Answer:
A bank is responsible for the endorsements on any check deposited with it. When a check is deposited by the payee of a check, there only needs to be one endorsement, and the bank is at least theoretically able to verify that person's endorsement.
On the other hand, if the payee has endorsed his check to a third party and the third party deposits it, the depositary bank is unable to verify the payee's endorsement (it can verify the endorsement of its own depositor).
Depending on the type of account involved (grocery store, liquor store, check cashing store, household account, etc.) and the financial stability of its depositor (who would be liable to the bank if a check is returned for endorsement), banks make risk-based decisions on whether to accept third-party checks for deposit, and may have different rules for different types of depositors.
First published on BankersOnline.com 11/28/11
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