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Measure for Measure
06-06-2002, 10:21 PM
What is the proper or best way to endorse a check? I know of 2 methods.

Pay to the order of Third National State Bank
Your Signature

or

For Deposit only
[account number]
Your Signature

I know that either will work. My WAG is that circulating your account number may enhance the chances of identity theft. OTOH, perhaps it also lowers the risk of bank error.

Apropos nothing, I also find it odd to write, "Pay to the order of...", unless I am paying a bank fee.

Any bankers out there?

Bearflag70
06-06-2002, 10:40 PM
Former bank teller here...

(1) "Pay to the order of " means that you are signing the check over to the bank. Why would you want to give the bank your money? You wouldn't. I don't recommend this endorsement.

(2) You can endorse a check with only your signature. This is acceptable. However, if you lose it, someone else may attempt to endorse it below you and cash it.

(3) Adding "for deposit only" is designed to prevent the above situation, restricting the check for deposit. This is not required, but it is the safest endorsement, assuming you want to deposit your check.

(4) A bank can stamp an endorsement. If you want to deposit money into my account, just write a check to me, take it to my bank, and tell them that you want to put it in [b]Bearflag's checking account. The teller will stamp the back of the check "for deposit only" with my account number.

Adding your account number with your endorsement tells the bank where the money went or is supposed to go. If your deposit slip and check get separated at the bank, then the bank can still put the check where it's supposed to go by the account number on the back.

Every time you write a check to pay a bill or at a store, you give a stranger your account number, address, name, and signature. The risk of identity theft from an endorsement seems minimal.

Lastly, don't endorse checks until you are about to negotiate them. You don't want to lose endorsed checks. See (2) above.

Bearflag70
06-06-2002, 10:50 PM
Also, if you do not put your bank account number with your endorsement, that just means the bank teller will have to do it for you. Best if you save them the trouble by putting all of that info down while you stand in line. It makes the lines move much faster to have all of your desposit slips and stuff ready to go as soon as you hit the teller window.

Also, be aware that every time you endorse a check, the person who wrote you the check will have your signature and account number. I don't know what you would do with that knowledge though.

Fear Itself
06-07-2002, 12:42 AM
Originally posted by Bearflag70
Also, be aware that every time you endorse a check, the person who wrote you the check will have your signature and account number. I don't know what you would do with that knowledge though. Seems only fair; if they wrote you a check, you have their signature and account number as well.

Max Torque
06-07-2002, 01:43 AM
I have in my notes from Commercial Law that, if you're signing a check over to another person, the endorsement that covers your ass most completely is:

Pay to the order of X
(signature)
without recourse
(date)

I won't bother explaining the significance of "pay to the order of" unless someone's interested.

"Without recourse" helps you if the check gets passed around a bit. If, for some reason, the check gets dishonored down the line, there's a chance that the persons to whom money is owed can come back and bite damn near everyone who signed the check. The "without recourse" gets you off the hook.

And you should include the date because it can help you keep track of things should the check be shut up in a drawer and not presented for payment in a timely fashion. Again, it's insurance that can help get you off the hook if there's a problem down the line.

Is all this necessary for a simple deposit? Not normally, no. But isn't it nice to know it's there?

To expand on something Bearflag said: a simple signature endorsement, without anything else, transforms the check into "bearer paper". That means any yahoo who's holding the thing is entitled to payment. So, you shouldn't put a simple signature on a check unless you're comfortable carrying an equal amount of cash, because essentially that's what you're doing.

ratatoskK
06-07-2002, 08:12 AM
Here's a related question... I have a child, the child receives a gift of a check, what's the right way to endorse it? Usually I just sign

Kid's Name
My Name

or sometimes

"For deposit only"
Kid's Name
My Name

It doesn't seem to matter how I do it, they always take the check!

pldennison
06-07-2002, 08:59 AM
Originally posted by Fear Itself
Seems only fair; if they wrote you a check, you have their signature and account number as well.

And, even more importantly, their bank routing number.

KneadToKnow
06-07-2002, 09:14 AM
(3) Adding "for deposit only" is designed to prevent the above situation, restricting the check for deposit. This is not required, but it is the safest endorsement, assuming you want to deposit your check.
Just be sure not to do this if, in fact, what you want to do is cash the check. I once tried to get money back when depositing a check and the teller gave me a very stern lecture because I had clearly written "For Deposit Only" under my signature.

