Stop Payment/Possible Forged Check Question

We have a customer that mailed a check for payment to a vendor. The vendor never received the check. Customer calls and asks about the stop payment fee and then asks who would be liable for the check if it was forged/altered. Bottom line is that they just don't want to pay the stop payment fee and want to roll the dice knowing that the bank would be liable if they notified the bank of the forgery within the appropriate time frame. The logical side of me says to just waive the stop payment fee and protect the bank from any potential loss. But there is this other side of me that doesn't want to waive the fee on principal.

My question is, since the customer knows about the potential risk of fraud, would the bank's liability be lessened at all because the customer knew and didn't take action? Of course I suppose the same could be said for the bank, right?

It's just sticking in my craw...

at the end of the day, 3 things in play here:

1. you need to take steps to minimize the risk to the bank, so i would put a stop payment in place (or a note in your core about the item needs to be reviewed prior to paying if you can do that), regardless of my cheap customer
2. customers are stupid
3. see number 2 above

We had a customer place a stop on a check and when it was presented it had been altered. We have had quite an increase in altered check claims over the last year+ - they now outnumber endorsement claims.

I just need to get over it and protect the bank. But geez...some days...

Definitely. Quite a few of our altered checks passed our signature verification process. We've had a couple claims denied by other banks stating that the signature was traced over; therefore forged.

I think that would be one of my main concerns. Whoever intercepted the check (if that's what happened) may be making checks using the information and the bank may see more than one fraudulent item.

If your customer mailed the check I am assuming they signed it. So the forgery you are referring to would be the endorsement? If the endorsement is a forgery or if the check is altered, wouldn't that fall back to the depository bank? (Assuming you wouldn't be the depository bank as well as the paying bank.) If new checks are created from whoever ended up with the check then those would be forged signatures that your bank would be on the hook for though.

The Devil's Advocate asks - what happens if the vendor finds the check and runs it thru and perhaps tells the customer it was found, no need to re-issue or that when received they'll hold the second payment? Then the bank is on the hook for wrongful dishonor?

If you do the stop, get the brownie points and tell the customer you waived the fee.

Mailbox thefts are increasing in our area. We've had a few altered check claims denied by the depositing bank stating that the signature was traced and therefore forged. Since they were traced the items passed our signature verification process so we ended up eating those.