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Sending Checks for Collection

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Question: 
How do you send a check through as a collection item instead of normal banking channels? What kind of notices do you give your customer?
Answer: 

Generally, the payee endorses the item and you affix your bank endorsement so you are in a position to present the item to the drawee bank. You include a cover letter with instructions to the drawee bank regarding how long you wish it to hold the item in anticipation of adequate funds to pay the item. Your letter also contains instructions as to how the drawee bank is to remit funds or return the item unpaid. You may have the customer sign a document that mirrors the terms in your collection letter so you can have assurances that the customer understands the process, but there is no federal requirement for anything akin to a disclosure. This is somewhat of an "old fashioned" practice, but it still has its uses.

First published on BankersOnline.com 5/22/06

First published on 05/22/2006

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