Answer:
If the item is payable to the depositing customer, there are no endorsement issues. Under section 4-205 of the UCC, the bank automatically becomes a holder of the instrument, even if it is not endorsed, if it is deposited to the account of the payee. If the item is not payable to the depositor, the item must be endorsed by the payee in blank or must be specially endorsed to the depositor. If the item is not endorsed by the payee, the depositing customer and the depositary bank would be in breach of the presentment warranties under the UCC.
Archive of Risk Management Questions
First published on BankersOnline.com 11/26/08
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