I can't find the UCC reg that identifies if we can refuse to cash one of our customer's checks made payable to a business. I know we have to cash a check to an individual, but what about businesses? For example: A check cashing business that receives a check from one of our customers, if they bring that check in to us and identify that they are legal rep of that business...can we tell them to process the check through their financial entity? Where in UCC would it tell me one way or the other?

I don't think you'll find the answer in the UCC, Doris. The key to your refusal to cash the check (which I believe is the correct policy, by the way) is in your words "identify that they are [the] legal rep of that business."

It's unlikely that the check cashing business will be able to produce a legal document that would satisfy your counsel that the body in front of your teller is authorized to cash checks payable to the business. On the other hand, if the check is processed through the system by the business's depository institution, you'll have an established business (that other bank) on the hook if there is anything wrong with the check or the endorsement. That's true whether the item is presented via inclearing or as a collection item.

Stick to your guns, Doris!

On the other hand, if the item is good, you can cash it and give them a Cashier's Check, payable to the business, and possibly less the CC fee. This aids them in timely collection, the bank in servicing its customer accounts and a fee is collected for your time.

If your CC fee is enough to cover your costs of issuing and clearing same, I'd agree with Andy. But make sure you include ALL your costs!

Does UCC identify that we can charge a fee for this procedure, or is that just our policy?

You need to be careful with this. We had another local bank present a check that had been cashed by one of their tellers that was drawn on us and had been returned NSF. It is common practice for us to give the other bank a cashiers check if the funds are available on the account and they will do the same for us. In this case we ended up losing the money because it turned out that the check had been forged. We are now out the money for the forged check, with no recourse against the other bank.

What happened to the practice of depositing checks ,payable to a business? We would never cash it. Think about it,. Thecheck is payable to who? It's not a person, so how could you justify it?

My apologies for chiming in "late," but I have been out of the office and am just catching up. I would let it pass, but the fact situation is one of my pet peeves and I agree with Ipso.

In a reported case, a Texas bank rightfully refused to cash a check its customer had written to a business. In an effort to appease the irritated payee, they issued a cashiers check payable to the business in replacement for the customer's check. The business owner then demanded that they cash the cashiers check, claiming that their conversion of the customer's check amounted to a recognition that he was "the business" and the bank was required to be consistent. Bank refused. Payee sued.

The court ruled for the bank, holding that it was in no position to identify the business at the teller window and was, thus, not required to cash the check. There is nothing in the Texas UCC that would make this ruling unique to Texas. Although the bank won, it is worth noting that they had to defend themselves in a ridiculous law suit - sticking with "No" would have left them in a better position.

In my home state check cashers are prohibited by statute from cashing checks payable to a business. Yet, they come into banks demanding that banks cash or exchange checks payable to them.

Check cashers would not get the time of day from me unless there was already a clock in my lobby. They are in a risky business for which they charge exorbitant fees - the drawee bank is not obligated to reduce their risks. They could deposit the check at their bank or send it for collection, but I would not replace it or cash it for them.

Rant: Cashing checks payable to a business is a lousy banking practice. Replacing customer checks with a cashiers check is an equally faulty technique not contemplated by the UCC. Those that cave in to complaints from non customers might get what they deserve.

It is not a deceitful practice to "Hammer" a check. There are valid and legitimate reasons a business, or a bank may needs to go directly to the payee bank and negotiate the item. One is the check has been returned NSF and and they want to collect the money owed them.

If the business goes to their bank and has their endorsement guaranteed it removes the ID liability from the payee bank, and places it on the business bank. The endorsement guarantee should included a statement that the item is to be replaced by a cashiers check (not cashed) made payable to the business. Endorsement guarantees are signed by a corportae bank officer.

Having this on the check absolves the payee bank from an authorized signer issue, and makes sure the funds go to the business.

This procedure provides for customer and merchant accomodation and is a banking service to the community.

Don,
I don't find any suggestion of deceit, only a practice that does not benefit the drawee bank. My perspective is that the payee's problems should be left to the payee and not adopted by the bank.

As for another bank's guarantee of the payee's endorsement, I am very comfortable with it when the check comes through the clearing system. When it is only a rubber stamp with a signature that I cannot verify, it is painfully easy to manufacture.

The payee is resolving their problem by coming to the drawee bank and presenting a valid demand deposit item, duly endorsed and guaranteed by a corporate officer of the payee bank. They are in no way making it a bank problem.

The problem is when there is an attitude of, there is a problem if items are presented this way. Maybe its because not many items are transacted this way and habit patterns have developed of believing only items that come in transit are acceptable for payment.

After all this is a demand deposit account and not restricted to only items that come through clearing house systems. It is an acceptable means of transacting banking business.

Its not to say you are required to, or must do, and there will be times you may refuse this process but, to reject the process out of hand and give it no consideration IMO is a breach of a banks service commitment to the community.

You could always call the bank and verify the endorsement was signed by the bank officer.

Just another thought on issuing cashier's check to check cashing companies. If their was a stop payment, you would probable know unless it was simultaneous. But what if the check happened to be fraudulent? Sometimes signatures look really good. The check cashier then has a good cashier's check, and we can't charge it back. How do you then get your money back from the check cashier?

if the payee is a business and the check was returned to their bank nsf, however the funds are now sufficient to pay the check, can the bank refuse payment to the business who is holding the check?

You mean they are presenting it again, either by redeposit at their bank or trying to cash it at yours? Why would you want to refuse payment?

I might condone cashing the check simply by offering a cashier's check made payable to the business. It seems that timing is an issue, that perhaps in a day or two the check would not clear. This would allow them to collect a debt owed to them.

Do not cash it outright as you would be liable for the endorsement involved for the next 3 years. If you cash it for an employee of the company and he tells his boss that he lost the check en route to the bank or something to that effect, the owner of the company could/would come after the bank for giving cash to someone other than the intended payee.