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Standard Procedure for Taking Third Party Checks

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Question: 
What are the standard procedures for taking third party checks?
Answer: 

There are no standard procedures for accepting these items. Under section 3-205 of the Uniform Commercial Code, assuming your state has adopted the model language, the payee of a check has the right to use a special endorsement to sign the check over to another party. Under Section 4-208, an institution accepting a check of this type "warrants" or guarantees that all endorsements on the check are genuine. Since the institution may be liable for up to three years for accepting an item with a forged endorsement, each institution must make a risk-based decision to accept these items and under what circumstances.

First published on BankersOnline.com 9/5/11

First published on 09/05/2011

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