Cannot Verify Endorsement: Put on Hold?

If I understand correctly, you have a cashier's check payable to John Doe and already endorsed by John Doe, but Jane Smith is actually endorsing and depositing the item. In my opinion, your inability to verify the prior endorsement would provide you with the basis for an exception hold based on reasonable cause to doubt collectibility. Your maximum hold will be until the seventh business day following the banking day of deposit.

Keep in mind, however, that an item may be returned for a forged endorsement up to two or three years (depending on state law) after it is presented for payment. In this circumstance, putting on a hold is the practical equivalent of buying a rain coat for fear the dam might break. If what you fear actually happens, your choice of a precaution won't help you. When considering the acceptance a two party item, base your decision on your opinion of how hard it would be to get the money back from the last endorser.

First published on BankersOnline.com 11/15/10