Answer:
Normally it is the drawee bank's loss in the case of an altered check UNLESS it is an obvious material alteration - for instance, if the payee's name was crossed out and another name written in - in which case it could be argued your bank was negligent in examining the item before negotiating it. In the case of a washed and altered check, you might be liable if the fact that the check was washed and altered was visible and apparent to the naked eye - particularly if it was a single check transaction, and not one of a number of checks being deposited at the same time. If, however, you took the check in good faith, and there was nothing apparently wrong with the item, it is usually the paying bank's problem, not yours. You'll find the section for altered checks in the Uniform Commercial Code section 3 - 407.
First published on BankersOnline.com 8/05/02
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