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#2167608 - 03/12/18 02:52 PM Factoring Company and Check deposits
Megaman Offline
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Joined: Jul 2017
Posts: 116
The bank is new to factoring. We have one factoring company that gets checks made payable to one company and being deposited into our customer's business account (different company name). From the bank's point of view, the bank is getting checks made payable to one business and being deposited into another company's account. How does other bank's handle factoring companies from a check deposit point of view? Can anyone point us to any guidance regarding factoring and the bank? What are the issues if the bank continues to take checks made payable to one business but deposited into another business account? Is there any documentation that the bank should be obtaining from the factoring company (bank's customer)?

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General Discussion
#2167610 - 03/12/18 03:04 PM Re: Factoring Company and Check deposits Megaman
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 79,633
Galveston, TX
"We have one factoring company that gets checks made payable to one company and being deposited into our customer's business account (different company name)."

Just not acceptable. What is the risk? - the bank being responsible to the company that is the named payee for the amount of each and every check. Something is terribly wrong with this situation.
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#2167648 - 03/12/18 04:47 PM Re: Factoring Company and Check deposits Megaman
Skyline Offline
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Skyline
Joined: Sep 2005
Posts: 589
Back in the 90's the bank I was with had a factoring company as a customer. We were a small community bank and they were located in our building. We had between 60 to 70 accounts opened at one time in all the different company's names under one CIF. Make sure your pricing for handling this customer is appropriate.
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#2167818 - 03/13/18 03:40 PM Re: Factoring Company and Check deposits Megaman
Elwood P. Dowd Offline
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Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
Your bank needs a resolution from each of your customer's customers authorizing your customer to apply the payees' endorsements and deposit the checks into an account that does not belong to the payees. Incorporated into each resolution will be a hold harmless agreement in favor of your bank. (You will supply all of the wording for the resolution.) Your employees need to find the resolution for each check each time these people make a deposit. If that sounds reasonable I have explained it badly.

Your risk is pretty simple: These people deposit one or more checks they had no right to deposit and your bank guarantees the lack of the endorsement. There are no limits on your liability.

I'm familiar with this because one of the banks where I worked did it, but that was in the 1970s...

Note Skyline's last sentence.
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