Bank Customer Sues Over Bounced-Check Fees

Do banks process large checks first, thus increasing the chance that other, smaller checks will bounce? Wells Fargo Bank customer Fred Sturm of San Mateo contends that the bank does and has filed a lawsuit that seeks class-action status.

Sturm charged that the bank unfairly boosts its bounced-check fee income by using the practice, which he said the bank conceals from its customers.

Wells Fargo, however, said Sturm has it exactly backward. A spokeswoman says the bank typically clears the smallest checks first to minimize the number of bounced checks.

When several checks from the same account arrive on the same day, banks may pay the checks in random order, according to a formula or in order of their amounts. When a bank clears the largest checks first, a customer with insufficient funds may wind up paying more bounced-check fees.

Sturm’s attorney, Pierce Gore, offered the example of a customer who has $95 in a checking account but who writes checks for $100, $30, $25 and $20, or a total of $175. A bank that pays the smallest check first would clear the first three checks before bouncing the fourth and largest check. The customer would pay one bounced-check fee. But a bank that pays the largest check first would charge the customer fees for four bounced checks.

Wells Fargo spokeswoman Kathy Shilkret says the bank usually pays checks in ascending order, with the smallest checks paid first. The exceptions are “must pay” checks--mortgage checks, car-payment checks and checks the customer has already cashed at a Wells Fargo branch, she said.

Fees for checks that are returned for insufficient funds range from $12 to $25, depending on how many checks the customer has bounced in the last year. Fees for overdraft checks, which are insufficient-fund checks that the bank pays anyway, range from $15 to $28.

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Times staff writer Liz Pulliam, who covers personal finance, banking and insurance, can be reached at [email protected].