Chicago Restaurant Owes $118K In Overdraft Fees, May Have To Close

If you’ve felt the burn of a $35 overdraft charge, just be thankful you’re not Chicago’s Heartland Cafe, which has had to shell out $118,000 in cascading overdraft charges.

The Chicago Reader reports the restaurant is on the verge of closing because it’s behind on state sales tax payments and has to cough up liquor license fees soon. The $118,000 in overdraft fees came at $32 per instance over the past 18 months. An organization is holding a benefit to try and raise $100,000 to keep the restaurant afloat.

The Heartland in Crisis [Chicago Reader]
(Thanks, Bob!)


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  1. TuxthePenguin says:

    1 – you should never have a problem paying sales tax. You’re simply transferring money from one place to the other.

    2 – shouldn’t you have stopped overdrafting and closed up shop $50k in overdraft fees ago?

    Makes me think the problem is really bad management…

    • Loias supports harsher punishments against corporations says:

      I agree. I recall you being in the Accounting industry. I’m in Payroll.

      I read to often how companies are brought to court by the IRS for failure to pay proper taxes because they chose to use the money to pay creditors instead.

      It’s just all sorts of stupid. A creditor will sue you. The IRS will destroy you.

      • trentblase says:

        Cookiepuss, I will eat your soul!

        – IRS, Eater of souls

      • BigSlowTarget says:

        If you don’t pay your workers they won’t come to work the next day. If you don’t pay for the food you buy you won’t have anything to sell tomorrow. If you don’t pay the rent or power you won’t be able to open your doors. The IRS isn’t the only group that can destroy you.

        You can delay creditors but by the time people are shorting the IRS they’ve generally exhausted their credit and already stopped paying all their other creditors. Realistically they’re bankrupt but they either can’t afford the lawyer, it won’t do them any good, they are unwilling to abandon the dead business or they have no skills outside the business and are playing a very long shot.

    • ParingKnife ("That's a kniwfe.") says:

      Sales tax? Jeez. Well that’s at least twenty different kinds of stupid. I sympathize with the folks for whom it’s a local institution, but methinks their mini-bailout should come with a string attached: Hire yourself a damn business manager. Clearly whoever’s doing it now has no clue.

    • BigSlowTarget says:

      Sorry, sales tax does not go into a separate bank account dedicated to only writing checks for sales tax. While you should be collecting enough to pay for sales tax (oh, and you may not be if you are being charged sales tax on some items you buy because your suppliers are out of compliance with sales tax exemption rules) that doesn’t mean that the dollars are there on the day you go to write the check if you’ve got losses elsewhere.

      What makes you think they will ever stop incurring overdraft fees? If you close up shop you still get charged more fees – that doesn’t stop. If you don’t have enough to pay your taxes why should you have enough to pay a lawyer to declare bankruptcy?

      All that said the problem is probably bad management decisions plus a decline in sales. If you have enough sales and you price things anywhere near high enough you’ll have enough money to pay the bills. If you choose to use the bank overdraft function as a credit line (which sounds like the case here) then you’re going to drive up your costs to the point where revenue can’t cover it.

      They do sound like owners who’s business has failed but will be forced to continue whether or not it makes money.

      • dg says:

        Are you nuts? Sales taxes collected don’t belong to the business – they’re collected by the business on behalf of the State. The business is considered an Agent of the State for the purposes of collecting and submitting the sales tax. In some states it’s called a “Retailer’s Occupation Tax” instead of a sales tax, to get around rules against sales taxes.

        In other states, the State allows the retailer to hold back a certain percentage of the sales taxes as compensation for collecting and submitting the taxes to the state.

        If you don’t pay them the taxes that are due, when they are due – you get fined out the yin yang. They get penalties and interest on top of the taxes. What you pay back to them goes to the penalties, then the interest, then the taxes – so you’ve gotta pay everything at once to get straight with the State.

        If you don’t have a different account that you move the sales taxes into temporarily before you pay them, then you at least have a program like Quickbooks that keeps track of it and which you keep an eye on so you know how much you’re liabilities are for.

        Basic business sense… Don’t spend what you don’t have. If you’re not making money at your restaurant then you have to look at several things:

        * Labor costs (overtime, hourly wages, any benefits, payroll taxes, insurance)

        * Food Costs (portion control, item quality)

        * Table turns – how many turnovers do you have per meal period? Why isn’t it higher? Could it be higher?