Cliffy
06-07-2002, 10:03 AM
Yeah, once you've made a restrictive indorsement (which is what the FDO indorsement is called), the person/institution you give it to can be liable if they don't follow the indorsement, so even if you're standing there and have changed your mind, they still probably won't risk it -- after all, the FDO instruction is in writing, and your instructions aren't.

--Cliffy

shelbo
06-07-2002, 12:08 PM
[ATM user] These words you're using -- "lines" and "tellers" -- what do they mean? [/ATM user]

Bearflag70
06-07-2002, 01:37 PM
Originally posted by Fear Itself
Seems only fair; if they wrote you a check, you have their signature and account number as well.

The only possible use of this info. I can think of is if you ever wanted to enforce a judgment against a person by going after his or her bank account.

Bearflag70
06-07-2002, 01:38 PM
Originally posted by ratatoskK
Here's a related question... I have a child, the child receives a gift of a check, what's the right way to endorse it? Usually I just sign

Kid's Name
My Name

or sometimes

"For deposit only"
Kid's Name
My Name

It doesn't seem to matter how I do it, they always take the check!

This sounds right to me.

Measure for Measure
06-07-2002, 08:56 PM
Thanks for the feedback, gang. (Nice presentation, Bearflag; Thanks for checking your notes, Max. )

Oddly, most mail-in deposit forms that I've seen recommend the "Pay to the Order of Third National Bank" endorsement. That doesn't make sense to me, either.

:foil: Follow up question: How often are people's bank accounts raided by criminals? I'm wondering whether somebody with my bank account and social security number could easily tap into my funds. :foil:

wfq1513
06-08-2002, 11:47 AM
As a related question...

Lets say a friend of mine wrote me a check for $10,000, and I deposit it into my account with the "without recourse" endorsement. My friend then stops payment on the check. Does this mean the bank has no recourse, and they are legally prevented from removing the funds from my account?

Max Torque
06-08-2002, 12:50 PM
Well, here's the deal in UCC 3-415.

"(a) Subject to subsections (b), (c), and (d) and to Section 3-419(d), if an instrument is dishonored, an indorser is obliged to pay the amount due on the instrument (i) according to the terms of the instrument at the time it was indorsed, or (ii) if the indorser indorsed an incomplete instrument, according to its terms when completed, to the extent stated in Sections 3-115 and 3-407. The obligation of the indorser is owed to a person entitled to enforce the instrument or to a subsequent indorser who paid the instrument under this section."

Of course, subsection (b) says:

"(b) If an indorsement states that it is made "without recourse" or otherwise disclaims liability of the indorser, the indorser is not liable under subsection (a) to pay the instrument."

Basically, if you endorse a check for $10,000, you're making a warranty that you're handing the person $10,000. If the check is later dishonored and the person you handed it to finds himself out of luck, he has the option of going after you, the endorser, as well as the person who originally wrote the check. The "without recourse" language means that you are not liable on the instrument. (Note that this does not necessarily mean that you are no longer responsible for the debt!)

But this really only applies to transactions between people. Banks have their own special rules. In your example, assuming the stop payment order was timely and proper, the check is stopped and you get no money. You'll have to go after your friend to get the cash.

SCSimmons
06-08-2002, 09:00 PM
Originally posted by wfq1513
As a related question...

Lets say a friend of mine wrote me a check for $10,000, and I deposit it into my account with the "without recourse" endorsement. My friend then stops payment on the check. Does this mean the bank has no recourse, and they are legally prevented from removing the funds from my account?

You should probably read the fine print on your account agreement. In general, when the bank increments your account on a deposit, it is a 'provisional credit', subject to their collection of the amount of the check. This is technically not an available balance, although (depending on the details of your account contract) they may treat it as such for certain purposes. This is technically an interest-free loan ...

OpalCat
06-08-2002, 09:55 PM
Eh. I always just sign 'em and let it go at that.

numberworks
05-16-2013, 11:28 AM
Former bank teller here...

Lastly, don't endorse checks until you are about to negotiate them. You don't want to lose endorsed checks. See (2) above.

I know this is an old thread, but I'm hoping someone might still be listening. Please tell me more about this. If the check is endorsed as "For Deposit Only" with the account number, wouldn't that prevent anyone from doing anything with it, other than depositing it to your account? I am trying to understand why it would be preferable not to endorse the check until just before depositing it.

Thanks!

Lasciel
05-16-2013, 11:54 AM
Wow that's one dead zombie.

"Endorsing" just means you write your signature on the little line on the back. No dates, "for deposit only" account numbers, or other hogwash required.

