I have a scenario I would like some thoughts about right of offset.

A commercial customer has an account with our bank. This same customer has an account at another financial institution which the customer issues payroll checks from. Many of the employees come to our bank to have these checks cashed. If these checks were to be returned to us, does the bank have right of offset against the account at our bank.

When I was a teller I was always told to check the customer's account, if there is funds to cover the check then cash it. I have read recently that the bank cannot take these funds. I have looked in my State code and numerous other places and cannot find the answer to such a situation.

If the payroll check comes back, to reverse this you go back to the person who cashed the check (payee), not an account of the entity that wrote it (payor).

That was what I was thinking! Because the person who cashed the check owes the money to the bank not the person who wrote the check.

Thank you very much!

But the person who wrote the check (drawer) is obligated to pay it if it was dishonored (assuming no forged signature or endorsement and no alteration). If you can't collect from the payee, there's no reason you can't go after the drawer. You could sue the drawer, but if the drawer happens to have an account with your bank, you have an easy way to collect (and a business decision about whether you want to do so).