        * Customer satisfaction – who’s coming in? Are they happy? If not, why? How often do they come back?

        * Overhead costs – utilities, credit card, insurance, cleaning supplies, advertising, lease, rent, mortgage, licenses

        If you can’t AT LEAST break even on everything, then you have to figure out a way to cut the costs, or close up shop.

        Restaurants are very, very, very tough businesses to be in. A very high percentage go out of business each year. Morons don’t make it in the restaurant business – and these people sound like morons to me…

  2. blogger X says:

    Came for the “blame the OP” comments. Made nachos.

  3. huadpe says:

    Okay, I am all for small community businesses, but in order to run one, you must be a reasonably competent businessperson. Letting your bank grab over $100,000 in fees over 18 months is not a sign of a competent businessperson, and I am not surprised his restaurant would go under.

    If you did it for one month and got dinged for a couple thousand, it would indicate a lesson you need to learn about reading the fine print. If you let it go on for 18 months for over 100k, you are far and away beyond hope.

  4. pegasi says:

    If they’ve that bad of a problem managing their finances perhaps they should have closed 18 months ago.

  5. gparlett says:

    From the linked article

    “James’s explanation for what would amount to 3,687 separate charges is that the bank he does business with was sold two years ago and the new owners instituted fees the old ones didn’t have. He says he accepts responsibility for not staying on top of it and “not really understanding how banks work.” They can’t afford to be “amateurs” about money and management anymore, James says, and they’ve already started making changes”

    This seems like a cool restaurant, but this is an open and shut case of Capitalism at its finest. If you don’t have the financial sense to balance a checkbook you’re not competent to run a business and the invisible hand shuts you down.

    • TuxthePenguin says:

      Let me offer one edit.

      “…and the invisible hand shuts you down.” should be replaced with “… and the invisible hand b****slaps you down.”

      Much better that way :p

    • tungstencoil says:

      So which social/economic system would allow this? By “this” I mean private entrepreneurship / business ownership and the ability to get in debt for both private and public payments due?

    • quijote says:

      I think everyone would acknowledge that the OP is at fault. The question is whether the punishment fits the crime.

      I still don’t understand how a bank can charge such a fee without justifying the fee amount. If that’s okay, then why can’t any business just start assessing fees for anything. For example, a rental car company could assess a $5 cleaning fee for every individual piece of garbage you leave in the car. “That’ll be $485 please.”

      • Billy says:

        It’s not a punishment. It’s an agreement. It has nothing to do with “justifying the fee amount”. Obviously if the law didn’t allow it, the bank shouldn’t be assessing such big fines, but outside of that, it’s fair game.

        That’s why there’s another bank up the street and another car rental place down the road.

        • quijote says:

          But overdraft fees are an industry wide practice, and people more or less need banks these days. So it’s like price gouging.

          • common_sense84 says:

            Clearly not. Since they said 2 years ago they had no overdraft fees. That a new owner implemented them.

            • inniskillin says:

              If I’m reading between the lines correctly, the Heartland probably used to bank with LaSalle Bank, a Chicago institution (as did I). About two years ago, LaSalle was acquired by Bank of America (a much less consumer-friendly bank). I agree that taking 18 months to realize how the overdraft fees were piling up is excessive, but really, Bank of America should have let them know that these overdrafts were piling up at the rate of 7 a day.

          • Billy says:

            Plenty of banks don’t have overdraft fees like that. There’s also that new law which makes such fees opt in.

      • Kibit says:

        The charged a $32 fee each time they over drafted their account. So in 18 months they over drafted their account 3,687 times or about 205 times each month. (about 7 times a day).

        I read that their old bank did not charge these fees, but it should not take a business 18 months to figure this out. When it first started they should have gone in to the bank and talked to them about the situation.

        I feel for the owners of this restaurant and for their customers. However, their is no guarantee that this will not happen again.

    • Boberto says:

      So, the state sales tax gets deducted “automatically” every month. I now see how the checking account overdrafts occurred (under the new banks rules).

      Pretty significant changes both happening at about the same time.

  6. RandomHookup says:

    They tried that fundraising shtick for a popular local ice cream shop in the Boston area when they fell behind on payroll taxes and the like. I’m sorry…if you’re so bad at running a business that you can’t take care of the basics, I don’t think a fundraiser is really a good idea.

