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Liability-Deposited Check w/o Proper Endorsement

Answered by: 
John Burnett

Question: 
If you have a check made payable to Jane Doe and ABC Bank and Jane Doe deposits the check at her bank but the check does not have ABC Bank Endorsement who is liable to making ABC Bank whole? Would Jane Doe's bank be liable to cover these funds since they deposited a check without an endorsement? What kind of actions can ABC Bank take, freeze account?
Answer: 

If ABC Bank makes a claim for non-payment against the issuer of the check, and provides an affidavit attesting to the fact it received none of the check proceeds, the check issuer, through the paying bank, can enter a claim against the depositary bank for breach of its presentment and transfer warranties. The depositary bank is liable on its endorsement of the check. It, in turn, can pursue Jane Doe, the depositor, on her endorsement, for the amount of the check.

First published on BankersOnline.com 10/1/12

First published on 10/01/2012

Filed under: 
Operations
Filed under operations as: 
Affidavit
Endorsement
IT

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