Pinery Glen Homeowners Association

An "FYI" Regarding Bank-Initiated Checks

Published Jul 18, 2009

Occasionally the management company receives concerns from home owners who want to know why they have received a late fee on their account when they initiated payment through their bank’s “free” check writing services a few days before the late fee was applied. Each of these requests are very similar, and involves confusion (or perhaps misinformation is more accurate) on the home owners’ behalf of how their banks process these payment requests. It’s important to understand that while you may initiate your payment on the 1^st of the month, these payments are not “immediately” processed and mailed to the Association.

To better understand the bank-initiated check system, let’s use an example. You initiate your dues payment of $55 on July 1^st, and the following day you view your online banking website and see that your bank withdrew $55 on July 1^st. However, later in the month you receive a statement from the Association indicating that your payment was not received on or before July 10^th, so you also have a late fee applied to your account. While the bank did remove your payment on the day you initiated your payment, the bank does not actually process / mail your payment to the Association for a few days. “But why would the bank debit my account for the $55 on July 1^st and not mail the payment immediately?” While the bank-initiated check service may be a free service, there is a cost to the bank to provide this service, including but not limited to postage, envelopes, checks, and a computerized system to enable this system to work. There is a cost to the bank for these items that the bank must recuperate. How the bank recuperates these costs is by immediately debiting your bank account for the check amount, moving this money to their account for a few days, and drawing interest on this money – this interest money is profit to the bank. While it would be easy to dismiss this “interest” for your payment as insignificant, when you combine millions of payments over the course of the year, the interest becomes significant.

Continuing with our example, on average these bank-initiated payments are received by the Association 10-14 days after the date you initiated the payment based on our experience and conversations with concerned home owners. So, on average, the management company will see your July 1^st initiated payment around July 11^th to July 15^th. Based upon the Collection Policy that can be found online at http://www.PineryGlen.com, payments are due on the 1^st of the month, and a late fee will be applied to accounts if the payment is not received on or before the 10^th of the month in which they are due. So, if you initiate your bank check on the 1^st of the month, you’re very likely to receive a late fee due to how your bank processes your requests.

It is important to note that different banks do have different processes and time frames on handling their bank check systems, so please discuss these questions directly with your bank.

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