Skip to comments.FYI: Beware of Automatic Payroll Deposits
Posted on 06/14/2005 8:43:07 AM PDT by The Ghost of FReepers Past
Have you signed up with your employer for an automatic payroll deposit? Then be warned. The employer has access to your bank account for 5 days after the deposit is made. Technically, the employer can only debit your account to reverse an error. BUT IN REALITY, he can debit your account for the full amount of your check for any reason he chooses. Revenge. Coercion. Whatever. Your bank won't care; it's not their problem. His bank won't care, or they may fake it and just not call you back. The ACH people won't care. Mid-America Payment Exchange won't care (it's not their problem -- "contact your employer").
Do NOT sign up for this unless you really trust your employer. And then I still wouldn't sign up for it unless they cannot debit your account for ANY reason. If they make an error, they should have to get your authorization FIRST! Don't repeat my mistake.
I'd rather get paid in gold ingots, but they didn't like that suggestion when I made it.
LOL! I'm serious about this. It sounds great and is convenient, but DO NOT agree to let them correct mistakes without your authorization. You are essentially giving them access to your account for the full amount of the deposit.
If your employer pays you with a check, he can stop payment on it for any reason he chooses, too.
So, I guess I'm missing your point.
What if you work for the bank like I do?
My mother has her SS check automatically depostied. They won't correct errors. They tell her about the error and she must refund it herself. They have no authorization to make debits. That's what you should arrange with your employer. Give them NO RIGHT to make debits so they can't take the money back just because you won't sign a non-compete or something.
What was the mistake on yours? and if you dont mind my asking, about how much were you screwed out of?
He can stop payment on a check, yes. But can he go to your bank after the check has cleared and take it back out of your account? That is what I am talking about.
one time, i went to take a few thou out of the bank, and they asked "and how would you like that?"
you shoulda seen the look on her face.
(I finally gave in and took $100s) =P
It was one of two choices,
b. Routinely look my purse and find my payroll check fom 10 days earlier that I had forgotten to deposit. AFTER I'd written and mailed my bills.
It's a no-brainer for folks like me!
That's exactly what happens if he stops payment on a paper check after you've deposited it in your account. As long as he stops payment before it clears HIS account, you lose, just like the ACH process you're talking about. One is electronic; the other is paper.
This person was told to sign a non-compete agreement or he would not get paid. He signed, but another employee didn't. The employee that didn't sign was told he had two choices: resign or be fired. That was a Thursday. Friday was a payday and the employer decided to just take back his pay of approx $1,500. It was money earned the two weeks prior to the pay week. The employee then met with the employer the following monday and signed a resignation letter. THEN AND ONLY THEN did the employer give the money back.
Okay. I'm just warning you that you need to check what you signed. Be sure that your employer has NO RIGHT to debit your account for any reason whatsoever. Then you should be safe.
Nope. An auto deposit starts out by clearing his account. It goes to his bank FIRST, then to yours. The funds are immediately available to you because they have already cleared his bank.
That also applies in this case:
BUT IN REALITY, (your wife) can debit your account for the full amount of your check for any reason (she) chooses.
ACH payroll transactions are different. They orignate with the signer and clear his bank BEFORE they get to the payee's bank.
Go ahead and give your employer the right to debit your account if you want. It's your risk. I'm just warning you.
LOL! Yes, but only if you agreed to a joint account. You probably do not want to have a joint account with your employer.
Nobody is going to agree to this, so if you can't live with that, you're pretty much going to have to do without direct deposit.
SSA agrees to it. The same rule should apply for employers. The rule should be changed. If a mistake was made they should have to get authorization from the account holder first.
Yes, of course. But, if he were to pay you with a paper check, he has the benefit of having the float time in which to discover and correct (via the stop payment) any mistake he may have made. Do you think employers want to just give up that benefit? Probably not. Therefore, the ACH provides this mechanism to keep them from losing that benefit.
Now, I also recall hearing a few months ago that, since paper checks are now processed electronically, there was some talk of eliminating the paper float; the check would clear the check writer's account when the issuing bank received electronic notification rather than waiting for the paper check to arrive. If that were to happen -- maybe it already did, I don't know -- this 5 days of float would seem to give direct-deposit employers a huge benefit that paper-check-writing employers no longer enjoy.
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