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How to Get Other Bank to Return Check Before 7 Days

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Question: 
Most of our customers are depositing checks remotely using a check scanner. We spot check deposits over a certain amount and have noticed occasionally some are made payable to multiple payees and they are not endorsed properly. We normally put a Reg CC hold on the deposit because most of the time the check is returned. We had one instance where the check was not returned and now the bank that issued the check is asking us for the funds back (6 months later) because of missing endorsements. We can't prevent the customer from depositing the check (unless we take the machine away), but what options do we have to get the other bank to return it, sooner than the 7 days?
Answer: 

You do not have any options to make the bank send a without entry claim sooner. The model language of the Uniform Commercial Code 4-111 sets the statute of limitations for a warranty claim relating to endorsement issues at 3 years. You accepted a check for deposit and made a warranty that the checks contained all of the correct endorsements. The payee of the check may not realize that their check was negotiated without their consent in 7 days so the law gives them 3 years.

You have the right to debit your customer's account for the amount of the check in order to pay the claim. Other options would include requesting a collateral agreement with your Remote Deposit Capture customers to help protect the bank from losses associated with return items. You may also need to adjust your risk procedures for this product and monitor more of this customer's deposits. Finally, if this is a regular occurrence for this customer, prudence may demand that you discontinue their privileges for using this product.

First published on BankersOnline.com 2/27/12

First published on 02/27/2012

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