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Forged Check Return Timing

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I've seen lots of discussion about forgeries discovered weeks or months afterwards. This one is at the other end of the spectrum. Stolen check with forged drawer signature is deposited at depositary bank on Thursday morning. Customer gets e-mail alert on Friday morning (check triggers overdraft protection). Customer comes into the branch, we pull check image, all agree that it is an obvious forgery, and customer IDs the forger. Customer needs to leave but returns mid-day after completing forgery docs (affidavit,etc.) Customer now claims that our (drawee) bank had sufficient notice to return the check to the depositary bank by the midnight deadline or otherwise take action to prevent the loss. The forger withdrew the proceeds from the depositary bank on Monday. Does the customer have a valid argument? Currently trying to determine if the ball got dropped at the branch level. (side note, not part of this question-- we think the customer was careless with his checkbook-- our defense.) The check was well over the $2,500 threshold.

The key to this question is the day on which the customer came into the branch: You haven't indicated when that was. If it was on Friday, you certainly had reason to return the check even if your customer wasn't able to provide the affidavit when he was there. You could have returned the check for signature (not forgery) just on the basis that everyone agreed the signature was unauthorized. You could have issued the Regulation CC large-return-item notice on Friday, too, or called the depositary bank to give them a heads-up the check was going to be bounced.

When DID you return the check?

You mention that the bank may have a defense to your customer's claim for reimbursement. As you said, that's a side issue, and one that will only be resolved after angering your customer and, possibly, dragging the question into court. All of that could have been avoided if you had timely acted on the information you had on Friday when your customer first visited the bank.

First published on 08/09/2015

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