Can we charge a fee to any non-customer who presents a check for cashing, particularly when the check is drawn on an account at our bank (for example, a payroll check for a business customer)?

We are not aware of any limitations on check cashing fees in Illinois law. We do recommend that you review your account agreements to see if the fee is disclosed; this will ensure that you do not run into problems with non-accountholders who refuse to pay the check cashing fee when the check was written by an accountholder.

As we discussed, you may find this Illinois Banker article helpful. And, here is some more detail on the history of this issue:

There was an Illinois case from 1986 that prohibited banks from charging check cashing fees to non-accountholders because the fees were contrary to the purposes of the Uniform Commercial Code. Your Style Publications, Inc. v. Mid Town Bank and Trust Co. of Chicago, 150 Ill.App.3d 421, 426–27 (1st Dist. 1986). It also held because the bank’s agreements with its accountholders did not clearly disclose the check cashing fee, the bank was liable for breach of contract to its accountholders and to the non-accountholders attempting to cash checks drawn on one of the bank’s customers’ accounts. Id. at 430–31.

However, more recent cases have confirmed that if someone does not have an account with the bank, that person lacks standing to sue the bank for wrongful dishonor of a properly payable check under the UCC (which provides a cause of action only for the bank’s accountholder, 810 ILCS 5/4-402). Kronemeyer v. U.S. Bank Nat. Ass’n, 857 N.E.2d 686, 689 (5th Dist. 2006); Johnson v. First Banks, Inc., 889 N.E.2d 233, 235 (5th Dist. 2008).

And, the Kronemeyer case confirmed that national banks can charge check cashing fees to non-accountholders under an OCC regulation, 12 CFR 7.4002(a) (a national bank may “charge its customers non-interest charges and fees, including deposit account service charges”).

Several OCC letters further confirm that the term “customer,” for purposes of this rule, includes any person who presents a check for payment and that the rule therefore authorizes national bank to charge check-cashing fees on non-account holders, without need for individual authorization from the OCC. OCC Interpretive Letter No. 932 (August 17, 2001)OCC Interpretive Letter No. 933 (August 17, 2001)OCC Interpretive Letter No. 934 (August 20, 2001).

Importantly, the Johnson case confirmed that this rule applies to state-chartered banks, too, as the Illinois Banking Act allows Illinois-chartered banks to “do any act . . . that is at the time authorized or permitted to national banks.” Johnson, 889 N.E.2d at 238; 205 ILCS 5/5(11).