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Old 09-06-2011, 03:29 PM
AndyLee AndyLee is offline
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How Does A Direct Deposit Bounce?

OK I lost my job recently. My final pay check was supposed to be Sept 2nd, last Friday.

So today I decide to go check my blance in my bank account to make sure they paid me all my vacation pay I had unused.

Now I don't have any of the check in the account and I have a $35.00 bounced checked fee.

I called my bank and they said, my deposit from Sept 2nd had been NSF, which they explained is not sufficent funds.

I called my work and they said, the reason the money isn't there is they do not issue final paychecks via, direct deposit you must pick it up. It was nice of them not to tell me this.

What I can't understand is why was the direct deposit classified as my bank as NSF? I talked to accounting at work, and she said, it's impossible and it's the bank's error.

The bank of course says, tough luck, I will have to pay it because my former employer tried to deposit funds into my account and it didn't have any.

I guess I'll get it all straightend out eventually but what I want to know is, is it possible for a direct deposit to bounce?

I put this under general questions, 'cause that's the real question I want to know.

Whether the bank retracts the fee or my ex-company makes good, I guess is for another thread. I just want to know if a direct deposit can bounce?
  #2  
Old 09-06-2011, 03:42 PM
Anaamika Anaamika is offline
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Your direct deposit check bounced out of your account because of NSF? There is absolutely no reason why a check wouldn't deposit because of that...I've never heard of a bank turning down money!
  #3  
Old 09-06-2011, 03:50 PM
obbn obbn is offline
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Trying to think logically about it I don't see how it is possible for a direct deposit to bounce. For one thing the direct deposit is initiated by the part deposting the money, your bank doesn't reqeust the money from them like they would with a check.
Something doesn't sound right here. Let's say for the sake of argument that your company has you set up on DD on an automated program. Everytime your paycheck is due their computer automatically sends a DD to your bank. The only way for that scenario to fail is if the account they pay from doesn't have enough funds in it. Even if this were the case, the DD would just not go through from the sending bank. Why in the world would your bank charge you a NSF?

Banks are pure evil. Please follow up when you get it resolved, I would like to know what happened here.
  #4  
Old 09-06-2011, 04:06 PM
Ravenman Ravenman is online now
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Quote:
Originally Posted by AndyLee View Post
I called my bank and they said, my deposit from Sept 2nd had been NSF, which they explained is not sufficent funds.

I called my work and they said, the reason the money isn't there is they do not issue final paychecks via, direct deposit you must pick it up. It was nice of them not to tell me this.

What I can't understand is why was the direct deposit classified as my bank as NSF?
I'm not sure I'm following completely, but it sounds like (1) your former employer did not issue a direct deposit for your final paycheck, because they insist that you pick up an actual check yourself; (2) you overspent the funds in your checking account, thereby generating an overdraft and the associated fees.

It sounds like you generated the NSF by expecting to have your final paycheck direct deposited (which seems like a reasonable expectation), not that your former employer caused the NSF through a botched direct deposit (because apparently they never tried to direct deposit any money).
  #5  
Old 09-06-2011, 04:22 PM
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Telemark Telemark is offline
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Originally Posted by Ravenman View Post
It sounds like you generated the NSF by expecting to have your final paycheck direct deposited (which seems like a reasonable expectation), not that your former employer caused the NSF through a botched direct deposit (because apparently they never tried to direct deposit any money).
This was my interpretation as well. I think there might be some confusion between you and the bank as to what generated the NSF charge.
  #6  
Old 09-06-2011, 04:27 PM
LonghornDave LonghornDave is offline
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Payroll direct deposit is completed through the Automated Clearing House system ("ACH"). It is possible that your company initiated an ACH transaction, it was processed by their bank, and then your bank rejected it because your company's account was overdrawn. The reason this is possible is that ACH transactions are processed a couple of days before they post to an account. Your company could have initiated the ACH, then your company's bank could have processed the transaction, then your company overdrew their account, then when your bank tried to collect the funds they weren't there.

It is important to understand that an ACH payment is not the same as a wire payment. The transaction is a much more lengthy one.

Now, it makes absolutely no sense that your company states they did not perform a direct deposit for your paycheck, but your bank charged an NSF fee. Logically, how would your bank even know to charge a fee unless your company attempted the transaction?
  #7  
Old 09-06-2011, 04:31 PM
LonghornDave LonghornDave is offline
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Originally Posted by obbn View Post
Trying to think logically about it I don't see how it is possible for a direct deposit to bounce. For one thing the direct deposit is initiated by the part deposting the money, your bank doesn't reqeust the money from them like they would with a check.
Something doesn't sound right here. Let's say for the sake of argument that your company has you set up on DD on an automated program. Everytime your paycheck is due their computer automatically sends a DD to your bank. The only way for that scenario to fail is if the account they pay from doesn't have enough funds in it. Even if this were the case, the DD would just not go through from the sending bank. Why in the world would your bank charge you a NSF?

