Our company issued a check to an employee. The employee stated that the check was lost, signed an affidavit, and we issued a new check. Later, the original check was cashed by someone at a check cashing company with a forged endorsement. The original check had the statement "Void after 90 days" on it too. Our bank returned the check payment stopped. Now the check cashing company wants us to pay them.

Am I correct that it is the check cashing company's responsibility to know their customer, so we are not at fault, because they are not a holder in due course? Also, the original check was cashed after the 90 day window, so wouldn't this also relieve us of any responsibility?

The answer, that you will not like, is here:


Payroll Connect

One of our business customers faced the exact same situation, went to court and lost to the check cashing company.

What a crock of $#!^! It must be nice to rake in the check cashing fees and have no responsibilities. Where are all the regulations governing these people? Bankers have regulators crawling up their @$$, but these crooks don't?!?!

I think the bottom line is that if your employee "double" cashed the check, it's your problem. If it truly is a forged endorsement, then it should be the check casher's problem. How you prove it either way is the crucial issue.

See the definition of a Holder in Due Course in section 3-302 of your state's Uniform Commercial Code. That section of the UCC generally requires that a HDC must have taken the instrument "without notice that the instrument is overdue".

The key here is if the endorsement is forged. Even according to the article cited above: "If the check/draft is fraudulent, then the check cashing company has a criminal case and that company no longer can attain "Holder in Due Course" for that check/draft against your company." Now, if your employee actually cashed it, it should be your responsibility and you should deal with the employee. If your employee's endorsement was forged, prepare an affidavit of forgery and request that your bank return the item to the bank of first deposit.

I would think that the bank of first deposit is ultimately responsible for knowing their endorser. If the endorsement is forged I agree...send it back with affidavit of forgery.

I agree with Randy (rlcarey) If the endorsement is forged, then it is the check cashing co.'s problem, since it is their responsibility to know (ID) the payee/endorser before accepting a negotiable instrument.