With that signature, that means that whoever has the check can do whatever they want with it, just like it were any other form of paper money - your signature means you're honoring that amount written on the check.

That's why the bankers and law peoples are saying it's much safer to do something more like:

For deposit only into
xxxxxxxxx (acct #)
DATE
SIGNATURE

That way even if someone else gets hold of the check, the teller SHOULD notice the acct number on the check, and make sure it goes to YOUR account, and not the other guy's account. On the other hand, everyone makes mistakes, so it's better not to write ANYTHING on it until you're ready to hand it directly to the teller, to minimize chances of loss or theft.

Why do you think they always keep that collection of pens right there?

Saint Cad
05-16-2013, 11:58 AM
Now explain how I can get rid of my debt by writing a check for $1 and putting "Paid in full" on the memo line and signing it saint cad, sov. cit.?



Just kidding.

Kimmy_Gibbler
05-16-2013, 09:16 PM
Now explain how I can get rid of my debt by writing a check for $1 and putting "Paid in full" on the memo line and signing it saint cad, sov. cit.?



Just kidding.

It's a misunderstanding (possibly deliberate) of UCC 3-311 (http://www.law.cornell.edu/ucc/3/3-311.html)'s accord and satisfaction provisions.

In particular UCC 3-311(a)(ii) requires that the amount due be a matter of bona fide dispute (i.e., "the store sent me a bill for the full price, but I contend I had a raincheck that entitled me to a sale price." NOT "the store sent me a bill, but I decided, after buying on credit, that I didn't want to pay as much as we had agreed, so I sent them a check for 20% of the bill and wrote 'PAID IN FULL' on it").

Moreover UCC 3-311(c), imposes, in addition to the substantive requirement of a bona fide dispute as to the amount owed, procedural obligations on the obligor whose obligee is an "organization" (like a bank, or credit card company, or utility company). In that case, if:

(1) within a reasonable time before the tender [of the "PAID IN FULL" check], the [business] sent a conspicuous statement to the [billed party] that communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to a designated person, office, or place, and

(2) the billed party doesn't send it to that designated person, office, or place

then there is no discharge of the obligation, the annotation "PAID IN FULL" notwithstanding.

(To be completely comprehensive, if there is a bona fide dispute and the recipient is genuinely notified that the check is being offered for accord and satisfaction and the recipient takes payment on the check, the obligation will be discharged.)

The provisions of paragraph (c) were meant to allow automatic processing of checks without throwing an accord-and-satisfaction monkey wrench into the mix. Generally, major businesses will be able to avail themselves of 3-311(c) because there communications will have contained notices about where to take disputes and it will not be the general remittance address. The workers at this special disputes address will obviously be on the lookout for checks that attempt to assert accord and satisfaction and will return them to the customer uncashed.

robert_columbia
05-17-2013, 09:38 AM
Here's a related question... I have a child, the child receives a gift of a check, what's the right way to endorse it? Usually I just sign

Kid's Name
My Name

or sometimes

"For deposit only"
Kid's Name
My Name

It doesn't seem to matter how I do it, they always take the check!

When I was a child, we would sometimes get insurance benefit checks that came payable to me. My parents would ask me to sign the check and apparently they would just deposit it in their account. This seems more or less fair because they probably had forked over a prepayment out of their own pockets and the check was reimbursement for that, so it wasn't like I was being cheated out of something that was morally mine.

Former bank teller here...

(1) "Pay to the order of [BANK]" means that you are signing the check over to the bank. Why would you want to give the bank your money? You wouldn't. I don't recommend this endorsement.
....

I have a brokerage account and one of the ways to deposit money into it is by signing a check payable to you over to the brokerage, but they claim that they won't accept just any random check signed over that way but reserve the right to only accept government, cashier's, and possibly payroll checks signed over that way. A check from Aunt Edna's last boyfriend's little sister's BFF, not so much.

TriPolar
05-17-2013, 09:45 AM
I remember checks.

kayaker
05-17-2013, 10:33 AM
I remember checks.

My business stopped accepting checks 4 years ago. The % of checks that were no good was higher than the national average. I looked into check guarantee services, but the cost was too high unless I increased the number of checks I was getting dramatically. So I stopped taking them.

I got some attention from local consumer type groups and the county DA stopped to discuss the situation. He felt it reflected badly on the area if businesses would not accept checks. I told him I would happily accept checks if he would personally make good on the ones that bounced, but he declined.