An original check draw on our customer was paid by our Bank on July 24 that we received in a cash letter from another Financial Institution (Institution A = BOFD)

2 weeks later, on August 8th the same check was received in a cash letter from a different Financial Institution (Institution B). We returned this check to institution B as a "duplicate item already paid".

Institution B has now mailed us a letter concerning the duplicate item and is telling us that we must pay them for the duplicate and that we must pursue reimbursement for the duplicate item from Institution A/ Bank of First Deposit. Institution B is claiming "Holder in Due Course.


We paid the original item received from Institution A back on 7/24, so why should we now have to pay institution B for the return of the duplicate item they accepted and go after the BOFD for reimbursement. We handled the original item and duplicate item correctly so why should we have to go after Institution A for reimbursement of the duplicate they did nothing wrong.

Shouldn't Institution B have to collect reimbursement from the payee of the check or the account at Institution B to which the duplicate item was accepted at their bank on 8/9/17 or eat the loss?

Our bank is under the assumption that the payee of the original check may have scanned and deposited the original check by PHONE at Institution A and then took the check to institution B causing the duplicate presentment.

I believe this is an issue that may be occurring frequently with checks now being able to be scanned by phone and then subsequently presented a second time at banks and other check cashing businesses. What's the proper course of action for banks to recover funds when this type of duplicate situation occurs.

Related Thread

You received the check for the second time on Tuesday, August 8. On what date did you return it to Bank B?

We actually received the duplicate check from bank B in our inclearings on August 3, and not August 8; we returned the check to Bank B on August 4, 2017.

Also, in reviewing the back of the duplicate check we received from Bank B it appears it was deposited to one of their customer accounts or cashed for one of their business customers as it has marking of the payees (consumer) endorsement and also a company name which is not the payee.

Thanks. That is helpful information, 52OPS. Bank B is blowing smoke either because it's trying to call your bluff or because it hasn't got a clue what is going on, and I suspect that's because its customer has no money in the account to recover the funds from. But this is Bank B's problem, not yours. Your return was timely, and Bank B is holding the proverbial bag.

Under the Fed's July 1, 2018, amendments to Reg CC, Bank B would have some chance of recovering under an indemnity from Bank A, if in fact Bank A received not the check but an image of the check for deposit (via RDC or mobile RDC). But depending on what the payee's indorsement says, even that indemnity would not be available. In any even, that's all a pipe dream for Bank B, since the amendments creating the indemnity don't go into effect until 7/1/18.

You met the midnight deadline. Bank B has recourse against its customer and doesn't need to spend it's time trying to "educate" you on the law. Their customer should go back to the person who handed them the check. Following that path, the person who dealt with the wrongdoer or maybe even the wrongdoer himself will eventually pick up the tab.

To be candid, I read this when there were no responses and was not anxious to be the first one out of the foxhole. Just a couple minutes ago, it occurred to me that the only reason the other bank would take this position is that their customer's account did not have the money. I returned here with my newfound wisdom only to find that John had figured it out first. I tip my hat...

Ha - Bank B is the one that is stuck because since their customer is a subsequent endorser, they are the ones claiming "holder in due course". That does not project to the bank however. That is why banks that have MSB's only allow checks made payable to the individual to be cashed or deposited. The bank is going to have to go after the previous endorsers and not their customer.

Sounds like it may have been cashed at a check cashing agency that banks with Bank B. We have a check cashing agency with an account at one of our branches and periodically they go to the branch and reference some obsure (NY?) law that states that we can't take the money from them, we have to debit the other presentor - we just tell that it isn't a law here and we were debited by the fed, therefore it is on them to go back to the payee and get their money back.

At this time, the fed permits you to go after either presentment in a PAID case. Most banks usually go after the most recent presentment - we usually try and go after the mobile deposit item if it is still within the fed timeframe for immediate resolution (I believe 6 months).