Skip to content

Bank Liability if Authorized Signer Removed

Question: 
If an authorized signer is removed from an account on 8/21/14 and outstanding checks issued on 5/2, 5/20, 6/5, 7/7, 8/8 & 8/18 clear on 9/3 by the removed signer, is the bank liable for paying those signatures after the signer was removed?
Answer: 

Generally, the bank is liable for checks that it pays that are signed by an individual that is no longer an authorized signer on an account. Because banks don't verify signatures on checks as they are processed, it's always best to close the account and open a new account, to help avoid this situation. Instructions provided by the account owner at the time the authorized signer is removed may impact the potential for loss here. If the account owner requested that the bank pay any checks signed by the authorized signer that was being removed that were dated before the date the authorized signer was removed, the bank would not be liable to the account holder for paying those checks.

First published on 01/12/2015

Filed under: 
Filed under operations as: 

Banker Store View All

From training, policies, forms, and publications, to office products and occasional gifts, it’s available here:

Banker Store

hot right now

image description

Looking for effective, convenient training on a particular subject?

BOL Learning Connect offers more than 200 courses ON-DEMAND or on CD ROM from AML to Reg Z and every topic in between.

Search Topics