Warranty Claim Forms for Business Check

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Question:

We have a business customer that mailed a check to a business for payment, and that payee is claiming they never got the payment. We can see the check cleared our customer's account in February 2018. We feel it could have been intercepted by a third party and negotiated. The BOFD did confirm that the check was negotiated at their institution, but obviously can not confirm who the third party is, or if it is in fact a third party. Do we have any recourse on this? We were thinking a warranty claim but do not have much experience with this or where to find those forms.

Answer:

The intended payee of the check provides an affidavit of non-receipt and forged indorsement. Your customer brings that claim to your bank and claims the check was not properly payable. Assuming that forged indorsement claims reaching back to February 2018 are valid, you'll have a claim against the depositary bank for breach of UCC 4-205 (Depositary bank holder of unindorsed item) if the check wasn't indorsed, or UCC 4-208 (Presentment warranties).

Then you'll hope the depositary bank pays up so that you don't have to take legal action to enforce your claim (which can be expensive). There is no rule on how promptly you need to reimburse your depositor.

The warranty claim against the depositary bank is done directly, usually by letter, accompanied by a copy of the affidavit and a copy of the check (don't let that out of your hands unless the other bank pays you).