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Question & Answer
Question: We have a customer who has a son that stole his checks and cashed some, forging his father's name as maker of the check. When we sent them back to the bank that cashed them for the son, they sent them back to us, refusing to pay for them. They said it is our problem, not theirs. Is it?
Answer: Yes, it is. Daddy brought the checks back to you when he got his statement, telling you the three checks in the statement were forged. Sonny evidently tried a small one first, then as he got successful, the checks got bigger. From $50, to $500 and then $2,000. When you called me, there were two more in file - one of which had come in that day.
The one that was in for payment the day you called can be returned through the work, for reason "Signature does not agree with that on file". If Daddy has already given you a copy of a police report, you might also want to mark it "Checks Reported Stolen."
But the new UCC allows you to ask a lot of questions before you pay this claim.
First, let's look at the checks in the statement. They should not have been taken from the customer and sent back through the work to the transacting bank. The only checks that can be sent back through the work are checks that just came in FROM the work within the last 48 hours. You have until midnight of the day following receipt to start checks back on their way from whence they came. Any other returns to negotiating financial institutions must be done "WITHOUT ENTRY". This is exactly the procedure it sounds like. You write a letter to the transacting bank, stating the problem, and either attach the check or send a copy of the check involved - through the mail.
In the case of an forged endorsement, (where the name of the payee has been forged) the negotiating bank is liable. In that case you send the original affidavit and the original check. They "bought" it when they negotiated the check, and they'll send you a bank check payable to your bank to pay for it. Your letter should mention their guarantee of endorsement under UCC, and request immediate reimbursement for the item.
In the case of a forged maker's signature, which is the problem in your case, your letter will be asking for reimbursement, if possible, or any details regarding negotiation. But the liability and responsibility on maker's signatures are yours, therefore you'll want to send just a copy of that check and hold the original. (Unless, of course, they pay you for it. Then send it to them, post haste!) All this is done without entry, through the U.S. mail. There are no entries into the work going in or out of your bank.
Now the questions. Was Daddy negligent? Where were the checks kept? How did Sonny get them? How did it go on for over a month with no knowledge? Does he still live at home? Can Dad get the money out of him? And, most importantly, has the matter been reported to the police, and did you get a copy of the police report along with the original checks and the affidavits of forgery? You'll want to know if your customer is going to join you in prosecution of the son. And your policy states you have to have a police report before you can accept a claim.
Doesn't it?
Copyright © 1999 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 9, No. 9, 10/99
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