Wednesday, April 30, 2014

Massachusetts Price Control: $5.71 Maximum Fee for Processing Dishonored Checks

As an economist, I am opposed to price regulation.

I came across an April 4th decision by the Massachusetts Division of Banks setting the maximum allowable fee that state chartered banks and credit unions may charge consumer deposit accounts for processing dishonored checks or deposit returned items for the next year.

Massachusetts State Law authorizes the commissioner of banks to annually establish a reasonable fee that compensates a bank or credit union for the direct cost incurred in processing deposit return items.

To determine the maximum allowable fee, the Division of Banks surveyed 53 banks and credit unionsd regarding the cost of processing deposit returned items. The cost per item ranged from $1.83 to $20.67. The average cost to process a returned item was $6.87 for banks and credit unions (banks had a lower average cost than credit unions), while the median cost of processing a returned item was $5.67.

The Massachusetts Banking Commissioner made the decision to keep the maximum allowable fee unchanged at $5.71 per item for between April 30, 2014 and April 30, 2015.

This decision means that some institutions are going to lose money processing dishonored checks. That is just wrong.

Banks and credit unions should have the freedom to set their prices, not have them dictated by the state.

Read the decision.


  1. Don't forget where the darling of the left, Elizabeth Warren comes from...same state. We may see it coming soon through the CFPB.

  2. It is a penalty, not a service charge. The price must be punishing enough to deter the customer from taking the bank's money without asking (stealing?) again.

    At $5.71, banks/cus will be CLOSING checking accounts after OD strike #3. Maybe not a bad thing.



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