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#252359 - 10/05/04 01:05 AM
returned deposit item
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100 Club
Joined: Apr 2002
Posts: 100
Silver Spring, Maryland, USA
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Situation: Back in Jan 04, a customer sent us a check in the amount of $2,700 for a mortgage loan payment, dated 7 Jan 03. We posted it to the customer's account [figuring that it is not stale-dated, that the customer just hasn't made the transition yet], bundled the check together with the rest of the day's work and sent it off to our correspondant bank as a deposit.
On Thursday, Sept 30th, we received a copy of the check back. Apparently the correspondant bank lost the original and then tried to put a copy through in September. Meanwhile, the customer has closed that checking account.
so -- who gets stuck with the loss?
Deposit Ops says that we should reverse the payment off the loan -- I disagree. We processed a check and sent it out with our work to the correspondant -- not the customer's problem. The COO says it is not our problem -- no notice of returned large item, long past the returned item date -- send it back to the correspondant bank. I agree, Deposit Ops disagrees. She feels that at the very least, we should call the customer and have him prove that the check that he gave us was good -- if it was, he would have the original and could provide us with it.
what say you?
Last edited by CHT; 10/05/04 01:06 AM.
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IMNSHO, FWIIW
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#252361 - 10/05/04 12:29 PM
Re: returned deposit item
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10K Club
Joined: Jul 2001
Posts: 83,361
Galveston, TX
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I don't think you can treat it as a late return if the paying bank returned it within their midnight deadline. It would be no different if you or I hold a check for 10 months before we deposit it and expect to get paid for it. You should go after your customer for the amount, otherwise they will be unduly enriched for a processing error. If you are unable to collect, then you would be able to possibly go against the correspondent bank that caused the delay. Right now, you are in the best position to make this right.
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#252362 - 10/05/04 12:39 PM
Re: returned deposit item
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100 Club
Joined: Apr 2002
Posts: 100
Silver Spring, Maryland, USA
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my concern is if I get involved with the collection effort, the $2700 loss will end up being mine
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IMNSHO, FWIIW
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#252364 - 10/05/04 01:33 PM
Re: returned deposit item
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10K Club
Joined: Nov 2003
Posts: 12,846
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Quote:
I don't think you can treat it as a late return if the paying bank returned it within their midnight deadline. It would be no different if you or I hold a check for 10 months before we deposit it and expect to get paid for it.
My understanding was that the check was presented to the paying bank in January and returned in September. Am I confused?
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#252365 - 10/05/04 01:57 PM
Re: returned deposit item
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Gold Star
Joined: Aug 2003
Posts: 372
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Return the copy of the check back to the paying bank as a late return. This is now between the paying bank and the customer.
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#252366 - 10/05/04 02:23 PM
Re: returned deposit item
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10K Club
Joined: Jul 2001
Posts: 83,361
Galveston, TX
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Joker Not the way I read the first post. Quote:
On Thursday, Sept 30th, we received a copy of the check back. Apparently the correspondant bank lost the original and then tried to put a copy through in September.
The check appears to have been lost in the process of forward collection. THe paying bank most likely returned it within the midnight deadline. You have no claim against the paying bank and getting the correspondent bank to pay when you haven't first tried on your end is going to be tricky.
Call the customer - explain the situation and tell him he needs to come in and make the payment good or it will be reversed from his loan. He is not entitled to undue enrichment.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#252367 - 10/05/04 02:43 PM
Re: returned deposit item
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10K Club
Joined: Nov 2003
Posts: 12,846
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Quote:
Joker
Not the way I read the first post.
Quote:
On Thursday, Sept 30th, we received a copy of the check back. Apparently the correspondant bank lost the original and then tried to put a copy through in September.
The check appears to have been lost in the process of forward collection.
If that is the case, they should have researched the missing item from their letter before now, shouldn't they?
But I'm not sure that it is the case. All it says is that the correspondent lost the original. It doesn't say when.
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#252368 - 10/05/04 02:45 PM
Re: returned deposit item
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10K Club
Joined: Nov 2003
Posts: 12,846
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Quote:
He is not entitled to undue enrichment.
You are assuming that the funds are not available at the paying bank?
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#252369 - 10/05/04 03:29 PM
Re: returned deposit item
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10K Club
Joined: Jul 2001
Posts: 83,361
Galveston, TX
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The original poster said the check was returned because the account on which it was drawn has since been closed during the delay in presentment. The customer is not entitled to a reduction in his loan balance for a check that did not clear - no matter who is at fault for the delay. That's undue enrichment - especially since the loan account is still open. Tell me the customer didn't figure this out and close that checking account after that check was not presented in a couple of months!! You're not talking about a third party involved here - it's all the same person.
