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Bank of 1st Deposit-Responsibility for Endorsement

Answered by: 
Brian Crow | CAMS

Question: 
We had a customer contact us regarding stolen checks drawn on his business that appeared on his bank statement. I understand that we did not meet the midnight dead line for returning a forged signature. The checks also had no endorsement by the payee and no bank endorsement either. Fed record indicators show the bank of first deposit for processing as a large bank that clears items for many banks. We are not able to identify the original bank of first deposit. We are wondering what our options are. Does the bank of first deposit share any responsibility due to the missing endorsement?
Answer: 

No, it does not. Whether or not there is an endorsement, the bank of first deposit makes a presentment warranty that the funds were given to the payee of the check. The Uniform Commercial Code does not require that the BOFD obtain an endorsement. Even in the case of a forged endorsement and a forged signature, the forged signature claim trumps and endorsement issues and the liabilty rests with the drawee bank for failing to return the item by the midnight deadline.

First published on BankersOnline.com 6/3/13

First published on 06/03/2013

Filed under: 
Operations
Filed under operations as: 
Checks
Endorsement
IT

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