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Linking Overdraft Protection To Business DDA Accounts With Automatic Transfers

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Question: 
Is it possible to link overdraft protection on a Business DDA account with automatic transfers instead of establishing a separate business line of credit with fund transfers?
Answer: 

The problem with this could be in the "from" account if this is a transfer program. That could promote an interest-bearing DDA for the business and would not be allowed.

An overdraft "privilege" should be another matter. Based on a case-by-case basis, I see nothing prohibiting this. You may have some risks, however. I had always been taught that when the bank chooses which items are paid and returned, it may be deemed as in control of the company. If the returned items happened to be withholding taxes, you could find yourself liable to the IRS for payment of those dollars.

First published on BankersOnline.com 07/07/03

First published on 07/07/2003

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