End of check card worries merchants

Pauline Bell

Wednesday, Oct. 16, 1996 | 11:59 a.m.

Small-business owners say Wells Fargo Bank's failure to continue First Interstate Bank's check-guarantee card could hurt their businesses.

And, new Wells Fargo customers are worried their checks will not be honored by smaller merchants that don't have the debit card capacity or work with a check verification service.

Consumers say the new policy will force them to carry large amounts of cash or use a credit card to pay for goods and services they would normally pay for by check, showing a check-guarantee card.

"Most if not all merchants take checks with a valid photo identification and photo ID is still there (in the form of a driver's license)," said Wells spokesman Kathy Shilkret.

But the transient nature of the Las Vegas community makes check-guarantee cards almost a necessity, according to some small merchants.

"Everybody deals with guarantee cards out here. ... They're going to lose money if they don't do it (issue guarantee cards). They're going to run into problems," said Ron Stark of Stark Express Shoe Repair with stores in the Meadows and Boulevard malls.

There are other ways to pay for goods and services including debit cards, cash and credit cards. And, many merchants subscribe to a check verification service which tells them immediately if the account contains sufficient funds to cover the check, Shilkret said.

And there is a 21-day grace period that began Sunday during which the bank will continue to honor the First Interstate check-guarantee card, she said.

Stark said the two shoe repair stores owned by his son don't have the debit card capacity, they don't work through a check verification service and they don't accept checks without a guarantee card. Wells customers will either have to pay cash or use a credit card to get their shoes fixed, he said.

Mike Waller, owner of MR Bookkeeping and Tax Service in downtown Las Vegas, said because of the nature of his business he pretty much knows whether his regular customers have sufficient funds in their accounts to cover checks written to him.

He said he is going to worry whether his walk-in tax customers do.

"It brings on that additional stress I don't need, especially during tax season," said Waller. "Now if somebody writes me a bad check, the likelihood that I'll get that money back are slim and none."

First Interstate Bank's check cards guaranteed checks up to $200 or $300, depending upon the state in which they were issued. The cards also doubled as ATM or debit cards. When Wells Fargo took over FIB this week, it issued ATM-debit cards to customers, but literature accompanying the cards made it clear that the new cards don't function as a check-guarantee card.

One reason the bank is discontinuing the card is to combat check fraud, Shilkret said.

If the guarantee card is lost or stolen along with just a single check, it increases the risk of customer loss because criminals use the check card to pass counterfeit checks.

Check fraud is a multibillion-dollar-a-year business. A study by the accounting firm of Ernst and Young between Jan. 1 and Sept. 17, 1996, found $7.3 billion worth of fradulent checks passed in the United States, the spokeswoman said.

Wells also is trying to standardize the product line throughout the states it serves. The guarantee cards were offered by FIB in Arizona, Nevada, Utah, Idaho and Oregon. They weren't previously offered by FIB in California and Texas and weren't offered by Wells, which operated only in California, she said.

"We conducted focus groups with our customers in Arizona, Nevada and Oregon in July and we found that eliminating the feature wasn't an issue for most of the people in the focus group as long as they didn't experience any problems when paying by check," Shilkret said.

But some people think customers will experience problems cashing checks and will end up taking their accounts to banks that do offer guarantee cards.

"I'm surprised that they (Wells Fargo) are doing it. It's going to make it hard for their customers to cash checks. It's going to encourage them (checking account customers) to take their (banking business) elsewhere," said Mary Lau, executive director of the Retail Association of Nevada.

Retailers will either have to work with a verification service, a practice many small business people can't afford, or "take their chances with bad checks," Lau said. Neither Lau nor Shilkret knew the cost of a check verification service.

Bank of America Nevada and U.S. Bank of Nevada both offer bank cards which double as check-guarantee cards and have no current plans to eliminate them, according to bank representatives.

Another merchant who generally won't accept checks without a guarantee card is Jason Sadow, manager of The Game Keeper in the Meadows Mall.

He will take checks with a major credit card and a driver's license shown as identification, but he said he still prefers a guarantee card.

But, he acknowledges that Wells' new policy probably won't be as much of a problem for his store because he does accept debit cards.

Larger retailers like Target and Wal-Mart use check verification services which can immediately tell them if there are sufficient funds in an account to cover a check. They are not likely to be affected by Wells' new policy, Lau said.

Wells will continue to cover non-sufficient funds checks written by their customers, later recovering the sum and an additional fee from the offender. The added fee is $10 per check for occasional offenders, $18 per check for those who do it more frequently and $25 per check for chronic offenders, Shilkret said.