What are the actual rules around endorsed checks?

Factual Questions
1

Actual Question: When a check is endorsed, what further restrictions are on it?

Boring Backstory: When I was born, my grandfather bought me some stock as a ‘college fund’. In case anything needed to be done with it, he made my father a joint tenant on the account. When I was little, dad would just cash the dividend check we got once a quarter, and give me the cash.

Once I turned 18, dad would just endorse the check and hand it over to me. I’d take it to the bank, endorse it, and deposit it or just cash it (since I was in college, I usually just cashed it). This worked fine for the first 3-4 times I took the check to the bank. Then, I once went and had the following conversation:

Teller: “I’m sorry, I can’t cash this for you”
Me: “Why not?”
Teller:“Because this other person isn’t on the account with you”
Me:“I’ve done this before”
Teller:“No you haven’t”
Me:“I’m sure I have. When did this rule come into place?”
Teller:“This rule has always been in place”
Me:“But I have done this exact thing before”
Teller:“Have a good day, sir”

I left a little confused, and just came back later that day, got a different teller, and got my check cashed with no questions.

Every since, I’ve had this conversation every 3-4 checks I get (so maybe once per year). Once I got older and cockier, I just started asking for a manager. The manager always approved it, with some comment on “Well, since the other guy is your dad, it’s ok”, “Well, since you’ve been with the bank so long”, “Well, since this check amount is so small”, or “Well, I can do it for you this one time”. This always sounds like total bull puckey to me; if it was not supposed to happen, they would not cash/deposit the check, period.

I get that the teller, no matter how intelligent they may be, is supposed to be drone and get approval for anything outside a small range of things from a manager. Annoying, but fine. But if the manager can override it, clearly it’s ok, regardless of who the joint tenant is, what the check amount is, or how long I’ve been a member of that bank.

(I know, I know, we should just get the stock transferred to me so it’s not a joint account and this isn’t a problem. We will do that one of these days)

Anyway, I suppose my question is what the actual rules around check endorsing are. I googled around, but all I saw was “If two people are on the check they both have to endorse it”, which we are, but there’s nothing about how both of them must be present to cash or deposit the check. As far as I can tell, this is just bank managers letting a little power go to their head, but I’m sure there are banker dopers that know the actual answer.

2

My experience:
Bob or Jane Smith - either can sign and cash or deposit it
Bob and Jane Smith - both signatures need to be on it. Needs to deposit into a joint account, usually. Cashing IIRC required both present, especially if not bank customers. Exceptions may be made if they are long term customers. Absolutely no exceptions for government checks like social security.
Obviously some were restricting more than others. It’s a common requirement, I’m not sure who the authorities here are, though.
I have had many customers like you. They always claim this is the first they’ve heard of it, yet you can tell (or see them again), and it’s obvious they’re just trying to slip past. I hope you were more polite than them. I have also seen cases where separating spouses cheat the other on a “and” check (I didn’t do the transaction, and I don’t believe it was ever the same branch, or even maybe bank).

3

Checks used to be a self-standing instrument whose every detail was critical to their validity and processing. Any more, they are a bit of wastepaper with a memo about paying someone some money scribbled on them. In many cases, banks don’t even care if they’re signed, endorsed, etc. according to the old rules.

If you’ve noticed, many places don’t even keep the check - they scan the info, enter the transaction more like a credit-card purchase, and give back the check itself. Then there are online e-check payments.

About the only checks still subject to rigid standards are government checks - there, banks will be held to account for two-payee checks signed by only one verified payee, etc. But even there, a tax refund check made out to a couple and deposited in a joint checking account isn’t going to get held up over the endorsement.

ETA: A lot of this assumes you have an account at the bank. If you’re a cash-pocket type who cashes paychecks and the like without putting them into or having an account, there will be greater scrutiny to make sure you are you - but not to enforce the details of endorsements etc. for their own sake. Cashing a check costs the bank or retailer money, and could result in a loss to them, so that has more to do with it than the formalities, no matter how they phrase it.

(I did work in front-line banking so long ago we actually went and checked signatures on file cards, and were held responsible for any problems if we didn’t cross every i and dot every t.)

4

If I understand the OP correctly, he is asking about something different; signing over a check to someone else, i.e. the person on the check endorses it and adds “Pay to the order of Joe Blow” so that Joe Blow can now cask the check.

5

No, no special endorsement, just a signature.

The check says “and”, we both sign it and only sign it, I deposit it into my account, teller either deposits/cashes it or gets a manager, manager always overrides.

thelurkinghorror I try my best to be polite but it does get exasperating.

