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#584853 - 07/18/06 01:40 PM Reg CC - Third Party Check
Poohie Offline
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Joined: Jan 2006
Posts: 200
USA

Okay, our customer comes in and wants to deposit a check made out to an attorney. The attorney has endorsed the check over to our customer and included the words "without recourse." Below that, the customer endorsed the check.

The teller wants to place a Reg CC Reasonable Cause to Doubt Collectibility with the reason being "Other: Restricted Endorsement - Third Party Check."

I can't find this situation addressed per se in the Reg.

I appreciate your thoughts and help.

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#584854 - 07/18/06 01:59 PM Re: Reg CC - Third Party Check
JustASquirrellTryinToGetANut Offline
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Joined: Jun 2006
Posts: 72
Call me "gun shy" but I wouldn't take this check for deposit at all. Who is to say it wasn't stolen out of the attorney's mail box and then signed by your customer.

I don't think it is ever a good idea to accept third party endorsements, I know it is "allowable" to do so I just wouldn't see why the attorney couldn't deposit the check to his own account and then write the customer a new check made only to her.

I know this isn't the help you were wanting but.....

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#584855 - 07/18/06 02:15 PM Re: Reg CC - Third Party Check
RBanker Offline
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Austin Texas
The procedure at our institution is that any item with a qualified indorsement (ie - without recourse) is NEVER accepted without supervisor review - and supervisors are encouraged to only accept these in cases of extreme circumstances (where they are EXTREMELY certain they wouldn't have to cover them out of their banking center loss/recovery cost center). You didn't indicate the amount of the check and in my mind that would have some play in this scenario - we would be more likely to accept a $50 check under these cirucmstances than we would a $5,000 check.
Last edited by TexTrainer; 07/18/06 02:15 PM.
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#584856 - 07/18/06 02:20 PM Re: Reg CC - Third Party Check
Becky Offline
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Becky
Joined: Feb 2003
Posts: 216
Dallas, Texas
Don't ever try to use Reg CC as a tool to avoid/prevent endorsement fraud/issues. The statute of limitations is SO much longer than that ity-bity Reg CC hold. If the attorney figures out 2 months from now that the check was stolen out of his mailbox and claims forged endorsement, how is that Reg CC hold that expired 5 days after you took the item for deposit going to help? It 'aint.

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#584857 - 07/18/06 02:29 PM Re: Reg CC - Third Party Check
Poohie Offline
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Posts: 200
USA
My question is what kind of a Reg CC hold CAN be put on it? Is there reasonable cause to doubt collectibility? Or is it a case by case?

(BTW the supervisor did approve the transaction and the check is a little over $1,000)

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#584858 - 07/18/06 02:44 PM Re: Reg CC - Third Party Check
RBanker Offline
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Posts: 2,675
Austin Texas
Reasonable cause - endorsement, would be my recommendation- if that's the route you feel you have to use. Of course, not seeing the actually document, my recommendation should only be taken with an extreme grain of salt.
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My comments are absolutely no reflection of, nor influenced by, my employer - take them at your own risk.

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#584859 - 07/18/06 02:48 PM Re: Reg CC - Third Party Check
Poohie Offline
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Posts: 200
USA
Tex - Do you mean the Reasonable Cause reason that states "We are unable to verify the endorsement of a joint payee?" or do you mean to mark "Other" and fill in the line with "Endorsement?"

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#584860 - 07/18/06 03:00 PM Re: Reg CC - Third Party Check
RBanker Offline
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RBanker
Joined: Jul 2003
Posts: 2,675
Austin Texas
Your first one - "assuming" of course that you truly are unable to verify the attorney's endorsement.
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My comments are absolutely no reflection of, nor influenced by, my employer - take them at your own risk.

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#584861 - 07/18/06 03:04 PM Re: Reg CC - Third Party Check
Poohie Offline
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Joined: Jan 2006
Posts: 200
USA
Tex - the teller says that the attorney was concerned that the check may not be paid so he put the restriction on the endorsement, so we should be concerned that it may not be paid.

What do you think now?

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#584862 - 07/18/06 03:07 PM Re: Reg CC - Third Party Check
RBanker Offline
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RBanker
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Posts: 2,675
Austin Texas
Check your PMs

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#584863 - 07/18/06 03:25 PM Re: Reg CC - Third Party Check
Elwood P. Dowd Offline
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Posts: 21,939
Next to Harvey
Regulation CC's Model form C-13 uses "unable to verify endorsement of joint payee" as the basis for a reasonable cause exception hold. Unable to verify prior endorsement isn't much of a strech from there; you are entitled to an exception hold. If the check is returned NSF, it should be back to you in time.

However, Becky has offered the most relevant observation. If there really is a problem with the prior endorsement Regulation CC does not offer any hold which protect you from a claim that can be made up to three years later. Imposing a hold because you question an endorsement proves too much; i.e. it proves the bank knew there was a potential problem, but had no comprehension of how to protect itself.

In general, I would feel like I was being set up here; I would not take the item for deposit.
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