WaMu free checking -- give or take $5

Washington Mutual Inc., which has made free checking a cornerstone of its marketing campaign, is about to start imposing a $5 fee on noncustomers who come into a branch and cash a check drawn on a WaMu personal account.

In other words, let’s say you’re a WaMu customer and you write a $30 check to your buddy Bob for his collection of vintage Peter Frampton records. If Bob, who doesn’t have a checking account, cashes the check at his local WaMu branch, he’ll only get $25.

WaMu would keep $5. Peter Frampton would get nothing.

Lisa Margolin-Feher, a WaMu spokeswoman, said the check-cashing fee was intended “to reduce wait times for customers.”

“Noncustomers who want to avoid the fee can take the checks to their own banks,” she said.

Well, there’s the rub. Many people don’t have bank accounts, and their only options are to go to the bank that issued the check or to check-cashing services that charge sky-high fees.

A 2004 study by the Federal Reserve found that about 5% of white U.S. residents and nearly 19% of nonwhite residents didn’t have bank accounts.

“We’re talking about tens of millions of people,” said Austin King, director of the Financial Justice Center of the Assn. of Community Organizations for Reform Now, or ACORN.

“The unbanked tend to be low-income people who either can’t meet minimum deposit requirements or who have bounced checks in the past, or undocumented people who deal primarily with the cash economy.

“Mostly,” King said, “it’s immigrants.”

WaMu already charges the fee in Washington state and Florida. Starting Dec. 1, it will be imposed at all other branches -- including the more than 700 in California.

WaMu’s credit rating was cut again this week by Moody’s Investors Service and Standard & Poor’s, essentially lowering it from junk to really junky. The troubled bank has put itself up for sale, and talks reportedly are underway with several suitors, including JPMorgan Chase & Co.

Chase also charges a $5 fee for noncustomers to cash checks drawn on its accounts. But it has no bank branches in California.

Citibank doesn’t charge such a fee. Bank of America and Wells Fargo don’t charge to cash checks drawn on personal accounts, but both banks charge noncustomers to cash checks drawn on business accounts: $5 at BofA, as much as $7.50 at Wells.

In 2004, BofA and Wells ran afoul of state labor officials by imposing fees for noncustomers to cash business checks. The California Labor Code requires that paychecks “be negotiable and payable in cash, on demand, without discount.”

The banks insisted that their fees were permitted under federal law. But California employers using the banks for payroll purposes were still on the hook for ensuring that workers could cash paychecks “without discount.”

Some large bank customers, including the city of San Francisco, were able to negotiate a waiving of the fee for employees. Other employers accepted the banks’ offer of free checking accounts for workers.

WaMu’s fee won’t apply to checks drawn on business accounts. It will also be waived if a noncustomer brings the check to the check-writing customer’s home branch. That’s a bummer if your WaMu branch is in Encino and your buddy Bob lives in Torrance.

I asked Margolin-Feher how big a problem it is for noncustomers to clog up lines at branches.

“It happens a lot in certain areas at certain times of the month,” she replied.

This was a red flag for ACORN’s King. “It tells me that they’ve had bank managers calling to say they have long lines of undocumented workers trying to cash checks every few weeks,” he said.

King speculated that employers of day laborers or other short-term workers may be writing checks on their personal accounts as a substitute for cash or for tax reasons.

If so, WaMu’s fee would place the employers in danger of violating California’s Labor Code.

“The employer would have a problem in such a case,” said Robert Roginson, chief counsel for the state Division of Labor Standards Enforcement. “If we had any complaints about discounts being taken on paychecks, even when those checks are drawn on personal accounts, we’d look into it.”

He said workers can call (866) 924-9757 for information in English or Spanish on how to lodge a complaint with state officials.

Margolin-Feher said the $5 fee in no way runs contrary to the bank’s free-checking philosophy.

“Our objective is to serve our customers,” she said. “We still offer tremendous value, we think.”

Margolin-Feher also denied that the new fee had anything to do with the bank’s financial difficulties.

“This has been under consideration for a long time,” she said. “It’s all about serving our customers better.”

And getting rid of pesky noncustomers who have the gall to try to cash WaMu-issued checks. Whoo hoo!

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