Liability for Damaged Checks

Question: We had a customer that came in to cash a check for $51.69 from Blue Cross and Blue Shield. It was returned to us unpaid, and we charged the customer back through returns. It was returned unpaid because it had been damaged somewhere along the chain, and the account number was ripped off. We can't put it back through because the account number that it was drawn on is missing. Our customer came in and said that he spoke to a lawyer and we can't charge him back because he gave us the check intact. Where do we stand on this?

Answer: Heaven deliver us from lawyers who give opinions on $51 checks! Actually the lawyer is right - but for the wrong reason. If you cashed the check for the customer, under the rules of the Uniform Commercial Code you made final payment on the check, and you have no right to charge it back against his account. The first thing you'll probably want to do is reimburse your customer his money.

Obviously, the fault lies with your equipment or the Fed's equipment. Don't bother going to Fed for the money - it'll be a lost cause.You'll want to try to get your $51.69 back from Blue Cross. You'll have to write a letter to Blue Cross/Blue Shield, make two good copies of the front and back of the check for your file, send them the original, and ask them to send you a replacement check. Carbon your customer with the copy of the letter and copy of the check, and be sure the customer understands that if BC/BS incorrectly sends the replacement check to him that the funds belong to you. He doesn't get to keep the $51.69 twice.

Or, considering the time, material, and aggravation involved, write it off as a loss and file it.

Copyright © 2004 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 14, No. 2, 5/05