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Question: We have had an overdraft on a customer's account for over three months. We have written to him and called him, and he keeps promising to clear up the overdraft, but so far has not yet made any effort to do so. He came in yesterday to cash a check. We knew the check was good, because it was his payroll check and it was drawn on us. So we cashed the check, deducted our overdraft from it, and gave him what was left. Were we within our rights? Was it OK for us to do that?

Answer: You sure were within your rights, and it was OK, according to all of our staff attorneys. You have the right of offset, and the fact that he cashed the check instead of depositing it does not alter the fact that he owed you the money. It probably would have been "cleaner" if you had made him deposit the check, make the overdraft good, and then had him cash a check for the balance left over, and thereby close out the account. What you did accomplished the same thing, but probably caused you a few uncomfortable minutes in the banking office, to say the least!

Copyright © 1991 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 2, No. 3, 4/91

First published on 04/01/1991

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