Tuesday, October 24, 2017

Why I don't accept foreign checks (aka North American banking is a mess)

By Steve Endow

Several years ago, I received a paper check, in the mail, from a Dynamics partner in Canada.  The partner was paying my US dollar invoice, and thought they were doing me a favor by drafting the check from their US dollar bank account at their Canadian bank.

Send a check in US dollars to pay a USD invoice--makes sense, right?


I attempted to deposit the check at my local Bank of America branch using the ATM.  The ATM would not accept the check.  So I went inside the bank, stood in line, and then told the teller I wanted to deposit the check.  The teller looked at the check, and confusion ensued.

Eventually a manager came over and explained to me, with full confidence, and in no uncertain terms, that they were unable to accept the check.  He explained that the problem was not that the check was from a Canadian bank.  He said that the problem was that the Canadian check was issued in US Dollars.  He claimed that because the country of origin did not match the check currency, the branch could not accept the check.  That's the policy. (no it isn't)

So...how can I deposit the check?

The manager handed me a special envelope and a triplicate carbon copy form.  He said I needed to fill out the form and mail it with the check to a super special obscure department at Bank of America called "Foreign Clean Collections"--whatever that means.  Once the check is received by that department, it will review the check and coordinate with the foreign bank to get the funds transferred.  This process will take 6-8 WEEKS.

You're kidding me, right?  Nope.

So, being curious about this banking train wreck, I gave it a try.  I filled out the form and mailed the USD $1,000 check off to the super special department.

A few weeks later, a deposit shows up in my account for $800.  Yup, $200 less than the check.  In addition to having to wait several weeks for the deposit, I was charged $200 in bank fees!

After that nightmare, I stopped accepting any foreign checks.  I put a big red note on my invoice that says that I only accept credit cards and wire transfers from non-US customers. And guess what: That process has been working just fine for years.

This week, a Canadian partner didn't read my invoice, and didn't read my email with the invoice, and they mailed me a paper check.  The check is from their Canadian bank, issued in US Dollars.  Great.

So I contacted a colleague who regularly receives Canadian checks, and she said that she routinely deposits Canadian checks issued in USD at her local BofA branch without any issues.  Huh.

But having paid my $200 entrance fee to the Bank of America Foreign Clean Collections Club, I wasn't about to just deposit this new check, wait several weeks, and see how much I get charged.

So I did the obvious thing:  I called my local Bank of America branch.

First customer service rep:  "Sorry, I don't deal with those things. Let me transfer you to our back office."  Apparently the back office doesn't have voicemail and is out to lunch at 9am, as the phone rang for 3 minutes with no answer.  I tried calling the branch back, but this time nobody answered and I got a voice response system.  So the local bank branches are useless when inquiring about these things.

So I then called the main BofA customer service 800 number.  I spoke with someone who tried very hard to help, but she was unable to find any information and her computer and phone were unable to contact the department who might be able to help.  So she gave me the phone number to the Bank of America Foreign Exchange Call Center.

I then directly called the illustrious Foreign Exchange Call Center and spoke with someone who, for the first time, sounded like he understood the mysterious process of depositing foreign checks with Bank of America.

"Can I deposit this Canadian check drafted in US Dollars at my local California branch?", I asked

"Every check is reviewed on a case by case basis.", he replied

What?  What does that even mean?

"Every check is reviewed on a case by case basis.", he replied

So you have no consistent policy about depositing foreign checks?

"Yes, we have a very consistent policy that I just explained to you.  Every check is reviewed on a case by case basis.", he replied

After speaking with him for several minutes and apparently annoying him, here is my understanding of the official Bank of America policy / procedure for foreign checks.

1. Acceptance of a foreign check is completely up to the discretion of the BofA branch, and the inconsistent and incorrect training that a teller or branch manager may have received.  The branch can simply say they don't accept foreign checks. Or they can conjure up an excuse as to why they can't accept the check, like "the country of origin does not match the check currency".

2. If the branch is willing to try to accept the check, they can scan the check in their "system".  This "system" then determines if Bank of America is willing to accept the check at that branch.  Apparently this involves super secret algorithms about my "relationship" with the bank, the physical check, the bank that issued the check, the country of origin, the currency, the amount, etc. 

