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#1974893 - 11/06/14 07:46 PM 3rd parties handling payroll
mdog76 Offline
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Joined: Jan 2007
Posts: 645
We have a customer who sends their payroll to a 3rd party (which I assume is payroll management company) and the 3rd party is who cutting their payroll checks. The checks are not drawn from us. What recourse do we have if a check comes back bad or insufficient? Granted, we assume the 3rd party would not cut the check if the funds were not there.

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#1974912 - 11/06/14 08:26 PM Re: 3rd parties handling payroll mdog76
Milby Offline
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Joined: Apr 2007
Posts: 953
Tejas
I don't understand. If the checks are not drawn on your bank, what recourse would you need?

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#1974916 - 11/06/14 08:36 PM Re: 3rd parties handling payroll mdog76
mdog76 Offline
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Joined: Jan 2007
Posts: 645
I'm sorry, I can see where this is confusing. We have a loan and deposit customer who is using a payroll management company for their payroll services. The bank the checks are drawn off of does not have a location in our area and the customer has been directing their employees to our branch. I think the tellers thought since it was our customer and loan, it was fine to cash them. The branch manager just became aware of this (its his loan customer). After further research, I believe there needs to be an agreement of some kind between the bank and customer for this to continue. Hope that makes more sense.

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#1974935 - 11/06/14 09:24 PM Re: 3rd parties handling payroll mdog76
Milby Offline
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Joined: Apr 2007
Posts: 953
Tejas
Gotcha - that makes sense. As it stands now, you have no recourse. I have seen agreements in past in which the bank will cash payroll checks like this. We never had any problem with it, but the first time your tellers cash a fraud/forged check that agreement will be worth the paper it's written on. Your customer's lawyer will say the agreement only covers bad funds on legit checks, fraud checks are not their fault, and that the bank should have know that wasn't the the right check stock / serial range / employee / whatever-other-excuse.

Can you do it? Sure. Recommend it? No.

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#1975545 - 11/10/14 08:30 PM Re: 3rd parties handling payroll mdog76
Gioia Offline
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Joined: Sep 2014
Posts: 82
We currently cash payroll checks as a courtesy for 2 of our business clients who issue their payroll checks in such a way as you described. We understand that we have no recourse, however these are businesses that have been banking with us for a few decades, so at some point management decided the risk was pretty low. There really aren't that many people that come in to cash these checks anyway, as most already have a bank account, or we have been able to open accounts for those that have come in simply to cash their check.

If this is a new customer, I would definitely not recommend this practice.

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