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#1653620 - 01/20/12 04:44 PM Third Party Checks
GottaLuvIt Offline
Junior Member
Joined: May 2009
Posts: 48
Does anyone have a bank policy about accepting third party checks for deposit? If so, would you please share it.

I'm looking for some guidance regarding checks payable to a business (non customer)that are signed over to a individual who wanted to deposit it into their personal account.

TGIF!!!!!!!

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#1654076 - 01/21/12 01:57 PM Re: Third Party Checks GottaLuvIt
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,293
Galveston, TX
Normally, there is no way to validate that the person that signed the check for the entity has the authoritity to do so. Generally, most banks will not accept them.
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#1654081 - 01/21/12 02:24 PM Re: Third Party Checks GottaLuvIt
Elwood P. Dowd Offline
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Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
So, the suggested policy would be: Don't.

As noted, you would be completely reliant on the last endorser's promise that the first endorsement was valid. Some endorsers might be willing or able to make their promise good. Some simply would not.
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#1655278 - 01/24/12 09:28 PM Re: Third Party Checks GottaLuvIt
Jennifer Offline
Member
Joined: Jul 2009
Posts: 79
Pacific Northwest
Our financial institution addresses third party checks by describing what they are, and outlining the following requirements for accepting them:

*Prior to acceptance, ANY third-party check must be referred to a Supervisor for approval.
*The first endorsement on the back of a check should be that of the original payee and must be verified by a bank employee. After the payee endorses the check, it may be given to another person, who may then endorse the check for cash or deposit.
* The last signed endorsement on the check must be that of a bank accountholder. If the check is returned to the bank for any reason, this accountholder is held responsible. As the bank is the final endorser on any item we process, the bank guarantees all prior endorsements.
* When there are multiple endorsements on a check and one of the signers is unknown, there are only two ways that the check can be accepted by the bank:
1 - The non-accountholder is present to endorse the check and provide valid identification which we document.
2 - The endorsement of the non-accountholder has been guaranteed by another financial institution. An endorsement guarantee is signified by a bank's placement of an "Endorsement Guaranteed" stamp under the payee's special endorsement on the back of the check.
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#1655282 - 01/24/12 09:30 PM Re: Third Party Checks GottaLuvIt
Jennifer Offline
Member
Joined: Jul 2009
Posts: 79
Pacific Northwest
With regard to situations where the original payee is a business, the only method we handle those is to obtain an endorsement guarantee from the original payee's FI.
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#1655284 - 01/24/12 09:44 PM Re: Third Party Checks GottaLuvIt
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,293
Galveston, TX
"The endorsement of the non-accountholder has been guaranteed by another financial institution. An endorsement guarantee is signified by a bank's placement of an "Endorsement Guaranteed" stamp under the payee's special endorsement on the back of the check."

I can buy one of those anywhere. It provides no protection.
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#1655435 - 01/25/12 01:31 PM Re: Third Party Checks GottaLuvIt
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 39,629
Cape Cod
Your acceptance of any check for deposit is always an assumption of some risk. When a prior endorsement exists, the risk is increased when you aren't able to verify the authenticity of (and in some cases, the authority for) that endorsement.

At the end of the day, the only factor on which you can rely is your recourse against your customer. That's affected by your customer's financial strength, character and stability as a customer.
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