Our customer wrote a check to one of their vendor, who in turn claim that they did not receive nor deposit the check. Meanwhile, the check has already cleared our customer's account. There is no endorsement on the back.

What is my course of action? In our few years of being in business, I am happy to say we have not dealt with this more often.

Can you get a Source of Receipt (SOR) from whomever handles your work? Do you have an image system that you can look this up on?

No payee endorsement, no bank of first deposit endorsement, or no endorsement, period?

Regardless, I can't help you with the digging, but can point out that the bank that accepted it without a payee's endorsement guaranteed the missing endorsement. If you can trace it back to that bank, it's theirs to resolve; i.e. you can put your customer in touch with them and step out of it. Your bank was not required to return the item "endorsement missing."

Don't assume liability or offer assurances to your customer at this point...just start digging.

I do have the BoFD stamp, there is no payee endorsement though.

So knowing who it is, do we just make a request to the bank for an investigation?

Since receiving image cash letter, I find about 25% of checks have no endorsements - BOFD or otherwise.

When this has occassionally occurred here. We tell the customer that we will investigate however there is no guarantee that we can collect the money if the wrong person cashed. We send a letter to the BOFD asking for SOR. The following info is our standard letter with CL info included. The CL info may take several SORs to find if you have to trace it back 2-3 exchanges. We usually get an answer and a check when deposited wrong. Credit is not passed to our customer until that check is in our hands. Otherwise we give them a copy of the other banks written response and tell them it is in their hands.

"The item information is listed below. This item is missing endorsement and has been sworn as funds not received by Payee. Please confirm that said item was paid to the Payee or deposited to the proper customer’s account; guaranteeing absence of endorsement.
If you should find check was processed in error, please refund said amount of check."

Tonya's post is helpful and to the point... You might speed things along by requiring a two sentence affidavit from the payee. It would indicate that it did not receive the proceeds of this item and, if applicable, does not even have an account at the BFD.

My standard letter requested a check from the BFD payable to my customer, not my bank. Again, you are trying to assist your customer, but this is not your issue to resolve.

I do disagree with Ken on this. I think the general idea is to reverse the transaction, to balance itself out.

Once we receive the Cashier's Check from the BoFD, the funds are deposited into the affected account. We then let our customer know that the funds have been collected and they can do what they need to with the restored balance.

As a BoFD, I deal directly with the Paying Bank when my bank is liable. I don't ever deal with the Payee. I didn't deal with the Payee during the check handling process, so I don't see where that should happen.

There really isn't anything to disagree with. The depositary bank's warranty under 4-205(2) is in favor of both the payor bank and the drawer; either can assert the breach. It's simply about making a choice.

At the point of payment, it is only the drawer who has lost money and can exercise a claim. The payor bank can simply tell its customer how to get in touch with Wells Fargo on the $214 check and thereby throw him into the briar patch. Again, the payor bank was not obligated to send the check back "endorsement missing;" it has done nothing wrong.

Alternatively, the payor bank can reimburse the customer and thereby have a basis for asserting its own claim. If the payor bank writes Wells and asks for a check payable to it, then the customer's attorney will say it has selected door number 2 and that the payor bank's choice was both gracious and binding.

By requesting a check payable to the customer I am trying to help him through the labyrinth. However, I am very clearly not saying that I will underwrite his loss if the BFD is not cooperative; e.g. the account is closed.