Banks are pure evil. Please follow up when you get it resolved, I would like to know what happened here.
It is possible for a direct deposit to bounce. The receiving party's bank attempts to collect the funds and they are unable to do so because the account at the sending party's bank is overdrawn.
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Old 09-06-2011, 05:20 PM
aceplace57 aceplace57 is offline
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I ran programs for payroll at our state university in the 1990's.

We first created a voucher tape that went to the state. They processed the vouchers and deposited the funds into a central bank account.

Our direct deposit run created a tape for ACH and a transaction for each employee. It used the special payroll account the state deposited into.

We had procedures to make sure the voucher totals matched the direct deposit total. The payroll officer in accounting had that responsibility. Timing was important because the funds weren't transferred from the state (into the special account) until the day before the direct deposits. It worked, we never had a direct deposit bounce. Twice, I had to personally take the tape to the bank because of payroll aborting. We had to fix the problem and rerun.

Termination checks were issued on paper. Because they weren't part of the regular payroll run. The OP was told correctly. Termination checks wouldn't be direct deposit at my employer.

Last edited by aceplace57; 09-06-2011 at 05:25 PM.
  #9  
Old 09-06-2011, 08:51 PM
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Alley Dweller Alley Dweller is offline
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Quote:
Originally Posted by LonghornDave View Post
Payroll direct deposit is completed through the Automated Clearing House system ("ACH"). It is possible that your company initiated an ACH transaction, it was processed by their bank, and then your bank rejected it because your company's account was overdrawn. The reason this is possible is that ACH transactions are processed a couple of days before they post to an account. Your company could have initiated the ACH, then your company's bank could have processed the transaction, then your company overdrew their account, then when your bank tried to collect the funds they weren't there.

It is important to understand that an ACH payment is not the same as a wire payment. The transaction is a much more lengthy one.

Now, it makes absolutely no sense that your company states they did not perform a direct deposit for your paycheck, but your bank charged an NSF fee. Logically, how would your bank even know to charge a fee unless your company attempted the transaction?
No, the status of your employer's account has nothing to do with whether an ACH credit clears after the entry has been sent.

A bank that participates in FedACH services must designate a SINGLE account at a Federal Reserve Bank from which ACH transactions are to be settled. This can be the bank's own account at the Federal Reserve or a correspondent bank's account at the Federal Reserve. The bank is responsible to adequately fund this settlement account to account for all ACH transactions it originates. The clearing house does NOT look to individual bank customers' accounts to settle ACH transactions.

Maybe if the employer's bank were insolvent and it didn't have enough cash or credit to settle the day's transactions, there could be a problem, but not because the employer's account was overdrawn. If the employer does not have enough money in its account and the bank is not prepared to extend it sufficient credit, then the bank shouldn't let the employer originate the ACH credit in the first place. If it does, collecting from the employer becomes that problem of the employer's bank, not the problem of your bank.

Let me give you an example of how settlement works: Let's say that Bank A has allowed its customers to originate $5 million in ACH credits ("direct deposits") that are due to be settled (posted to your account) today. But other banks have originated $4 million in direct deposits to customers of Bank A. On settlement day, the clearing house will deduct $1 million (the difference between what the bank sent out and what the bank has coming in) from the bank's settlement account. The clearing house does not have access to check individual bank accounts at Bank A. They just make one big withdrawal from Bank A's settlement account for the net amount.

In fact, if the numbers were reversed, let's say Bank A's customers originated $4 million in direct deposits to other banks and other banks' customers originated $5 million in direct deposits to Bank A's customers, the clearing house would simply give $1 million to Bank A at settlement time.

Technical note: Banks that have a history of underfunding their settlement accounts may be subject to real-time monitoring which causes their settlement accounts to be debited for direct deposits they originate at the time each batch is submitted.


See "Designation of Settlement Account" and "Settlements" in "Federal Reserve Banks Operating Circular 4 (pdf)."
  #10  
Old 09-06-2011, 10:17 PM
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Alley Dweller Alley Dweller is offline
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First, are you in the USA?

Are you absolutely sure your employer uses ACH (electronic inter-bank direct deposit) to pay you? I know they call it "direct deposit" but is it possible that they mean that they mail a check to your bank on every payday?

By any chance, do you have one of these arrangements where the employer tells you to open an account at a specific bank (or get a debit card at a specific bank) and they deposit your salary into that account? These are usually called something like "bank at work." (Many employers are also offering their hourly employees a debit card program instead of traditional paychecks/direct deposits.)

