Musings from Brian J. Noggle

Cascading System Failure

The Riverfront Times has a story this week about a paycheck-to-paycheck guy who got screwed when his last paycheck from a company that closed down got yanked out from under him, after he'd gotten it. Basically, it went like this:

Company's out of money and closing down, but it's got enough in its account to pay employees their last paychecks.
Company authorizes the payroll outsourcing company to issue last paychecks/direct deposits based on the strength of the money in its accounts.
Payroll outsourcer issues checks and direct deposits from its own funds, expecting reimbursement from the company's accounts.
Employee gets money directly deposited into account.
Employee pays bills with money.
Company's creditor seizes company's accounts.
Payroll outsourcer tries to get money from company's account. Surprise! No money there.
Payroll outsourcer contacts employee's bank and asks for the employee's directly-deposited pay back. Of course, payroll outsourcer can't get money from checks it issued, but it will take what it can get. Payroll outsourcers cannot typically get this money back from the people it pays unless they issued two payments or overpaid, but dammit, it's not going to be the one who takes the hit on this deal.
Bank gives money back to payroll outsourcer, even though some bill payments have cleared, and counts this unethical withdrawal as an overdraft against employee.
Other checks from the employee come in and bounce since the money's no longer there. Bank adds overdraft charges and payees add their charges.

------ (Sum)

Employee on the hook.

Keep in mind, dear readers, that paperless direct-deposit schemes and and their hell-spawned counterparts "online banking" and "online bill pay" are not designed for your convenience, they're designed to trim some costs of your banks and your creditors, and unless they offer a benefit beyond saving you some ink from a ten cent Bic and a first class stamp, they're not worth the possibility of a cascading failure.

For rest assured, this entire system is designed to handle a failure of this nature gracefully, as far as the designers of the system are concerned. When it comes to Paul and Mary getting reimbursed for financial shenanigans beyond your control, guess who's paying for it? Why, that's you, Peter. Hand over the money and you won't get prosecuted for passing bad checks.

Of course, as a final bit of fiscal advice, I recommend you take your pay in the form of guns and whiskey like I do. When the whole system collapses, you'll have something to defend yourself with and something to trade for necessities.

Also, I would not recommend cutting me off during my afternoon commute on paydays.

Thank you, that is all.

- posted by Brian J. @ 12:46 PM