees as for overdraft fees. He found that the average DIR fee for New York at $13.94 is more than double the national average of $6.88.
However, according to Katie Marshall, spokeswoman for the New York State Banking Commission, some of Weiner’s conclusions may not be correct. She said DIR fees are regulated by New York state law and are not legally permitted to exceed $10.
Marshall said that when the state commission investigated Weiner’s report, it found that Israel Discount Bank of New York, which Weiner said charged $30, actually charged only $10 for DIR fees.
A spokesman for Weiner said the source of the report came from the banks themselves and he found it surprising a bank would contradict itself.
Marshall said customers should always investigate fees before signing on with a bank to prevent being surprised by high DIR, overdraft and other fees and that the state banking commission would continue to investigate the banks under its regulatory authority for DIR fee violations.
Weiner’s survey also said banks across the nation actually make a significant amount of money from DIR charges, generating $1.64 billion in revenue every year. According to the report, the cost of processing a bad check is significantly smaller than the fee charged, suggesting that banks institute the high fees to turn a profit rather than to pay for processing.
“It is true that it costs the bank extra money to process a Deposit Item Returned,” Weiner’s report said. “But that cost is estimated at between 48 cents and 65 cents per transaction, while the average DIR fee is $6.88 — 10 to 14 times the actual cost.”
Marshall defended banking institutions somewhat from this claim, saying DIR fees are a necessary protection for banks against the potential cost of bad checks.
“Banks do, in the processing of bad checks, do some work,” Marshall said. “They need to recoup that work. I think there is a middle ground though.”
Reach Reporter Dan Trudeau by e-mail at Timesledger@aol.com, or call 718-229-0300, Ext. 173.