3. If the "system" determines that the branch can accept the specific check, apparently the check will be deposited in a fairly normal manner.

4. If the "system" determines that the branch cannot accept the check, then the magical process with the Foreign Clean Collections department kicks in, and you get the multi-part form, special envelope, a 6-8 WEEK processing time, and hundreds of dollars in fees that you will not be able to determine in advance.

5. The representative claimed that Bank of America only charges a flat $40 for the Foreign Clean Collections process, but that the issuing bank can charge their own fees for having to process the foreign check.  In my case, I was charged around USD $150 by the issuing Canadian bank just for the honor of cashing their USD check.  There is realistically no way for you to know how much the foreign bank will charge in advance.

6. I asked the representative how I was supposed to accept payments given the uncertainty and fees involved in this process.  He told me that they recommend wire transfers for foreign payments, and basically told me not to accept foreign checks.

What a shocking conclusion.

Naturally, I have received several responses from people saying that they accept foreign checks all the time at their bank and never have an issue.  Good for you, I say, enjoy the 1900s!  The Pony Express loves you!

I rarely receive such checks, don't want to have to drive to the bank to deposit them, and don't want to deal with clueless bank employees and the nightmare game-of-chance process outlined above.

Checks are a vestigial organ of banking and are a testament to the absurdly anachronistic North American banking system.  Talk to someone from any country with a modern banking system and ask them how many checks they issue.  "Checks?  What?" will be the response.  People from Singapore and Australia literally laugh in disbelief when I mention that the US still uses paper checks.

Wire transfers have been well established since the late 1800s and now provide same day international funds transfers, usually for a reasonable fixed fee.  Credit cards are a defacto payment method for a massive volume of transactions for many countries, and have benefits like fraud protection and points, and the merchant pays the fees for those transactions--which I am happy to do.

And services like the excellent TransferWise provide very low cost EFT funds transfers to dozens of countries with an excellent exchange rate.

The only reason I have to explain why North American consumers and businesses seem to cling to checks is because our backwards banking system does not (yet) charge fees to shuffle around millions of pieces of paper with ink on them, pay the postage to mail them, scan those papers into digital images, and then perform an electronic funds transfer behind the scenes.  But they do charge a fee if customers initiate a payment electronically through EFT / ACH or a wire transfer and no paper is involved.  It's crazy.

So, after wasting a few more hours researching this topic, I now have a clear decree, straight from the heart of Bank of America, and will continue to accept only credit card and wire transfer payments from non-US customers.  If it's good enough for the rest of the world, it's good enough for me.

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go away said...

It's crazy anyone even bothers with cheques any more. How is using a cheque easier for anyone? In Australia the only time I even used a cheque was when buying a house as they wanted a bank cheque or if my CFO wanted to delay payment as the cheque would take a couple of days to clear. Surely EFT is easier although GP could be improved with payment gateways etc.

Beat BUCHER said...

I laughed so hard, it almost hurt.. I had the same experience with a US customer sending me a US check from City Bank (I believe it was), because he couldn't pay me thru PayPal, nor was he able to do a wire transfer to my Canadian Bank (granted, it's not one of the big 5).. At the end I got a check in the mail for about 1000$ and guess what, I couldn't deposit it at the ATM, nor take a picture with the mobile app (as this has become very common here in Canada) and when I called the customer service, I was told that the cheque needed to be mailed to a central cheque processing office in Toronto, and it could take ut to 10 day to get the money in the account.. doh!..
I ended up walking into the branch of my other bank (one of the big 5) and just cashed the check at the teller, got it deposited on my account, got home, initiate a wire transfer that cost me 1$ to send the money to my other bank account.. Guess what, it didn't worked on the 1st attempt, as somehow the sending bank wasn't letting it go out.. and I had to call both customer support lines to get this cleared..
We're living in the 21st century, block-chain and bitcoins are all over the place.. how the major Banks in North America expect to keep their customers with such an outdated behavior (and huge fees on top of that).. When I came over from Europe 20 years ago, I was just puzzled how outdated the banking system was here over.. end of the 90's we already had bank cards with chips, could do online banking with 2FA and send money from 1 institution to the other online without paying any fees.. unbelievable.