    • TuxthePenguin says:

      Getting behind on payroll taxes is a different story. I’ve had clients who’ve had problems and that’s usually the sign that the business is either a) overstaffed (you don’t have the revenue to support that level of employees) or b) doomed. I’ve had multiple clients in that situation and I’ve seen two turn around. Three just closed up shop and moved on.

  7. ma1234 says:

    A benefit to keep a poorly ran business afloat? Seriously? Because there aren’t real issues to donate your money to. Sad.

    • ClaudeKabobbing says:

      Dang, I should have had a fund raiser back in 2006 and maybe I could have kept my business open.

  8. SonarTech52 says:

    If you just ignore it, it goes away right?

  9. rpm773 says:

    Everyone is seeing this the wrong way.

    Business is slow. The restaurant is losing money. We need to get an advertising campaign going! But we don’t have any money to pay for it.

    Ergo, we start skipping out on our sales tax, overdraft our bank account, and face imminent shutdown. We get the local alternative paper to write our story that we were ravage by the banks, and we get a donation program started to pay for our debt.

    Ad campaign done.

    • common_sense84 says:

      But it is a terrible idea.

      What would be better would be to file bankruptcy. Let the bank take what it can get. Then hold the fundraiser and open the business debt free by using the fundraising money as startup cash.

      Granted they can’t manage a business, so they will fail again, but this is by far the only solution that makes sense. Trying to raise a million bucks to clear your debts is stupid.

    • Razor512 says:

      Business is slow for them, in a struggling economy, people become less willing to spend $30 for $2 worth of food. It has to do with the problem of businesses wanting maximum profit per item sold because it means less work for them, even though they can make more money by lowering the price.

      (a matter of would you rather have 5 people buy a product at $28 profit per item or would you rather have 500 people buy the item at $1-2 profit. The companies that make the decision early on, are able to expand which is how we have so many mcdonalds and burger kings all over the planet)

      170 grams worth of hamburger at burger king is $1, 170 grams worth of hamburger at a restaurant is probably $10-15 while not tasting much better.

  10. cosmic.charlie says:

    At least the Reader article is well written.

  11. Macgyver says:

    It’s their own fault.
    If you want to run a business, take a class in community college, to learn how to run it successfully And take a class, or read how to budget your finances.

  12. mk says:

    I love the Heartland…of course I haven’t been there in years so I guess I’m not helping the situation much. On the other hand, saying “I don’t understand how banks work” doesn’t really put much faith in your ability to run a business, much less a restaurant.

  13. Skellbasher says:

    If you’re taking cash from sales tax payments to pay other things, your business is broken.

  14. LenVesper says:

    I’m not sure why this is on consumerist. This is not controversial or unfair treatment from a company. This is actually a pretty cut and dry case of the owner not paying attention and managing his/her business improperly.

    I mean, really, if a business is so mismanaged to a point that it cannot properly pay its taxes (be it due to being insolvent or just because of apathy), what in the world do people think a benefit would … benefit… the business?

    Raise money for people in need. REAL need.

    • apd09 says:

      I am not touching this one, but I bet you $1.00 you will get a lot of responses regarding who posted the article.

    • Rectilinear Propagation says:

      I think it’s here just because it’s an extreme case. The blurb is actually neutral on whether or not people should support this business.

      I have to wonder how this case got so extreme in the first place. You’d think with so many overdrafts the bank would have just closed the account and sent it to collections. At the very least you’d think they’d revoke the business’ overdraft privilege.

  15. Cicadymn says:

    In the age of bailouts who WOULDN’T rack up 100k+ in overdraft charges.

    I mean seriously, I know banks don’t like to tell you you’ve run out of money and are overdrafting, but somebody should have noticed it and stopped right then. Charging money you don’t have is just stupid.


  16. Rectilinear Propagation says:

    “not really understanding how banks work.”

    They’ve always been undercapitalized, James says, expanding from two to 11 storefronts without a significant cushion.

    More than just “getting over this hump,” he wants to grow the business…put in a real roof garden (instead of the current bunch of bucket planters)…develop the Heartland’s own line of products…and resume publishing the Heartland Journal, a free seasonal tabloid of sport, culture, and progressive causes that’s been on hiatus for five years.

