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I did a one-time contract gig for a company (a few hours of work), and the company insists that I send them my direct deposit information for payment, including an authorization to make deductions from my account in the case of error.

This seems excessive to me, since I don't intend to do any more work for them, and I don't want to just hand out my bank info to every person or company I do a gig for. (I do a lot of gigs.)

What, if anything, would require me to comply with their request? Can I just demand a check? They have been insistent that I do it their way.

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    Could you open a throw-away account that you only use to receive that payment? – Patricia Shanahan Mar 26 at 1:50
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    Can you clarify if you are an employee or contractor? You say "one time gig" which implies contractor but this question is tagged as "salary" which implies employee. – Gregory Currie Mar 26 at 2:31
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    "What, if anything, would require me to comply with their request?" Probably a desire to preserve the relationship. How important is that to you? (Note that phrasing your question like that is often really asking about legal advice/options that we cannot normally give here.) – Lilienthal Mar 26 at 8:33
  • The only way I would approach this is by opening a separate account that is solely for receiving money from this company. The part about including an authorization for deductions in case of error is troubling to the point that I wonder if there isn't some sort of planned fraud going on. – NotMe Mar 27 at 22:30
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Direct Deposit Reversal is a very real thing in the United States.

Both Federal and State laws govern direct deposit reversals, how and when a company may reverse a direct deposit, and what they can do in the event that your available funds don't cover the amount of the reversal. Some states require express written consent for direct deposit reversal and some do not.

This is a very normal and standard thing. It is not in any way abnormal or unorthodox, and it has been around for a very long time. If you're worried that they could come back in 6 months, or a year, or whenever and randomly and indiscriminately take money out of your account... they can't. Anyone engaging in such activity would in fact be committing a crime... for which they would be prosecuted.

You should contact your bank to find out what the governing laws are in your state and what your bank's policies are regarding direct deposit reversals.

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    I didn't downvote, but just wondering, does this apply to relationships between businesses, or between employees and businesses? – Gregory Currie Mar 26 at 3:43
  • Yeah, the down vote is a little mystifying. What I stated in my answer is accurate in the United States. At any rate, this is relevant to any entity that sets up direct deposit. So if I set up direct deposit with my client (as a freelance contractor) then this applies. If I set up direct deposit with my employer (as an employee) then this applies. – joeqwerty Mar 26 at 3:47
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    If they have the legal right already, what is the authorisation for? – Gregory Currie Mar 26 at 3:51
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    Five business days for an employee relationship for a reversal. The language of this looks worrying. "authorisation for deduction" – Gregory Currie Mar 26 at 10:26
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    @Dan I'm not sure what you're driving at. I didn't say anything about sinister purposes. I inferred from the question that the OP was concerned about the "deductions" aspect of direct deposit and I stated that this is a perfectly normal provision. I didn't imply anything about sinister purposes in my answer. – joeqwerty Mar 26 at 19:21
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You're in the United States, you should heed joeqwerty's answer

If you are not in the United States read on.

I am going to assume you're a contractor.

I would advise against the deduction authorisation, and instead provide an offical invoice with direct deposit information, detail of the work completed, with a date that you expect payment by. You should do this for every single gig.

A contractor is a type of business. Do you think businesses authorize each other to pull money out of each other's bank accounts? Of course not.

They are free to be insistent, but they are obliged to comply with law.

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    The problem with this is if they refuse to pay the invoice you have to pursue it through court. I wouldn't authorize a company to make deductions to my account though. If the company thinks there was a payment error there are other avenues they can pursue. – AGirlHasNoName Mar 26 at 2:54
  • @bruglesco Yeah, it's nasty. – Gregory Currie Mar 26 at 3:01
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    @bruglesco: Yes, but if the company refuses to pay in the manner agreed (or implied) in the contract, they'd very probably lose in court, and they will know that. – sleske Mar 26 at 9:55
  • @sleske that doesn't stop people from not paying. – AGirlHasNoName Mar 26 at 11:24
  • I'm curious if anyone here ever had a checking account or if they had direct deposit? Every direct deposit has the clause that they can reverse incorrect charges. It does not mean they can go willy nilly and minus things from your account. They simply call their bank and say "transaction #123456 is to be reverted as we mistakenly gave him a million dollars." Bank would revert the transaction and hopefully you didn't spend the obviously incorrectly received money. – Dan Mar 26 at 17:40
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Why should you give them your bank routing and account numbers? So they can direct-deposit your pay.

Why not demand a live check as your pay? Hassle. You're making more work for the accounts payable person responsible for getting you paid. They have to receive the live check from their payroll company, find you, and hand it to you. They may have to cover the cost of express delivery and insurance for a package containing just your check.

Is direct deposit good for you? Very likely yes. The funds hit your bank account right on time (or maybe even early) and are generally available immediately: the bank trusts the payroll company so you don't have to wait for a check to clear.

Is it a routine request? Yes. In the US receiving pay by direct deposit is the norm.

Is it safe? Yes. Both your employer/customer and the payroll company have far more to lose in reputation and money than you do if they try stealing from you. They aren't going to do that. Police and judges take wage theft very seriously.

Here's something to think about: As a contractor / gig worker, it's important to be really nice to the person who processes your payments. They can help you with all sorts of stuff related to billing and payments. A smile can get you paid a couple of days sooner sometimes. A live-check hassle is the opposite of being nice.

With respect, I hope you reconsider your position. Direct deposit is normal and good. Seriously.

  • A vast majority of Americans do not have a checking account. Believe it or not. They typically have minimums of $1,000, sometimes $2,000 unless you have a auto deposit set up with your employer. Some banks have $200 minimum without a auto deposit. So I'm not totally surprised by the advice on this thread. A direct deposit is common and they cannot withdraw from your account as you did not give consent but they can revert incorrect charges and they do it through their bank, not yours. – Dan Mar 26 at 17:44
  • In 2017, the most recent year I can find data for, only 6.5% of American households did not have a primary deposit account - according to the FDIC. I don't think 6.5% counts as "a vast majority." @Dan - if you have data that does support your statement, that might be worth sharing. – dwizum Mar 26 at 18:43
  • Sure, they have a bank account but look at the underbanked percent. A little higher than that at nearly 20% of people who don't actually use the bank. The question is of the upper percent, how many use auto-deposit vs cashing their check? I know if you take your check to the issued bank you can usually cash it with a thumb print and if you have an account, you can cash your paycheck or any non-personal checks. Does that mean they have auto-deposit set up? I doubt it. – Dan Mar 28 at 16:57
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To add to joeqwerty's excellent answer, I would advise speaking to your bank about the difference between a "withdrawal" and a "direct deposit reversal". Make sure you're giving the company the right information to get the correct permissions that they need and nothing more. As common sense would dictate, do not give the company blanket permission to take any and all action on your bank account, for obvious reasons; no sane company would ask for this in the first place.

  • I agree with what you're saying, but maybe it's not possible for them to get the fine grain permissions required. – Gregory Currie Mar 26 at 23:59
  • @GregoryCurrie In which case he should ask his bank what the safest/best thing to do it. – Ertai87 Mar 27 at 14:34
  • The safest thing would be not to grant a deduction authorization? – Gregory Currie Mar 27 at 15:52
  • @GregoryCurrie I mean true, but that might impact OP's ability to get this job. That's a question for the OP to decide, not us. – Ertai87 Mar 27 at 15:54
  • Right, but the question is if they are required. I mean, we can answer: "You do whatever they require you to do" and call it a day. But I'm interpreting it to mean, technically what is required in order to get paid. Legally what can they request etc. – Gregory Currie Mar 27 at 15:58

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