Liability for ATM Deposits (Non-Customers)

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Question:

Our bank accepts deposits in our ATMs for non-customers. Our tellers review each deposited check making sure the endorsement matches the payee before running the check through for clearing not knowing whose account is being credited. The non-customers bank receives the deposit electronically without ever seeing the check. What is our liability if John Doe deposits a check through our ATM with his ATM card, but the check is payable to and endorsed as Jane Smith or a business for that matter.

Answer:

In an ATM interchange deposit environment, liability of an ATM deployer to a card issuing bank is addressed in the network contract or operations procedures. However, if Jane Smith in your hypothetical makes a claim of non-payment upon the issuer of the check, and the issuer of the check initiates a claim on the paying bank, which results in a presentment or transfer warranty claim against your bank as depositary bank, you'd be responsible for that claim, and you'd have to look to the network agreement for recovery from the card issuing bank.