Counterfeit Cashier's Check, Who Pays

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Question:

A customer cashed a Cashier's Check which turned out to be counterfeit. Now they don't want to pay us back. They say that UCC law makes the bank liable. The bank's deposit agreement states that any item returned unpaid even if the item was cashed can be charged back to the customers account. Who is right?

Answer:

The statement that the UCC makes the bank liable is patently false. The party cashing the check presumably endorsed it; that endorsement carried a warranty that, among other things, the endorser would cover the check if it was dishonored.

We clearly don't have all the facts here. There may be mitigating circumstances that protect the consumer, but on the face of it, the consumer owes the bank the money.

First published on BankersOnline.com 8/02/04