Union Planters Corp. will test a direct-deposit payroll system next month for businesses whose employees do not have checking accounts.

Ron Alsbrook, Union Planters senior vice president for small-business, said the bank will process the businesses' paychecks and give employees debit cards to withdraw cash from automated teller machines.

Mr. Alsbrook said the payroll-processing service is designed for small businesses like construction companies or janitorial services whose employees often cash their checks at bank branches.

"This is for minimum-wage workers who get their cash out and take the money to their landlord, the grocery store, and the utility company," Mr. Alsbrook said.

The Memphis bank will begin testing the program next month with a local construction company. About half of the company's 80 employees do not have strong enough credit histories to open checking accounts.

If the payroll-processing program is successful in Memphis, Union Planters will add it to the slate of small-business products the bank offers in the rest of Tennessee and in areas of Arkansas and Mississippi, Mr. Alsbrook said. The employees will not be able to write checks or make any deposits, he said. They can make partial withdrawals, but their "payroll disbursement" accounts will not bear interest.

The payroll-processing service is expected to reduce the bank's costs by keeping these customers out of the teller lines, and Union Planters hopes it will help reduce fraud by people who present fake checks, Mr. Alsbrook said.

The bank will charge a fee, which businesses may split with their employees, for the payroll-processing service. Local check-cashing services charge as much as 10% to cash a weekly paycheck. This price can be difficult for someone who earns minimum wage, Mr. Alsbrook said. But he would not say how much Union Planters would charge or expects to make from the service.

Last fall most of the large banks in Tennessee began asking customers who wanted to cash checks, but did not hold bank accounts, for fingerprints to prevent fraud.

Losses from check fraud, which includes fake payroll checks, cost commercial banks as much as $1 billion annually, according to American Bankers Association estimates.

Jim Rieniets, vice president for small-business at National Bank of Commerce in Memphis, said his bank is considering offering a similar payroll-processing service.

"It's a way to migrate people out of the branch network so you can focus" on your account holders, he said. "It's a great idea."

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