Answer:
If you and I worked for a bonding company, we might painlessly give the same advice, "Return unsigned demand drafts 'signature missing' if you do not have a signed authorization on file from the customer." However, you clearly work for a bank and can envision the required manual review of paper items that would entail and the number of customer complaints that would follow.
What you do here is based on the amount of risk you perceive vs. the amount of risk you are willing to take. Search Bankers Threads using "demand draft" and you will find discussions that raise more points than can be addressed here. Key issues are: 1) the possibility that your state's version of the UCC has been tweaked to allow for the late return of demand drafts; 2) the fact that you may be able to revise your signature cards to shift the risk back to the customer who authorized the demand draft on the phone and 3) the fact that it is not possible for the depositary bank to use the clearing system to protest your return of an item as "late" if the item is less than $100.
The principal reason this issue is on our plate is that most banks no longer physically inspect items below a certain dollar amount. We stopped doing that in order to save a lot of money, but it opened the door for those who generate these unsigned, paper items. The risk we took was that we would pay some garbage and end up absorbing the cost. While the risk has come home to roost, we still save a lot of money by not inspecting each item.
First published on BankersOnline.com 4/01/02
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