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#252370 - 10/05/04 04:35 PM
Re: returned deposit item
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10K Club
Joined: Nov 2003
Posts: 12,846
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Quote:
The original poster said the check was returned because the account on which it was drawn has since been closed during the delay in presentment.
Ok, I follow you now. That is how you surmise that it was lost prior to presentment.
Quote:
The customer is not entitled to a reduction in his loan balance for a check that did not clear - no matter who is at fault for the delay.
Agreed. And as you point out, the lender is in the best position to ensure that this is charged back to the borrower.
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#252371 - 10/05/04 08:06 PM
Re: returned deposit item
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100 Club
Joined: Jan 2004
Posts: 125
Snow Country
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Quote:
Tell me the customer didn't figure this out and close that checking account after that check was not presented in a couple of months!! You're not talking about a third party involved here - it's all the same person.
If this assumption that the customer was super smart about the check not clearing, he sure wasn't smart enough to payoff and move his loan to which the "missing" check was applied. Then the paying and receiving bank would no longer have a relationship for which to collect on. Now that would have been true undue enrichment. The fact the customer didn't do that provides enough doubt for me to think they closed the account to avoid paying the check.
I think you need to look to who mishandled the check in the first place to collect. There is insurance for lost or destroyed cash letters. I don't think it is the bank of first deposit's responsibility to collect on its correspondent's or the paying bank's miscue or unfortunate circumstances without being contacted to handle item as a collection item. Just my opinion.
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#252372 - 10/05/04 08:15 PM
Re: returned deposit item
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10K Club
Joined: Jul 2001
Posts: 83,361
Galveston, TX
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And I don't disagree - in fact I totally agree.
However, the shear fact of the matter is - you have your customer right in front of you and collecting in that manner - which I believe is totally within your right, is a much better avenue then pursuing the correspondent bank. If I was the correspondent bank, I would say - fine- sue me - then I would show the court that you had the customer's loan on your book the whole time and you are coming after me??? Even if you do win, after attorney fees and court costs you are going to have very little of the $7,200 left and you still have a customer that is sitting in a unduly enriched situation.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#252373 - 10/06/04 02:24 AM
Re: returned deposit item
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Power Poster
Joined: Nov 2001
Posts: 6,719
PA
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Quote:
I don't think you can treat it as a late return if the paying bank returned it within their midnight deadline.
I agree, but I'm not convinced that it happened that way. As I said above, the only facts in this situation that the depository bank knows are the deposit date and the return date. I may win the nitpickers choice award here, but this statement is speculation:
Quote:
Apparently the correspondant bank lost the original and then tried to put a copy through in September.
It is equally plausible that the original check was presented and paid in a timely fashion, and somewhere along the way, a correspondent created a duplicate, which is causing all of the problems. I've seen this happen several times.
By honoring the return, you may find yourself having to defend your actions to your customer if the original check was paid. And I think this is worth a call to the customer and/or the paying bank to find out if that is the case. So file the late return claim, and let the paying bank pull together the appropriate source docs to validate their position. There's no need for you to shoulder the burden until you are sure you are obligated to do so.
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#252374 - 10/06/04 08:58 AM
Re: returned deposit item
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100 Club
Joined: Apr 2002
Posts: 100
Silver Spring, Maryland, USA
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thank you all for your comments!
to recap: The check in the amount of $2,700 for a mortgage loan payment was received by us and processed in January 04 although it was dated 7Jan03. We bundled the check together with the rest of the day's work and sent it off to our correspondant bank as a deposit.
my argument: any collections efforts should be the responsibility of the correspondant bank -- we were never informed of a large item return and the transaction is over 9 months old. Our Deposit Ops does not want to return the check to the correspondant bank without making an effort to collect it from the customer.
_________________________
IMNSHO, FWIIW
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#252375 - 10/06/04 01:26 PM
Re: returned deposit item
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10K Club
Joined: Nov 2003
Posts: 12,846
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Quote:
It is equally plausible that the original check was presented and paid in a timely fashion, and somewhere along the way, a correspondent created a duplicate, which is causing all of the problems. I've seen this happen several times.
Ah, I've seen this, too - good point.
(I am as fickle as a mob of Springfieldians in The Simpsons.)
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