I received a call from our Br. Mgr. regarding an insurance draft that was deposited into an individual account. However, the Mgr. has learned that the check was payable to the individual and a Savings & Loan where the individual had a car loan. The check was payable to both the individual and the S&L. The Mgr. believes that the S&L did not endorse the check that was deposited on July 12. The check has not been returned to the bank according to the Br. Mgr. The Br. Mgr. wants to know can a "Hold" be placed on the balance of the funds in the individuals account? The check was $3,400.00 and the balance left is only $1,400.00. Also, can the check be returned beyond the mid-night deadline for an endorsement missing?

Because proper endorsement is the depositing bank's responsibility, yes the check can be returned after the midnight deadline. Before placing a hold, I would recommend trying to verify that the check was paid. Also, contact your customer. This is most likely a scenario where the customer had an insurance claim following a car accident, and got some repair work done. But the insurance company lists the S&L as a payee because, as the lienholder, the S&L is the first named loss claim payee on the policy.

If the car was totaled, you can guarantee that this check is coming back. As soon as the S&L finds out that they have not been paid (most likely they are holding a loan secured by the car), they will contact the insurance company and the check will be returned. I would review your film and verify whether or not there really is a missing signature and freeze the account if that is the case. If the signature is missing, you are dealing with a fraud and Reg CC is out the window.

You can't place a hold for a check that was deposited that long ago. The check will probably come back "without entry" meaning it will come back through the mail and not with your other returns. This type of return can be done past the midnight deadline, and in fact will probably take quite a while. The insurance company will get the check in their statement, look at the endorsement, go to their bank and fill out the paper work, and it will come back. Hopefully you will either be able to recover the money from the customer or get the savings and loan to endorse the check. If not, you may be looking at a loss because you accepted the check without the endorsement of all of the payees.

Going back to the original post, I have another question that could help explain the exact scenario here. What prompted the branch manager to contact you four weeks after the deposit?

If you have evidence that the check is coming back, i.e., you review the film and it's not endorsed by the credit union and you call the credit union and they say they will not endorse it if presented, I would not hesitate to hold the $1,400 that was still in the customer's account. I know of no reason to continue to release illegally obtained funds from the bank to a customer.

I recently had this same bad experience. Bad = loss.

The body shop that did the work just knew the insurance check was going to pay them as soon as the lender got the check. They released the car. So we had a bum check, the lender had their endorsement forged and the body shop was unpaid. Two out of the three were resolved really easy, which left us holding the bag.

I'd look at the golden rule here, as rl mentioned. He who has the gold, makes the rules. If you hold it, you can release it. If you release it, its gone. If you have low cost counsel, consult them. In any case, you get to communicate with the customer or you get some of your money back.

Isn't this situation the reason ALL insurance checks should be sent for collection? This is a long standing issue with our senior management and branch managers and customers. Senior management states that all insurance checks must be sent for collection. Br. Managers argue that if the check is drawn on bank, it is not a draft, and should be deposited to customer account with a maximum hold placed on it. We have lost customers due to the fact we will not deposit an insurance check and the bank down the street will. WHat do you all think?

I think it is much more situational than that. If I bring in an insurance check payable to me alone, and I deposit it to my individual account, I could tolerate delaying availability, but that's it. Even with joint payees, I have called the other payee (lienholder, car dealer, mechanic) to verify their endorsement before accepting the check for deposit. I think there are ways to be cautious without disrupting cusatomer service in most cases.

I agree with you that we can be cautious without disrupting our customers, however, I need help convincing senior management. Once upon a time, all insurance payments were presented as drafts and had to be sent for collection. It is my understanding that as a result of complaints to insurance companies, the insurance companies began issuing checks, payable through a bank, to prevent handling insurance payments as collection items. Is this correct? I would appreciate any help on this matter. Can anyone refer me to another site or reference regarding insurance checks? Thanks

Take a look at the next insurance "check" see if it says "Payable Through" and not Payable At. If it says Payable Through its a draft. "Payable At" its a check.

A Draft is not a demand deposit account item and does not have to be paid upon presentment. It is not subject to the 24 hour return requirement a check has, and can be returned for any reason the insurance company decides not to honor the claim.

Don,

I guess I beg to differ with you. These distinctions went away with Reg CC. Both payable at and payable through "drafts" are consider the same as checks when it comes to the expeditious return rules. Please refer to:

Sec. 229.36 Presentment and issuance of checks.

(a) Payable through and payable at checks. A check payable at or through a paying bank is considered to be drawn on that bank for purposes of the expeditious return and notice of nonpayment requirements of this subpart.

Post deleted by Don Narup

Post deleted by rlcarey

I was having problems getting my reply to post so wound up with a double posting. Sorry about that.

My response was more to Anonymous query about why we sent drafts as collection items and was asking for more info.

I should have been more explicit and said "Back in the old Days"

Ah yes - and the good old days that they were! I delete my redundant reply also.