Some Consumers Resist End to Canceled Checks

When banks began to send out mailers offering to keep customers’ canceled checks safe for them, the response wasn’t all enthusiasm. People noticed several flaws in the generosity.

First, the bank may have automatically put them on the program “so that, if you want to continue receiving your canceled checks,” says Ken McEldowney of Consumer Action in San Francisco, “you have to contact it.” Second, the $1-a-month rebate commonly offered “check safekeeping” customers seems to some consumers the same as charging $12 a year to give checks back.

Finally, the banks’ clear preference for the program precipitates some worry, a Santa Monica resident says, “about how long it’ll be before they make it mandatory.”

Publicly, “check safekeeping” is posed as a gift to consumers: “You never have to handle your canceled checks again!” California First Bank wrote. Even the name was changed: In the industry, it’s “check truncation,” but that sounds “so damn final--that’s what they do to you when you die,” says Robert Sabeck, executive vice president of Valley National Bank of Arizona, one of the first to introduce it.

Like many services in the deregulated banking world, it’s actually a boon to banks, reducing paper handling by one more step--the final collating and mailing of canceled checks. San Francisco-based California First Bank would save almost $300,000 on postage alone if 30% of its customers signed up. Valley National nets a saving of $5.50 a year on each of its quarter-million accounts (43% of customers) signed up for the service, or $1,375,000 in all.

Safety Emphasized

“The initial impetus for the idea was operational,” Bank of America senior product manager Pamela Keane says, “but when we added certain features to serve consumer needs, it became a service.” Banks emphasize the safety of bank “storage” and the convenience, promise to keep microfiche check copies for seven or eight years and to provide photocopies on request in a matter of days. Some don’t even limit the number of copies, or charge for them.

Still, “it’s a remote, rare occasion that you even want a check,” Sabeck says. In the year that B of A has offered the program, Keane says, “fewer than 2%, maybe fewer than 1% of customers ever come in for a check.” Valley National gets only one request for a photocopy in every 1,500 checks.

Nevertheless, and apart from the natural resistance to anything new, banks know that there will always be people who “just feel better having the checks around,” Keane says. In some cases, their record keeping is too sloppy to make do with only their check register and monthly statement; in others, “psychologists and psychiatrists say they just want to shuffle those pieces of paper,” Sabeck says.

Some consumers voice more substantial worries, however, having needed canceled checks for proof of purchases--magazine subscription payments, insurance premiums, property and income taxes. Others mention taxes: “A good half of our monthly checks have some relationship to next year’s taxes,” the Santa Monica man says, “and you might need them.”

Indeed they might. Bills and receipts, stamped paid, could prove tax-deductible expenditures, of course, but sometimes “your canceled check is your receipt.” Some think bank statements and check registers are enough, but statements don’t give names of payees, and a check register “is not third-party verification,” IRS spokesman Robert Giannangeli in Los Angeles says. “It’s just the taxpayer verifying his own deduction.”

Copies May Not Suffice

Even a check copy may not suffice, says Mike Sedgwick, partner at Ernst and Whinney accountants in Century City, “if it’s not a good copy of both sides, showing the bank where it was cashed. If you ever have a real dispute about a payment you made, you might even need the number stenciled in at the bottom, and microfiche copies aren’t usually that good quality.”

Taxpayers may also need some checks longer than eight years “if they have a bearing on the future,” Giannangeli says, “like money spent improving property that becomes part of its cost basis if you sell it years later.” And if they’re audited and have to prove a year’s worth of auto expenses, business deductions or even sales tax, they may need more checks than their bank considers reasonable (some banks already charge for “excessive” requests, although the number is not defined). The only people who may never need canceled checks for taxes are the 37% of taxpayers who use forms 1040EZ and 1040A, which allow only a deduction for charitable donations.

Aside from questions about quality, quantity and cost of check copies, the idea of such dependence on the bank doesn’t comfort those whose faith in bank efficiency has suffered some slippage. “Look how long it takes and how many letters to get a (questioned) Visa charge searched and cleared up” a Pomona housewife says. “It’s not like going into your desk for a check,” agrees a San Franciscan who recently requested a truncated check. “First, the right ‘girl’ was at a meeting, then she said it would take two weeks because they were ‘moving things.’ When she never got back to me, I went to the manager, who got someone to do it.”

Understandably, many banks are still hanging back. New York’s Citibank truncates checks only on one special account: “All our research indicates customers want an adequate substitute for their checks,” Citicorp spokesman Susan Weeks says, “and we’re not yet satisfied with the processing--either the check reproduction or the handling of photocopy requests.”

Consumers, too, may prove resistant, thanks partly to the marketing. They resent the sales technique of enrolling them in the plan unless they object. They may also dislike banks pretending that a reduction in service is an expansion.