    I…I can’t…

    No, you know what, I don’t have to blame them for the overdrafts to be able to yell at them. This is insanely out-of-line. You don’t beg for money, explain how you ended up in financial trouble, and then admit you’re going to do the exact same thing that got you into trouble with the donations. How many people is he telling his business expansion plans to while he’s pushing the lifetime membership? It’s bad enough to ask for money to save a for-profit enterprise but to then say, “Hey, as long as you’re handing me money how about you give me more so I can add more stuff!”

    NO. No, no, no, no!

    • RxDude says:

      “and resume publishing the Heartland Journal, a free seasonal tabloid of sport, culture, and progressive causes that’s been on hiatus for five years”

      Situation explained.

  17. Loias supports harsher punishments against corporations says:

    This is what happens when a person with no finance education opens a small business.

    • crazydavythe1st says:

      I think you’re average person without finance education could do better than this…

      • GoBobbyGo says:

        This restaurant’s been open since the 1970s. You think the average person with no finance education could keep a restaurant going for more than 30 years?

    • Hoss says:

      This type of finance education comes at about the 3rd grade when you start working w minus signs

      (35-year finance guy)

  18. tungstencoil says:

    From the article:

    How much will it take to keep the endangered Heartland empire going? According to the letter, $50,000 by mid-October and over $50,000 more “very quickly in order to get through the winter.” Long-range goal: $1 million.

    Anyone out there feel like they can float a really lucrative new business with a 1.1 million dollar cash infusion? Seriously…

  19. ames says:

    I’ve eaten there. Ugh. I’m not surprised.

  20. RandomHookup says:

    An ice cream store in Cambridge, Mass., actually raised $34k in customer donations to cover the same kind of problem.

    He shut most of his stores, but is still in business. He owed about $140k in meal taxes and 27k in payroll taxes.

  21. frank64 says:

    The problem I have is that there is very little real cost to the bank, maybe 5K?

    I also wonder how much the banks spends on advertising. Not related, except that much of the benefit could be negated by the bad publicity. Especially if it is true that higher fees contributed to the restaurants issues. You can bet customers with the bank will be taking a second look, as well as potential new customers. Sometimes it is better to be a human being.

    • humphrmi says:

      How much cost is involved in serving a burger with a Tabasco- based sauce on it? I can make one at home for about a buck. So the bank that’s making a profit off their severe mismanagement is less entitled to their markup than the restaurant serving $1 food for $5?

      • frank64 says:

        I think I was being real generous when I said 5K, I really think the cost to the bank is much, much less, and may be negligible.

        So I think it would be more like that $1 hamburger on the menu for $5, but in the fine print that if I ordered after 9PM, when it was raining it cost $5,000. They already are making the profit on the $5, would ordering past closing cost them that much? Sure I was stupid for not reading it, but gotcha capitalism sucks. I really hate it, and I am really pro business, and even banks at times.

        • 99 1/2 Days says:

          The last owners of the bank was loaning this business money for free for years, apparently. That was awful nice of them, but the owners were fools for thinking it would last forever.

      • peebozi says:

        I agree. Also, I believe we should begin charging Local Business Licenses based on the Business’ need and percentage of market capitalization, not the typical $300 per year.

        For instance, BoA, would be charged $250,000 per year to operate a branch in beautiful North Philadelphia. They desperately want to be in this area of the city due to its high number of poor (aka Predatory Lender’s Prime Demographic) so they should pay what we feel we can get out of them, not the actual cost to reimburse the city for its services.

        Like bank fees and text service rates.

    • 99 1/2 Days says:

      There ain’t a lot of cost in loaning money, excepting if you might not get it back. Going into overdraft is spending money you don’t have. Damn right you have to pay for it. A bank is not your mom.

  22. sir_eccles says:

    So I guess he is going to be featured in next season’s Gordon Ramsey Kitchen Nightmares then?

  23. common_sense84 says:

    The business failed and they used a overdraft fees to delay folding.

    Rather than just going under, now any assets the business does have is going to the bank.

    That owner is an idiot. Any donating money to this cause is a jerk.

  24. MarsVolta187 says:

    I’m from Chicago, and Heartland is an icon in our city. The management are green tea hippie types, so this story doesn’t really surprise me. We want to keep the Heartland open not to save the owners, but to keep one of our most storied community watering holes from collapse.

  25. GoBobbyGo says:

    I see what you did there. The way you quote him it makes it sound like he wants to go through with these expansion plans as soon as he’s solvent. But adding back in that phrase you took out, “if he had his million” makes it clear that these are dreams, not immediate plans he’s looking to go through with right away.

