Legal Definitions - payor bank

A payor bank is the financial institution that holds the account of the person or entity who writes a check or other payment order. It is the bank that is instructed to *pay* the amount specified on the check from its customer's account. Its primary role is to either honor the check by deducting the funds from the customer's account and sending them to the recipient's bank, or to dishonor it (refuse payment) if there are insufficient funds or other valid reasons.

• Imagine John writes a check from his personal checking account at "First National Bank" to pay his electricity bill. In this scenario, "First National Bank" is the payor bank. It is the bank that holds John's account and is responsible for deducting the electricity bill amount from his funds when the utility company deposits the check.

• Consider "Tech Solutions Inc.," a software company, which issues a check from its corporate account at "Citywide Bank" to pay an invoice from a consulting firm. Here, "Citywide Bank" acts as the payor bank. It is the institution that will process the check and transfer the specified funds from Tech Solutions Inc.'s business account to the consulting firm's bank.

• Suppose a local charity, "Community Aid Foundation," writes a check from its endowment fund account at "Heritage Trust" to a family in need for emergency housing assistance. "Heritage Trust" is the payor bank. It is the bank that holds the charity's funds and is tasked with verifying the check and disbursing the money to the family's account or allowing them to cash it.