Customer A has $250 in his account. Six checks, totaling $325, have come in for payment. One check is for $257.00, with the remaining five checks making up the difference to the $325 total. First Bank pays the five smallest checks first, honors the $257.00 with overdraft protection, and charges the customer one overdraft fee. Second Third Bank pays the largest ($257) check first, pays the five remaining smaller checks with overdraft protection, and then charges the customer five overdraft fees. Which of the following is correct?
A) If this type of charge is legal; it is ethical.
B) This type of charge is an example of taking unfair advantage.
C) This type of charge is a conflict of interest.
D) This type of charge is not an ethical issue.

Question

Customer A has $250 in his account.  Six checks, totaling $325, have come in for payment.  One check is for $257.00, with the remaining five checks making up the difference to the $325 total.  First Bank pays the five smallest checks first, honors the $257.00 with overdraft protection, and charges the customer one overdraft fee.  Second Third Bank pays the largest ($257) check first, pays the five remaining smaller checks with overdraft protection, and then charges the customer five overdraft fees. Which of the following is correct?
A) If this type of charge is legal; it is ethical.
B) This type of charge is an example of taking unfair advantage.
C) This type of charge is a conflict of interest.
D) This type of charge is not an ethical issue.

Quizplus · Accepted Answer

Both banks are exploiting the customer's lack of funds by using overdraft protection to pay the checks and then charging fees for each overdraft. This is an example of taking unfair advantage of the customer's financial situation. It is not ethical behavior from either bank.

Customer a Has $250 in His Account