Am I Supposed to Have Positive Pay?

Positive Pay is a fraud protection service you buy from your bank.  You pay a fee for this service each month and it acts like an insurance policy against someone fraudulently obtaining money out of your account(s).  It is not as easy as just paying a fee though, there are several steps you need to take in order for the service to work.  In simple terms, you must tell the bank which checks you have written/issued, and then the bank will make sure that they are the only checks that get paid.  So how do you “tell the bank” which checks you have issued?  Every time you do a check run, you have to immediately turn around and provide that info to the bank – specifically you need to let them know each check number and check amount.  This is Basic Positive Pay.  The means to provide that information to the bank is by you running a utility in your software that will transmit your “check issue file” to the bank.  It is important that you provide the info to the bank before your checks hit the street.  If your current software does not have this feature, you can purchase software that will create a bridge from your information into the format needed by the bank.

Now that you have provided the bank with the information on each check you have written, they will notify you if a check is presented to them for payment that you did not write.  This is called an exception item.  You will have the chance to review the exception item and let the bank know if it truly is a fraudulent check in which case it will not be paid.  If for some reason you do want the check paid (perhaps you wrote one manual check and forgot to send the info to the bank), you can let them know that as well.   Your bank may notify you of exception items via email or a phone call.  Timeliness is important because the bank has a cutoff time they must meet in order to get the item paid or returned.  If for some reason you are not able to view or “decision” an exception item, you and the bank will have a predetermined disposition (default) of such items – either pay or return.

Basic Positive Pay should cost around $50-$100 per month for maintenance, plus another $0.05 to $0.08 per item (check issued).  Some or all of these charges can be paid for based on the average balances you keep in your bank account.  Be aware that Positive Pay only protects you against paper items, i.e. checks.  It does not provide protection against electronic attacks on your account.

Positive Pay is a very important consideration in these times when fraud is so prevalent.  Do not expect your bank to pay you back if someone does pass a bad check against your account.   Case law is on the side of the banks but hopefully you will never have to experience that type of rift with your bank.  If the price of Positive Pay seems too high, consider an alternative – Paid Check Review.  Stay tuned.


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