We are currently having some problems with the tellers not understanding the importance of checking the endorsements on checks. I have searched the internet and used information from my Banking Law class, but there are still loads of questions. Does anyone know of any place to find training information about endorsements? Thank you for you help.

I don't know of a particular place, but I do know what a nuisance it is when processing a deposit return and there is no endorsement/account # on the back. Especially for a customer with multiple accounts. We spend a little time trying to figure it out - if we can't we charge the branch's over/shorts GL and send them the check to handle. Of course any entries to the over/short GL must be brought to the attention of management.

I don't have any actual training either... we did ours in house after finding not a lot which would meet our needs.

We used the UCC as a guide, but we had to interpret the legalese of UCC which can be a little difficult.

The over simplified approach we took was to explain to our tellers that the check is a contract.

The first contract is between the payer who signs on the front and the payee. By signing the front the payer basically says to the payee, this is good money, take it to your bank to settle it or cash it, or what have you, but it is worth $XX and I WARRANT that I have good funds in the account with which to make this payment.

The second contract (not really a contract per se, but for simplified purposes) is between the payee and the deposit bank. By signing the back the payee (the person presenting to the check for deposit) is telling the bank that "I have this check from JPeter, they are a good person and hava assured me that funds are available. I hereby warrant to the bank that I have the right to make this deposit as part of a contractual agreement between me and the payer (JPeter in this example). I also warrant that should JPeter not be the good person that I believe them to be and the check is returned, the bank can get the money back from me and I will take the matter up with JPeter... This is what makes the endorsement so crucial IMO for banks to have. Now UCC talks about special endorsements and a bunch of other things which for the most part equate to a signature, if not completely equate. Obviously if I sign JPeters check over to someone else, I am warranting those same things to the next person... so the signature trail continues with the same logic.

Lastly, and this is what I think gets banks into trouble is that by stamping, or encoding the endorsement on the back of the check (as required), the bank is again making a contractual obligation to the paying bank for settlement purposes. Essentially saying "Bank XYZ, we here at Bank ABC have a customer Afaquir, who got a check from your customer JPeter. JPeter signed the front and obligated themselves to pay Afaquir. We know AFaquir is a good dude, and he signed the back warranting that he has right to the funds in the account and we now have the right to collect those funds from you, which you can take from JPeters account." However under UCC if the deposit taking bank doesn't get my endorsement on the back but endorses the check with their own stamp (as all banks do naturally), then THEY become the last man holding the bag should their be a problem during settlement... which is what makes endorsements so critical... they establish warrants and contractual agreements as well as "chain of ownership and responsibility" to make good on the funds... ALL THE WAY BACK to the contractual agreement to pay for services with the draft in the first place. If that chain of "endorsements" is broken at any point in the process, last name on the list prior to the break holds the bag.

I hope that helps maybe ease the process of creating your own endorsements training... again that is a REALLY REALLY simplified version, but I think it nails the low level basic intent of the endorsement process.

Cheers!

Thank you for you help and information.