One of our banks reviewed 2 incoming checks payable to a local tax authority, one over $5K and one over $30K. The back endorsement simply read: "Credited to Account 123456789/Return account 123456789". The bank believed that the endorsement was insufficient, as they had no idea whether or not the tax authority received the checks, and returned the checks as such. Were they within their rights to do so?

The depository bank says the endorsement was fine, and now the tax authority is charging the maker (our customer) late fees because the payments were late - due to the return/redeposit. Our customer thinks our bank should have to pay the penalties, since we were the ones who returned the checks.

Help!

By processing the check, the depository bank guaranteed that the funds went to the proper payee, even if there was no endorsement on the item at all.

They guarantee that they will "buy back" the item if the payee claims that your customer did not pay.

Al

So basically, our bank should have ignored it entirely?

yes, unless the payee or maker made a claim

OK - thanks.

We routinely return items over $2500 for missing endorsements (this would be a check payable to 2 parties and only one endorsed it or a check with absolutely nothing on the back). We have even asked other banks to return items that our tellers accepted that were not properly endorsed. I was surprised at the number of banks that responded that they only return for endorsement if their customer requests it.

We often return our official checks for insufficient endorsement, but personal checks are only returned at the request of the maker if they believe the endorsement is not enough to verify the identity/account of the payee. I am, however, astounded by the amount of people who put only "FDO" on the back of a check (not even a full "for deposit only") and then are flabbergasted by the return...

i'd be flabbergasted if my bank returned it for that reason as well...especially if the BOFD accepted the item and by doing such guaranteed the prior endorsement

Ditto, WorldCup!Rules.

What he said.