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#1709750 - 06/13/12 03:58 PM Right of Offset on Government Deposits
GatorGirl09 Offline
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Joined: May 2008
Posts: 42
Sunny Florida
We have a customer that was involved in a fraud scheme as a supposed "mystery shopper". The check he deposited came back fraud after he had withdrawn all of the funds. (Teller should have placed a hold, but did not.) Now that we have contacted the customer has told us that he does not intend to pay, but we know he has a Social Security Payment coming in at the first of the month, unless he has time to change it. Can we legally use that as right of offset? I am questioning this because of the Garnishment Guidance issued by the Treasury last year. I understand this is not a garnishment, but is there anything that says we do not have right of offset to the funds?

Link to the guidance: http://www.fms.treas.gov/greenbook/guidelines_garnish0311.pdf

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Deposits and Payments
#1709756 - 06/13/12 04:05 PM Re: Right of Offset on Government Deposits GatorGirl09
BrianC Online
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BrianC
Joined: Nov 2004
Posts: 6,694
Illinois
Don't look at this as exercising right of offset. When the check was returned, you can excercise your right to charge the check back and overdraw the account. When the direct deposit is made, you can simply cover the overdraft with the direct deposit.

See this Quick Reference Guide in the BOL Info Vault
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#1709759 - 06/13/12 04:10 PM Re: Right of Offset on Government Deposits GatorGirl09
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
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).
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#1709772 - 06/13/12 04:22 PM Re: Right of Offset on Government Deposits GatorGirl09
BrianC Online
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BrianC
Joined: Nov 2004
Posts: 6,694
Illinois
While we're on this topic, it's a good time to put in a plug for John's upcoming webinar on August 1st Avoiding Bad Check Losses. John will have some good tips to help your tellers spot these before you end up in this situation.
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