John Doe has an account with us and someone writes him a check for $50.00. John wants to deposit the check to his checking account. John writes "For Deposit Only" on the back of the check and instructs the teller to deposit the check into his account.

Under the UCC, does John need to sign the check or is the restrictive endorsement sufficient? Your help is greatly appreciated!

Tim

This is common place. You warrant to the paying bank that the proper party got the funds in any case.

So, if you are confident that it's being deposited into an account of the payee at your bank, you don't need an indorsement.

I strongly recommend, however, that your bank require full indorsements including "Mobile deposit to [NAME OF BANK]" to accept a check via mobile deposit. Even here, if the indorsement doesn't include the payee's signature, Article 4-205 of the UCC still says your bank is warranting that the proper party got the funds.

is the process of our teller staff stamping the back of checks lacking endorsement with the following stamp a "waste of time" since our bank is warrantying that the correct payee account was credited.

"Credit to the Account of
The within named Payee
In Accordance with Payee's Instructions
Absence of Endorsement Guaranteed
(insert Bank Name)
(Insert Bank City, State)

I would not say it is a waste of time. There are still paying banks out there that are returning checks unpaid if they aren't indorsed, particularly checks for larger amounts. You don't know which banks they are. And there are bank customers out there who do not know the UCC from a hole in the ground that get unreasonably worked up when they don't see the payee's indorsement on checks paid from their accounts. Because of those bankers' or bank customers' ignorance of UCC 4-205, your bank's rubber stamp may save a check a round-trip back to your bank to get that "missing" indorsement.

Those unnecessary round-trips back to the depositary bank are the waste of time. And effort.

Don't forget -- there are still people out there who think a postdated check is not properly payable, even though the UCC was updated in the last century to change that.

Thanks, John. Very good response. We were having the discussion on this topic after some of our staff attended a training. The presenter took the “waste of time” approach. But your thoughts are very much appreciated and will win the day at our bank to keep on “stamping” when needed.

the waste of time analogy is only as good as those who understand why it really is a waste of time

For a mobile deposit, if a customer checks the box on the back of the check "for mobile or remote deposit only" and completes the name of the bank underneath that checkbox line, is that an acceptable restrictive endorsement? I've heard from some that "For Mobile Deposit Only" should be handwritten on the back of the check.

Reg CC provides "For mobile deposit only" as an example of a restrictive endorsement which will protect the bank from a liability claim.

There is no case law to support whether or not a checkbox will hold up in court if the bank becomes a party to a lawsuit. You should ask your legal counsel what protections they believe a checkbox will provide to you if you choose to accept the use of a checkbox as a restrictive endorsement.

Technically, to complete in indorsement, the payee of the check should also include his/her signature.

To expand on Brian's statement on a lack of case law, there are practical concerns about that checkbox. Remember that the "restrictive indorsement inconsistent with the means of deposit" exception to the ability of a depositary bank that accepts the original check for deposit making an indemnity claim for losses if the loss is due to the check having already been paid is based on the expectation that such a restrictive indorsement will alert the teller taking the in-person deposit of the original check that the check may have previously been deposited.

The checkbox and related instruction on the back of checks (not all checks include this feature, by the way) are printed in half tones -- really light gray ink -- so they don't interfere with indorsements and other information that will appear on the back of the check by the time it is paid or bounced and returned. A "tick" of the checkbox is not going to stand out in the cursory glance most tellers may make for indorsements as well as an actual restrictive indorsement.

If your bank receives an indemnity claim under § 229.34(f) of Reg CC because you took the check in an RDC or mRDC transaction and there's nothing in the indorsement area of the check to indicate it was an RDC or mRDC deposit except for a tick of that checkbox, you can decide whether you want to refuse the claim because the checkbox was ticked, knowing that the claimant bank may go legal on you if the stakes are big enough.