Looking for a little input...

Scenario...a previous customer (bank has charged their checking account off for bad checks) comes into the bank and wants to cash a check made payable to them from another bank customer (on-us check).

Are we obligated to cash this on-us check or may we refuse since the payee "owes" the bank money?

Thanks in advance for any input.

If you refuse to cash the check based on that reason, the issuer of the check could sue your bank for wrongful dishonor. You'd better have a better reason for refusing to cash the check.

Thanks John! This is what I was wondering about.

Banks have come up with a lot of "self-help" ideas for collecting on charge-offs. This is one of them. Another one is misapplying the right of set-off (or offset, if you prefer) and grabbing all or part of a check like the one you've asked about and just telling the payee it's being applied to his debt.

Either of those schemes might get short-term results, but at the risk of legal hot water that could make the attempt more costly than helpful.