Handling Forgery Claims

Question: We had a check returned to us that was cashed out when it was presented by one of the payees over six months ago. The check was for $5,400. There is now about $100 in her account. The check was made payable to two people, one of whom has a joint account with her husband with us. But the other name on the check is someone else - we suspect it to be her mother. The check was sent back to us with an affidavit of forgery. We're going to charge it back and overdraw the joint account, but can you give us some idea of where to go from there?

Answer: First of all, you have a problem charging the check back against her account. The Uniform Commercial Code says that when you cash a check you have made "final payment" of the item. Section 4-214 very clearly states that "...these rights to revoke, charge-back and obtain refund terminate if and when a settlement for the item received by the bank is or becomes final." You've made final payment, and overdrawing the account really is not an option at this point.

Contact your customer and see what kind of an explanation she gives you. Tell her that because this is a forgery, you'll have to contact the police about the matter. If the other payee is indeed her mother, that may rattle a few chains.


Consider filing a police report under any circumstances, because you will have to go after your depositor at the very least in a civil suit. DO NOT take the $100 from the account to put “towards” the loss. If you do, it could be considered your settled, total reimbursement for the item.


Copyright © 2003 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 13, No. 6, 8/03