We have a business account in which one of their customers submits payment via check frequently; but the pay to the order of the business name has an additional letter in the name. Ex: Friar rather than Fiar. We have advised our business customer to contact their customer in order to have the name corrected and they state that the company has been contacted but they continue to send checks with the wrong spelling. Our customer stamps the back of the check "For Deposit Only" which is not accurate since the name is incorrect. Our customer has been with the bank for years and it is a great banking relationship. We can clearly identify that this is our customer despite the spelling error. The thought would be to have them endorse the check as it's written incorrectly and then endorse it the correct way but the full name of the business is fairly long and they are typically depositing 5 or more checks at a time.

How would you handle this situation?

Talk to you attorney about the risk - good client or not,

many a fraud story starts with this very statement. not meaning to imply that this in any way is fraud, but it sure opens your bank to potential for liability.

you've identified potential risk, so you can either refuse future deposits until it gets fixed - and i think your client would work much harder to have the maker write the checks correctly if they are refused for deposit - or continue to accept and take on risk.

and of course, Randy's suggestion of engaging counsel is sound.