Question

a check was issued payable to chuck. Sam endorsed the check

Expert Q&A Done A check was issued payable to Chuck. Sam endorsed the check and deposited it into his account with National Bank. Chuck did not endorse the check, but he is a customer of National Bank. National Bank supplied Chuck's missing endorsement and forwarded the check to the drawee bank. Chuck sued National Bank for cashing the check without his endorsement. May the bank supple the missing endorsement of a joint payee who is not a customer depositor with the bank? Explain.

Answer 1

Each bank has its own policies regarding cashing and depositing checks, but virtually every bank in the United States requires that the payee endorse a check to accept it. Because of the rising incidence of check fraud and theft, banks require checks be endorsed. In addition to the endorsement requirement, many banks may charge a check-cashing fee if the person cashing the check isn’t one of its customers.

Endorsement by Payee

In most circumstances, a bank requires the person named as the payee of the check to sign the check to cash it. The signature must be made on the back of the check, in the 1 1/2 inches at its left side – the side directly behind the payment information on the front side. Banks use the remaining portion of the check to track which institution handled the check. In addition to a valid endorsement from a payee, most banks will also require the payee to present identification when cashing a check. If you forget to endorse the check on accident and turn it in to the bank, the teller may return it and request the endorsement.

Restrictive Endorsement

If the payee – or someone acting for the payee – doesn’t need to cash the check immediately, banks become slightly more lenient with endorsement requirements. A check may be deposited into the account of a payee without a signature endorsing it if the person making the deposit makes a restrictive endorsement. Most banks allow anyone to deposit a check using these endorsements – usually qualified as “For Deposit Only” on the back of the check with the payee’s name. A stamp with account information may also be used for restrictive endorsements when making a deposit.

A bank may be asked to collect a check that has not been endorsed by a payee. This may happen where the payee's endorsement cannot be obtained because of his absence or for some other reason. If the payee is in fact a depositor of the bank, the check may be collected, notwithstanding the absence of the endorsement. In such instances, the depositary bank may indorse the check with a legend reading "Credited to the account of the named payee absence of endorsement guaranteed". It seems quite clear that a bank may safely pay a check bearing such a legend and that neither a collecting bank nor the payor bank will be liable on the unendorsed check if the intended payee actually receives the proceeds.