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A Common Business Practice?
Answer by Jim Bedsole, BOL Guru
Guru Bio

Question:  We opened a new personal checking account for a new customer, gave him checks and let him sign checks before getting his signature on the signature card. When I objected to this, I was told that this is a common business practice. Whose is correct the new bank president or myself?

Answer:  I can't speak about how common or uncommon this is. I can say that if your signature card, like most, also serves as your account agreement, you don't have an enforceable written contract until you have a signature from the customer. In that, you open yourself up to significant liability with regard to how you decide whether to pay or not pay items. I would not be comfortable with this level of risk in my bank without some pretty compelling exception reasons. In addition, without the customer's signature, what basis do you have to review items presenting against the account for possible fraud, forgeries, or counterfeits?

First published on 5/25/09

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