If you've created an overdraft in the customer's account with the charge-back of the fraudulent check (as you have a right to do), your acceptance of the customer's Social Security check into the account via direct deposit will post as a credit toward that overdraft amount, and the customer will likely still be overdrawn. That is not an example of setting off against the account.
Setting off happens when the bank has an overdraft balance in one account (or a defaulted loan), which is an amount owed to the bank by its customer. It also has an account for that same customer with a positive balance, which is an amount owed by the bank to the customer. Setting off would entail charging the account with the good balance and crediting those funds to the account that's overdrawn (or to the defaulted loan).
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8