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Positive Pay Defintion

What Is Assertive Pay?

Positive pay is an automated cash-management service used by financial institutions employed to deter check fraud. Banks use undeniable pay to match the checks a company issues with those it presents for payment. Any check considered suspect is sent service to the issuer for examination. The system acts as a form of insurance for a company against fraud, losses, and other liabilities to the bank. There is in the main a charge incurred for using it, although some banks now offer the service for a reduced fee or free.

Key Takeaways

  • Positive pay is a fraud-prevention plan offered by most commercial banks to companies to protect them against forged, altered, and counterfeit checks.
  • Oneness thieves and fraudsters often try to create and cash counterfeit checks, and those checks could be cashed.
  • Companies all things considered provide a list to the bank of the check number, dollar amount, and account number of each check.
  • The bank be in a classes the list to the actual checks, flags any that do not match, and notifies the company.
  • The company then tells the bank whether or not to currency the check and the banking officials will do what the company requests of them.

Understanding Positive Pay

In order to protect against shaped, altered, and counterfeit checks, the service matches the check number, dollar amount, and account number of each check out presented against a list provided by the company. In some cases, the payee may also be included on the list of the checks. If these do not agree, the bank will not clear the check. When security checks are not put in place, identity thieves and fraudsters can create sham checks that may end up being honored.

When the information does not match the check, the bank notifies the customer from stem to stern an exception report, withholding payment until the company advises the bank to accept or reject the check. The bank can waste away the check, notify a representative at the company, and seek permission to clear the check.

In addition, if the company finds only a trace error or other minor problem, it can choose to advise the bank to clear the check. If the company forgets to send a slate to the bank, all checks presented that should have been included may be rejected, which could cause some fiscal problems.

As banks may not be responsible for fraudulent checks, companies should review the institution’s terms and conditions thoroughly.

Misfortune Positive Pay vs. Positive Pay

A variation on the positive-pay concept is the reverse positive-pay system. This system requires the issuer to up on its checks on its own, making it the company’s responsibility to alert the bank to decline a check. The bank notifies the company daily near all presented checks and clears the checks approved by the company.

Typically, if the company does not respond within a fairly midget time, the bank will go ahead and cash the check. This method thus is not as reliable and effective as positive pay, but it is cheaper.

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