We had more response to our latest contest than on anything before!

The question: When should we cash a check issued on an account at another bank?

The issue: Chase Manhattan refused to cash an on-us check brought in by a stranger, while Columbia Federal Savings Bank even cashed a foreign check (not on-us) for a stranger.

Our conclusion: Chase was probably within its rights, while Columbia had much to lose and little to gain by its friendly action.

Here are some responses:

Of course, there is the possibility that Columbia could have gained a new account through their hospitality, which is why P. William Manion of Esther Growth Fund, Clarkston, Mich., wrote:

"How can you say Columbia has nothing to gain?" Then he gave me his suggestion: "Don't give up your day job at Rutgers."

But others didn't think I was crazy. Rather, they felt Columbia's kindness was inappropriate.

Alan Flint, vice president of SunTrust Banks, Atlanta, summed up the basic feeling of most of those who responded.

"I find it hard to characterize the actions of Columbia as anything other than wishful thinking that if they do a 'good deed,' they might obtain a new customer. In my opinion, they had no business cashing the check. They took an unnecessary risk in handling the transaction."

The question of whether Chase should have honored the on-us check was more controversial.

On one side, William J. McGurk, president and chief executive officer of Savings Bank of Rockville, Conn., stated clearly and definitively:

"My posture is that banks have an obligation to honor on-us checks provided proper identification and normal procedures are met. We hold the funds and have an obligation to pay them as the account holder has directed. If you assume the legitimate holder of the check has no banking relationships, how are they to gain access to the funds?

"The presentation of a check by a payee to a drawee bank is a formal, legal request for payment. A bank is obligated to honor this request just as they are obligated to any holder in due course of an instrument of this type to pay (subject to normal verification procedures in place at the institution) or in the absence of value (cash) in the account, to dishonor the check. If a payee can offer irrefutable proof of their identity and no stop-payment instructions or other impediments exist ... it should be paid."

But then we get to the other side-What is the motive of the person trying to cash a check at a bank where he has no account?

Steven Rosenbaum, executive vice president of Prospect Federal Savings Bank in Worth, Ill., puts his case against simply cashing it:

"The majority of on-us check presenters seek to avoid Internal Revenue Service obligations. We stymie those efforts on a regular basis. A bit of skillful questioning uncovers this scheme.

"A significant percentage of on-us checks are also presented in an effort to defraud our customer. We explain to our customer that a bank trail assists them if they are victimized. We rarely find that our customer objects when we explain this protection to them and refuse to cash a check for a noncustomer."

In short, the federal and state governments, along with the customer and institution, are harmed when on-us checks are routinely accepted.

Warren Taylor E-mailed us this response. He listed four reasons why the noncustomers do not go to their own banks:

"1) They did not want the IRS to see activity going through their account at their bank.

"2) They do not like the holds placed on their account at their bank. Typically, holds can be avoided if collateral exists in another account. No collateral, no money.

"3) They think the person that gave them the check is unhappy with them or is 'no good,' and the money will not be there in the short amount of time it takes to clear.

"4) They do not have their own bank because they perhaps have done some bad things in the past, like not maintaining their account properly-or maybe sticking it to their past bank.

"I hate being the stickee," Mr. Taylor concluded. "My vote is: Do not cash it."

And Mr. Nadler's vote: Mr. Taylor wins.

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