Sign Here Please

When Regulation CC was put into practice in 1988, we were advised at that time to have our customers endorse their checks on the back, at the top, and if possible take up no more than one and one half inches for the total endorsement.

The second area on the check was for our depository financial institution endorsement, and the last area for subsequent endorsements.

Change
The Federal Reserve Board of Governors modified that original advice when Reg CC was enacted. But we still get questions and comments from many bankers who think they still have to have checks endorsed in that way.

As long as the depository financial institution's nine digit transit number can be read on the back of the check, it doesn't make any difference at all how long your -customer's endorsement is, or how much room it takes up. If they want to use an identification stamp with information on it on the back, it is perfectly permissible. As a matter of fact, your customer can write all over the back of the check if they wish, as long as your nine digit transit number can still be read on the back of the check. The whole reason behind the original requirement was so that if the check has to be returned, the returning financial institution will have no problem knowing who the depository institution is, and will be able to return the check as quickly as possible. If the nine digit transit number of the depository institution can't be read on the back, it will slow up the return.

Your Liability
Fed says if that happens, and your customer takes a loss because of a late return, you may have to share the loss, because you accepted the check for deposit knowing your transit number couldn't be read on the back as the depository institution.

We've heard a lot about fines and penalties for violations of regulations and legislation lately. It is interesting to note there is no fine or penalty intended or mentioned for "improper" endorsements. Your exposure is in sharing your customer's loss on late returns.

Copyright © 1993 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 3, No. 11, 4/93