    Look, there are things I like about the Heartland and things I don’t. Brunch is really good, but a little overpriced. The outdoor seating area that he wants to winterize is kind of nice. The health department stuff last year was kind of skeevy. Lunch and dinner ain’t that great. The store gives me hippie flashbacks.

    But Mike and Katie have kept this place open for 34 years. Could I keep a restaurant open 34 years? Hell no. Could you? Maybe, but the overwhelming majority of people who, you know, open restaurants cannot. The stuff from the last few years sounds insanely dumb – this doesn’t even go into their liquor license fiasco from a couple of years ago.

    Eleven storefronts? That’s a bar, a store, a restaurant, and a radio show all in one place, the bar next door, the theater next door to that, the coffee shop across the street, etc. My understanding is that, rather than aggressively expanding, they picked these places up when those places were closing up shop. That neighborhood (my neighborhood) certainly won’t be better off when all of this stuff closes down.

    • Rectilinear Propagation says:

      I see what you did there.

      No you didn’t because how soon he plans to do this is not the point.

  26. Opie says:

    That amounts to over 200 overdrafts per month for 18 months. Since banks only process on weekdays and there are some bank holidays in there, that is conservatively 8 to 9 overdrafts per day.

    What the ???

  27. 99 1/2 Days says:

    Like a usual episode of Kitchen Nightmares but without the con artist head chef.

  28. Speedstr says:

    I read the article yesterday, and my soul cried a little to see this place in financial turmoil. I been to this place countless times for brunch, seen friends’ bands play, and am sad to see it most likely close shop. I’m sure the owner is a nice guy, but you have to come to terms (certainly he did) that he wasn’t financially responsible enough. So in overall blame, I have to say the the owner was at fault for not checking as close as he could have.

    While the bank is technically not at fault, I’m surprised that they let so many overdrafts be processed without feeling obligated to contact the owner of the account. They just got greedy, and let charges stack up. Instead of making more money over time by keeping a personal relationship with a customer and telling them at an early point of their financial recklessness, the bank is now most likely stuck holding these overdraft charges, and having no business with them in the future. This greed only reinforces the popular opinion of how evil banks can be.

    • JeremieNX says:

      Every single bank I have ever dealt with personally or seen/heard of has ALWAYS sent out a notification in the mail of all overdrafts at a minimum. Some banks even call if the overdrafts are severe or if it’s been overdrawn for a couple weeks. Still, it is not the bank’s job to hand-hold and coddle the financial idiots out there.

      There is absolutely no excuse what-so-ever for these people to have not been aware of the situation.

      • Speedstr says:

        I agree, the owners should have been more financially responsible, but the point I was trying to make, was “a little customer service goes a long way”. Obviously, reimbursing 3,687 overdraft charges is not a viable solution at this point. But perhaps, had there been some intervention by the bank (that has alert flags in place) after the first 20 or even 50 times, this story would have been dramatically different.

    • madanthony says:

      Banks have this nifty thing called a statement, which is typically mailed out every month, and shows how much money has gone in and out of your account, including fees. It even tells you how much money you have in the account, so you don’t overdraft.

      And most banks these days will even let you access this “statement” through this newfangled communications network called the “internet”, where you can get real-time info on what is going on with your account.

      If you are running a business, it’s not unreasonable that you should be checking your statements on a regular basis.

  29. gman863 says:

    Why did the bank allow this to go on so long???

    If an individual racks up too many overdraft fees or bounces too many checks, the bank will close the account. Period. The bad account history will be reported to TeleCheck, Dunn & Bradstreet and other agencies. This information (as on personal account history) will be shared with any future bank the business attempts to open an account at.

  30. jim says:

    this appears to be a chain of sorts. if the owners/management are incompetent, which they clearly are, they should sell the business to someone else and just work there. As for the “pleas”, jeez, anyone with a small business could probably say the exact same things. Why would anyone want to give money to people that are incompetent to handle it? It would be just like throwing it away, despite anything else good they may do for the community.

  31. Verdant Pine Trees says:

    Reading the article, you’ll learn this restaurant has been around for 35 years and that the owner is 69 years old. Definitely old enough to know better!

  32. Jimmy37 says:

    No sympathy here. Owners are not telling the truth. You can’t be in business this long and make believe you don’t know how the world works.