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Remote Deposit Endorsement Issues

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Question: 
With the new technology factor of remote deposit machines it brings with it new questions. I have a customer that had a joint account titled as an "or" account with him and his wife. He closed the account and used his remote deposit machine to take the cashier's check made payable only to him and deposit it at another bank. When we received the check through our system it was reviewed due to the amount of the check and then determined it wasn't endorsed properly even though the deposit machine stamped the back. The other issue is that it was made out to a person, but deposited into a business account. We did decide to return the check to the customer. Did we really need to return it because the account was titled as an "or" account and he chose to close the account and deposit the check in a business account? He did not sign the check, but his machine did endorse it.
Answer: 

Take the fact that the remote deposit service was used out of the scenario, and analyze what's left. Was it appropriate for the cashier's check to be payable only to the individual? Yes. In spite of the fact that he was closing a joint account, this individual had the right under the Uniform Commercial Code (4-403) to withdrawn from or close the account; therefore, there was no need to make the cashier's check payable to both him and his wife. If your bank had insisted on making the cashier's check payable as the account was set up (remember the "or"?) it still could have been negotiated without the second payee's endorsement.

You do have a legitimate problem with the way the check appears to have been endorsed. Because the check was payable to the individual, you were entitled to expect his endorsement. You have suggested that it was endorsed in the name of his business, instead. That's an improper endorsement and you were correct to refuse payment. If, on the other hand, the endorsement had been in his personal name it would not have made any difference if the endorsement was made manually by signature, with a rubber stamp or by the remote capture system.

First published on BankersOnline.com 12/01/08

First published on 12/01/2008

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