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Forged Checks & Signature Verification
Question: We've had a claim on six forged checks from one of our customers who has a construction business. In our conversation with him while filling out the forgery affidavits, he told us he pretty much knew who did it, because he knows the name of the payee on the checks. He said, "The SOB must have spotted the checkbook I keep on the front seat of my pick-up all the time and stole the checks out of the back of the checkbook."
At this point, we felt secure in telling him he didn't have a claim, because of customer negligence, referred to in our customer agreement and as described in the UCC. We'd read about that in articles in the BANKERS' HOTLINE.
He has now come back to us and says that when he read the section of UCC that we quoted it says that we're negligent too, because we didn't check his signature. I'm sure somewhere there is a defense for this. Can you tell me where?
Answer: Sure can. In our conversation I learned that all his checks came in through the exchange - not over your counter. The revised UCC recognizes that we do bulk filing, and do not examine the checks that come in through the clearing exchange. You'll find you are relieved of that responsibility in Section 3-103 (a) (7) which are the definitions in Section 3…
(7) "Ordinary care" in the case of a person engaged in business means observance of reasonable commercial standards, prevailing in the area in which the person is located, with respect to the business in which the person is engaged. In the case of a bank that takes an instrument for processing for collection or payment by automated means, reasonable commercial standards do not require the bank to examine the instrument if the failure to examine does not violate the bank's prescribed procedures and the bank's procedures do not vary unreasonably from general banking usage not disapproved by this Article or Article 4.
Copyright © 2004 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 14, No. 3, 7/05
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