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Question & Answer
Question: We have an individual account in the name of a woman, who recently deposited an income tax refund check payable to her and her husband. We have no accounts with him, and he is not on her account. She endorsed the check with her name alone. Not only did our teller accept it for deposit, but we added insult to injury when we stamped the check (in error) "Credited to the account of the within named payee-prior endorsements guaranteed".
We just got a call from the husband-and he's pretty mad. He says he's going to sue us. He wants his part of the money from the check.
We pulled a copy of the check, and he is correct. His endorsement does not appear on the back of it at all.
Is there anything we can do? The check is for over $7,000 and $1,000 is already gone.
Answer: There is quite a lot you can do. The first of which is to move all the money out of the wife's account, and return any checks that came in yesterday or today, in an attempt to recover your funds. The call from the husband has put you on notice, and you have a right to protect your financial institution.
(The husband would not have to sue you. All he has to do is sometime in the next 18 months make a claim to the government. Your guarantee of endorsement on government checks is one and one half years [18 months] from the time you accept the check. The government would send you a copy of the check, the affidavit, and a charge against your account-you'd be out the $7,000, with the interesting job of trying to collect it from the wife.)
The next thing you should do is contact the wife and tell her the problem. Explain to her that without the husband's endorsement, you cannot release the funds from the check. Regulation CC, by the way, has nothing to do with this claim.
You have a large problem when you encounter this type of check claim involving a government check. You can recall a check from another financial institution, and have it endorsed, and re-presented. You will NEVER get back a government check…for any reason. The only agencies that can do that are the Secret Service or Internal Revenue.
And even if the husband signs the affidavit and gives the claim to the government, they may be over a year getting the claim to you.
What you can do is draw up a release and indemnification for both the husband and the wife to sign. The release will state that they will not make a claim on the check, they will not sue you, and if the government sends the check back, they will make good. (We were glad to help draw up such a release for you)
After such a release is signed-either in your presence with both of them there, or notarized and returned, you could then release the remaining funds from the check. Get a receipt from the husband and the wife for the amount of the check.
As a "let's not create any more problems" gesture, I think I'd also refund any service charges from the bounced checks from the wife's account. However, having observed what the account holder attempted in this case, I'd also indicate that we no longer wish to service her account, and suggest she go elsewhere.
The bad news-and the good news-is your endorsement guarantee stamp on the back of the check. The bad news, of course, is that it never should have been applied . . . but then again, the check should never have been accepted in the first place. The good news is, that because the stamp is there, that unless the husband initiates a claim, the check will more than likely never be returned for his endorsement.
(Thanks to the Secret Service Office in Dallas for their help in this response)
Copyright © 1995 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 5, No. 9, 6/95
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