Dealing with Forged Endorsement Claims

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Question:

I have two forged endorsement claims from another FI. It is within the time frame of three years, and appears that the checks, payable to a husband, wife, and a contractor, have a forged signature of the contractor. I actually spoke to the victim/contractor, and he states that at no point were any of these funds were due to him. He filed this claim because the IRS says he owes taxes on this money earned for a job, that he never did! I want to deny the claim (over $12,000), since this seems more of a civil situation, but the facts don't lie. The contractor's signature is forged. What do I do?

Answer:

Get your attorney involved. Although there is a warranty provision in the UCC that establishes your liability for the forged endorsement, your attorney may be able to argue successfully that the underlying claim for payment (from the contractor) is without merit. If the drawee bank has not yet paid its depositor for the original claim, your counsel may be able to defeat the claim altogether. Your bank shouldn't be responsible for resolving the contractor's dispute with the IRS!

First published on BankersOnline.com 9/13/10