Answer:
Answer by John Burnett: It is wrong for at least a couple of reasons. First, if the check is payable to the business, the business needs to endorse the check before it can be negotiated. For businesses that are entities (not sole proprietorships), only certain individuals have authority from the business's governing body to endorse checks, and in most cases none of them has authority to endorse them for any other purpose than to deposit them to an account in the name of the business. Consequently, most banks have a firm policy against negotiating a check payable to a business (or at least a business that is not a sole proprietorship) for any purpose other than accepting it for deposit to an account of the business.
Secondly, exchanging the check for a cashier's check payable to a third party leaves the bank wide open to the risk that this conversion is, in fact, a diversion of funds that rightfully belong to the business. Interestingly, this is a special kind of theft that is often referred to as "conversion."
Checks payable to a business ought to be deposited to an account of the business, period, with the possibility of exceptions for businesses that are sole proprietorships.
Answer:
Answer by Ken Golliher: If the original payee ever alleges that the check was "converted," I imagine the teller will be at another bank very soon, deservedly so.
An on-us check cannot be "converted to" or "replaced with" a cashier's check. Both terms simply confuse the fact that your bank sold a cashier's check (oftentimes to a non customer) and accepted a customer's check in payment. It's a practice that banks started when they stopped "certifying" customer's checks and it has nothing to recommend it other than the fact it's what the payee of the check wanted. (If the payee really wanted a cashier's check, that's what he should have requested from your customer.)
It's a lousy banking practice, but the actions of this teller have made it even worse.
First published on BankersOnline.com 7/8/13
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