Recognizing the threat to banks from fraud, a federal judge has given the industry permission to fingerprint some consumers who cash checks.

Judge Bernice B. Donald of the U.S. District Court in Memphis ruled last month that three banks did not break the law when they required a consumer, who was not an account holder, to include his thumbprint next to his signature when he cashed checks drawn from their banks.

"The banks were entitled to impose the requirement of a reasonable identification upon any person making a presentment," she ruled.

The plaintiff "makes no rational argument that thumbprinting is not reasonable."

Industry officials applauded the ruling.

"This is a first," said Michael F. Crotty, deputy general counsel for litigation at the American Bankers Association. "If upheld and followed elsewhere, this essentially immunizes from challenge the increasingly commonplace practice of requiring thumbprints."

"This was a big issue," said Elizabeth C. Smith, vice president and counsel at First Tennessee Bank, one of the defendants. "As the court said, the arguments ... had no merit. And we were really pleased the court ruled the way it did.

The controversy started in December 1997 when Bill Cockrell tried to cash checks at First Tennessee, Union Planters Bank, and National Bank of Commerce. All the checks were drawn from these banks.

All three require consumers without accounts to give a thumbprint before cashing their checks. Mr. Cockrell refused, arguing he was well known, had reasonable identification, and had cashed checks at these banks before. He sued for breach of contract, theft, and impairment of his ability to make a contract.

The banks asked the court to dismiss the suit, arguing that Mr. Cockrell was not injured, had no right to the funds, was not owed a fiduciary duty, and failed to exercise due care.

Judge Donald, in a June 29 decision, sided with the banks. She ruled that Mr. Cockrell never contracted with the banks for a service so they could not have violated a contract. "As a check is not a contract, plaintiff's allegations fail to establish any violation of Article I of the Constitution for common-law breach of contract," she wrote.

She also said the banks are not guilty of a type of theft known as conversion. "Plaintiff retains the checks in his possession," she said. "Thus, there has been no conversion."

Requiring thumbprints from noncustomers who cash checks has become an increasingly common practice in the banking industry. Reacting to reports that check fraud cost the industry $800 million in 1993, Bank of America rolled out a fingerprinting program in 1994.

It reported that fraud losses in Las Vegas alone fell 42% within a year. Also, the Arizona Bankers Association in 1995 urged its members to require thumbprints from noncustomers cashing checks.

Samir Nanavati, a partner at International Biometric Group, New York, warned that even with fingerprints banks will still lose money to check fraud.

"We are not doing anything to prevent them from committing fraud," he said. "What we are doing is saying if you commit fraud we will have something to use against you so we can sue you and recover damages."

The best way to prevent fraud is to use biometrics, such as finger or iris scans. These tests compare the customer to a record on file, making them ideal for workers without bank accounts who cash payroll checks regularly. A quick scan would eliminate the chance of fraud, he said.

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