BROOKINGS, Ore. -- Bad checks are paying off quite nicely at C&K Market here, whose automated deposit system generates up to $1,500 weekly in new revenue while successfully collecting on the great majority of shoppers' checks returned by banks.
The retailer has pocketed between $25,000 and $30,000 in penalty fees paid by shoppers in the six months it's been outsourcing the task of redepositing checks returned for insufficient funds, said Hank Shields, director of management information systems and electronic data processing.
In addition to that new revenue stream, the chain has been able to successfully collect on 94% of NSF checks and relieve store-level staff from the time-consuming and unpleasant task of personally contacting customers to collect on bad checks, he said.
C&K's banks are now routing NSF checks to a third-party service provider that redeposits each one only when funds become available to cover the check. Although banks permit checks to be redeposited only once, electronic inquiries into accounts can be conducted more frequently and CheckFast, Salt Lake City, provides that service for C&K.
Electronic queries only verify that funds are available to cover a particular check; account balances and other information are not released. The queries are transmitted through CheckFast's software on a daily basis.
"They do this for a period of up to 60 days and once it's found that funds are available, they submit a debit request, which is a facsimile of the original check, and the check clears the bank, plus a $25 handling charge," Shields said.
"It's a fairly new idea in the industry as far as check collection," he said. "People [who pass bad checks] are penalized a little more, our money is collected sooner and it saves a lot of time for store personnel in dealing with collecting on a check."
Shoppers paying for their purchases with personal checks authorize C&K to charge a $25 penalty fee if their check fails to clear the bank, Shields noted. The chain receives $5 per check and CheckFast receives $20 per check.
The system is used in the collection of NSF checks only, which represent about 75% to 80% of all returned shopper checks at C&K Market. Collection for checks returned because of a stop payment order or closed account, for example, must still be performed by staff at the store level.
However, the time and labor spent on check collection has been greatly reduced, Shields noted. "We estimate our people were spending anywhere from six to 12 hours a week dealing with NSF checks. That's been virtually eliminated." Shields said staff currently spend one or two hours weekly to follow up on nonNSF checks.
Over time, Shields said, he expects fewer checks will be handled by the chain's 34 stores as a result of the new system.
"We anticipate a reduction in the number of checks that will be cashed in our stores once customers realize the heavy cost they are being charged for taking a chance on a returned check. Typically, a bank charges $15 for a returned item and we're adding $25, so that's $40 [in penalties] per check -- and a lot of these checks are written for $6, $7 or $15."
C&K maintains an electronic record of all returned checks and links them to the cashier accepting them.
"It gives us information we didn't have before. We also have consolidated information on people who write checks at different stores," he added. The chain feeds the information into its negative check file.