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Question & Answer
Question: One of our customers brought in a check he had made payable to his brother last month that was stolen from his brother's mail. Our customer had gotten the check back in his statement. It had been cashed by another financial institution in our town for someone impersonating the brother. The handwriting doesn't match at all. We have a signed forgery affidavit, and the original check, which we sent through the mail, without entry, to the other bank, with a request for payment. They returned the check and the affidavit to us with a letter that said that as far as they were concerned, the check had been cashed by the brother, and they refused to pay us. What do we do now?
Answer: The obvious and immediate answer is to sue them for the amount of the check plus the cost of collecting it. But before you do that, a personal contact and investigation are certainly in order. Start with the security officer. That person most often knows about the Uniform Commercial Code guarantees on check negotiations. In the case of an out-and-out refusal, there could be circumstances that an investigation can discover. Let your customer know what happened, and we would also advise the customer that an investigation into the matter was being initiated. Sometimes, you may discover the claim will then be withdrawn. We've known it to happen!
Whether or not you want to sue the other financial institution depends on the amount of the check. You don't want to spend more than the check is worth on legal fees trying to collect it.
Our advisor experts all suggest that you not credit the customer's account until all avenues and investigations had been completed to your satisfaction. The practice of the "quick adjustment" seems to be a thing of the past. Of course, you'll weigh that decision carefully and base it on your relationship with the customer, and, if applicable, on your attorney's advice.
Copyright © 1997 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 7, No. 12, 12/97
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