Our customer deposited an item to his account in May. In Sept. the item was returned "missing endorsement." We guaranteed endorsement and resubmitted the item. It then came back "stop payment." Obviously the maker's bank placed a stop pay on the item while it was out due to the endorsement issue. Our operations dept. did not catch it as a late return and charged it back to the depositing customer who now, of course, has no money.

It is now too late for us to return. Is there any way to recoup our money from this sneaky financial instituion?

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It is now too late for us to return.

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Through the clearing system, maybe, but not for sure. The Fed's form says you have two calendar months to protest the late return. Even if they respond that their return was timely and the Fed reverses the entry in your favor, the form they complete will clearly indicate that their return was late.

Whether you get them to admit their delay in writing first or not, you can still go bank to bank.

If you go to court on this one the other bank is going to get a lecture about the "good faith" requirements of the UCC. Your bank may also get its own lecture about inspecting return items. Translated: The judge may not say all of the loss is theirs.

It also may depend on how much the check was for. If it was large enough to send a large item notification and the bank didn't, you may be able to use that in your favor too.

To get any money from the other bank you first have to prove that you would not have suffered a loss had they returned the item timely. And their liability is limited only to the amount you could have recovered had they returned the item timely.

If you can prove the above, I would have my bank councel send them a letter.