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#550825 - 05/19/06 12:54 PM Forgeries
CrashDavis Offline
Gold Star
Joined: Jun 2005
Posts: 283
I need some help. A customer of our bank has come to one of our locations and has indicated she has forgeries on her business account. She told our people that she has an employee that she gave her business checks to and told her to pay her bills for her. Told her to sign her name to the check.(The business owners name). The employee then wrote checks for her benefit and not the business. The business owner did not come to the bank and inform the bank what was taking place. The employee was not an authorized signer on the account. She even indicated that she knew about this for a while but did not report it to the bank because she was hoping the employee would pay it back. She has not.

She is now coming to the bank and wanting her account reimbursed along with NSF Fees. The checks total around $2,000 and NSF Fees total $2,010.00.

Can the bank legally not reimburse for these forgeries. What is our legal responsibility.

Thanks for your help.
Last edited by Baseballfan; 05/19/06 12:56 PM.
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#550826 - 05/19/06 02:00 PM Re: Forgeries
Elwood P. Dowd Offline
10K Club
Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
Clearly, your bank may have some liability for paying forgeries of your own customer's signature. However, you have at least a partial defense to liability if you can get the business owner to say that the employee ever forged her signature with her permission. (Look for a forgery by the employee on a check that was used to pay a business debt.) That's called "ratification" and your bank would not be able to tell the difference between an "approved" and "unapproved" forgery.

The second issue would be exactly how long she waited to inform your bank of the forgeries after they first appeared on her statement. In general, she would have a year, but it is likely that the language in your agreement shortened that time frame dramatically.

In any case, you need to talk to your bank's attorney. Coming here to get insight into a situation may be helpful, but you will not be able to protect your institution adequately if you are only attempting to repeat the observations that others offer you here.

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#550827 - 05/21/06 03:06 PM Re: Forgeries
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,868
Cape Cod
When you talk to your attorney, also suggest he or she look at defenses relating to "repeat wrongdoer forgeries" in the Uniform Commercial Code section 4-406(d)(2).
John S. Burnett
Fighting for Compliance since 1976
Bankers' Threads User #8

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