Answer:
John writes a check to Mary Beth. The check, with "Mary Beth" written on the back, is presented for payment by Andy. Andy is willing to endorse the check in order to cash it. By signing his name, he is promising that all previous signatures on the check are good.
Your bank should be entitled to an exception hold, because you are unable to verify the prior endorsement, Mary Beth's. However, under the model version of the UCC, the paying bank would have up to three years to return the check for a forged endorsement. Imposing an exception hold that can last no more that eleven business days is not going to afford you much in the way of protection. Your bank will make a decision to cash or not cash the check based on your evaluation of Andy as a source of recourse.
First published on BankersOnline.com 8/31/09
print
share