Can an Issuing Bank Not Cash Payroll Checks?
An issuing bank has the authority to honor or refuse payroll checks as it sees fit when customers without proprietary bank accounts present these checks for payment. These policies are in place to encourage customers without bank accounts to open new accounts and begin doing business with the particular financial institution. Without proper identification, cashing checks even from an issuing bank may be difficult.
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Check Cashing Laws
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No state or federal laws exist requiring national or local banks to cash checks from customers who are not members of these financial institutions. Banks are free to set policies restricting the ability of those who are not members from cashing payroll checks at branches and offices across the country. This includes customers attempting to cash payroll checks drawn on accounts housed in the very same banks. Such policies allow local and national banks to reduce the instances of fraudulent check cashing by ensuring all transactions trace back to member bank accounts.
Bank Check Policies
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Many banks choose to honor payroll checks drawn on accounts housed with the same institutions because of the security associated with these accounts. Banks can actively monitor the balances in these payroll accounts to ensure sufficient funds are available to honor outstanding payroll checks. Policies regarding check cashing at these banks may reflect the reliability of fund management for in-house accounts. If checks bounce, banks need only refer back to the in-house accounts to recover costs.
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Proper Identification Required
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Bank customers trying to cash payroll checks without existing bank accounts usually must present up to two forms of identification. This is a legal requirement to verify that the name on the checks matches the identities of those attempting to draw funds from them. Proper identification includes an unexpired state driver's license, valid state identification card, valid military ID and a valid U.S. passport. Customers also may use unexpired credit or debit cards as a supplementary form of identification as long as the first identification presented has a picture.
Check Cashing Fees
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Cashing checks for customers without bank accounts makes customers with proper accounts wait longer in line and increases the workload on tellers. According to the Department of the Treasury's website, it is legal for banks to charge presenter fees to customers without bank accounts attempting to cash payroll or personal checks. This also applies to payroll checks drawn on accounts existing with the given financial institutions. Fees are relatively small, usually under $10.
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