Did you have some sort of arrangement at your bank where they would advance you the amount of your direct deposit and then repay the advance when your direct deposit came through?

ACH credits (direct deposits) cannot bounce. They are final on the settlement/posting day (pdf). ACH debits (for example, when you let your electric company take your bill payment out of your checking account) can bounce. Debits can be reversed until midnight of the following banking day.
  #11  
Old 09-07-2011, 08:02 AM
robardin robardin is online now
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Quote:
Originally Posted by Ravenman View Post
It sounds like you generated the NSF by expecting to have your final paycheck direct deposited (which seems like a reasonable expectation), not that your former employer caused the NSF through a botched direct deposit (because apparently they never tried to direct deposit any money).
Seems to me to be as simple as this. There's no need to ask after some odd incident of a non-clearing of an ACH deposit, or whether "direct deposit" meant auto-mailing of paper checks instead - the OP clearly was in the habit of spending the paycheck amount from his account on the day of deposit, his surprise was that his last paycheck didn't go through the way the others had.

Which apparently is company policy, and we'll just have to believe him that they didn't tell him about that beforehand. More likely it was in some form or other he signed that didn't stand out and nobody verbally emphasized the fact that he had to come by to physically pick up his last paycheck.

Which is not as annoying as you may think. Depending on the level of miscommunication between departments in a very large corporation, for the left hand to tell the right hand something has happened can have a lot of weak points - key people being on vacation, missing a form stuck in the middle of a pile, etc. One time I left a job, I moved to another state but maintained the same bank account and continued to get direct deposit paychecks (in the usual amount) for another THREE pay cycles (a month and a half). They stopped coming after that, and a few weeks later contacted me to authorize a direct auto-WITHDRAWAL from my account to recover those three paychecks, the alternative being to start working out a payment schedule with their legal department. I had figured this might happen and so hadn't spent the money, but if you're already living paycheck to paycheck I think it would have been very tempting to dip into the "bonus paychecks".
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Old 09-07-2011, 12:01 PM
AndyLee AndyLee is offline
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Just to clarify, I am in the USA, Chicago.

I had my paycheck deposited directly into my bank. It can be any bank I choose. So that's all I know.

The last check written on the account was to the phone company on the 16th of August. My balance was exactly 98.00 after that check was written.

I have not used it since, there is no activity on it excpet the NSF charge of $35. My blance now reads $63. So this is definately not my fault

I guess have I my question answered to how a direct deposit can bounce.

It is definately my former company that is screwing me over. At the end of last month eight of us were let go. I contacted one of them and she got her last check through direct deposit and it went through fine.

So first of all the accountant is lying to me. Not all final checks have to be physical checks. I had coffee with my former co-worker yesterday and she showed me on her online bank that the money cleared her account Friday, Sept 2nd.

I also know this is funny as I went and got my physical check yesterday. This morning I went to deposit it and the teller says "I can't accept this check." I looked at her funny and she says, 'It's not signed."

Sure enough the paycheck I it is not signed. You know usually they have the stamped signature of the controller. There is nothing where it's supposed to be signed.

So I have to go back to my former employer and figure out this now.

I always thought the signature printed out when the check printed.

But this is just BS and for another thread. At least I know it's most likely my former employer screw up and not my banks. Now to try to get someone to pay me the $35.00

Thanks for the ideas, but this seems to be a case of my former employer screwing things up.

Last edited by AndyLee; 09-07-2011 at 12:05 PM. Reason: clarify
  #13  
Old 09-09-2011, 10:22 AM
LonghornDave LonghornDave is offline
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Originally Posted by Alley Dweller View Post
No, the status of your employer's account has nothing to do with whether an ACH credit clears after the entry has been sent.

A bank that participates in FedACH services must designate a SINGLE account at a Federal Reserve Bank from which ACH transactions are to be settled. This can be the bank's own account at the Federal Reserve or a correspondent bank's account at the Federal Reserve. The bank is responsible to adequately fund this settlement account to account for all ACH transactions it originates. The clearing house does NOT look to individual bank customers' accounts to settle ACH transactions.
Thanks for the correction.

Quote:
Originally Posted by Alley Dweller View Post
Maybe if the employer's bank were insolvent and it didn't have enough cash or credit to settle the day's transactions, there could be a problem, but not because the employer's account was overdrawn. If the employer does not have enough money in its account and the bank is not prepared to extend it sufficient credit, then the bank shouldn't let the employer originate the ACH credit in the first place. If it does, collecting from the employer becomes that problem of the employer's bank, not the problem of your bank.
You are right. I now recall back when I worked at a bank that the treasury management department did need credit approval to set-up ACH services for accounts. Clearly this was to handle the situation that you described: an ACH hitting an account that is overdrawn does not bounce, it is an extension of credit to that customer.
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