6

Yea, I feel like if I banked at Chase where I could just take a picture of the check with my smartphone this would never come up, but what do I know.

It seems like an odd thing to get lax about - I imagine they would get more anal if it was a $100,000 check instead of my piddly $30 check, but it seems like a bank would be anal about everything.

7

The actual rules are contained in, first and foremost, your state’s codification of UCC Article III. Additionally there are some pertinent Federal Reserve Regulations (although as I recall, these are about the availability of funds/check-clearing timelines), Check 21, and I’m sure a handful of others.

You should also know that some of these rules can be varied by agreement, and would be contained in the paperwork you signed when you opened the account.

UCC 3-110(d) provides:

UCC 3-201(b) defines negotiation when the instrument is made to specified person(s) as:

Your dad accomplishes this by endorsing the back in blank and handing the check over to you.

Banks don’t like this because there are warranties presumed to be made by a party transferring or presenting and instrument (UCC 3-416, 3-417). Some of these may be disclaimed (IIRC) by endorsing “without recourse.” (NOTE: if you endorse your check “without recourse,” your bank will not accept it.)

So, yes, you have endorsed the check in a legally adequate fashion, such that there’s no necessary step left untaken. However, because the bank, in processing the check and presenting/transferring to the ACH/drawee bank incurs its own risk, they may insist on firmer evidence that the check has not been misappropriated.

In short, you’ll probably always need a managerial override, but that probably won’t be withheld.

Also, in like ten years, checks and UCC Article will thankfully be a dusty old relic, supplanted by just-as-complicated rules and regs for electronic payment systems.

8

Thanks Kimmy! I knew if I waited long enough someone would cite chapter and verse.

I admit I am probably futilely hoping that the bank will quit requiring a manager to get pulled over. And I would love to do away with physical checks altogether, but I think 10 years is a little optimistic. Hope I’m wrong!

9

Not trying to be judgemental here, but why haven’t you simply modified the account (the check is drawn on) so it’s in your name alone? I wouldn’t think that would take more effort than two or three trips with the added hassle of going to the manager.

10

Checks are negotiable instruments, which are governed by whatever form of the UCC is operating in the state you’re in. The basic idea of negotiable instruments is to allow pieces of paper that aren’t money to be treated like money, so long as certain forms are followed. Just as paper money can be used by anyone holding it, even if it’s money you found laying on the ground, a properly endorsed check can be used by anyone (with certain technical caveats, but that’s the basic idea). ’

This is something a bank manager would have to know, but a bank teller may not. In all likelihood, the teller is probably more worried about accepting a fishy deposit and getting in trouble than he or she is worried about not observing the negotiable instrument statutes.

ETA: Kimmy sniped my point, and better to boot.

11

Chiming in with what everyone here has said with another anecdote:

For the past two years, my spouse and I have received a sizeable check co-addressed to us both. My spouse has signed it and I’ve gone to the bank to deposit it and both times the teller said that she couldn’t do it, but that I should just go out and use the ATM instead. I have been quite amused by this procedure and willingness to get around their own rules.

12

Oh, if only that were true. My wife and I got two tax refund checks this year - one from the state, one from the federals. Both checks were made out to both of us and arrived about a week apart. The first one was from the state. I endorsed it alone and deposited it via a teller. No problem. The second one, from the feds, I also signed and gave to a teller. She refused to take it until my wife signed it as well, wasting a good hour out of my day.

Not that I’m bitter.

Oh, and it was a joint account, with both our names on it, for what that’s worth.

13

From the OP:

14

Ohh, oops. Those are usually called “third party checks.”

Chase isn’t worth it.

Some of these times a manager is required because the computer forces them/a lead teller to come. It doesn’t sound like this is your situation though.

Sometimes this doesn’t work. I mean, it goes through and may even credit your account, but then awhile later you get a Check 21’d shrunken printout. I’ve seen this with the social security/disability type gov’t checks.

15

What I meant was, had you scrawled your wife’s signature on it - not too obviously or in front of the teller - they wouldn’t have bothered validating it.

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17

When you say “actual rules” like your title, you have to remember there are laws and there is individual bank policy. Legally, once the check is endorsed anyone can cash it - it’s why they used to warn people not to do so until they got to the bank because if you lost it, you were screwed. To reduce risk of fraud, banks institute their own policies, which it seems you’re running into. Our policy was you had to endorse an item in front of the teller and provide ID if requested if you were cashing it, rather than depositing it; with a deposit, we had a chance of yanking the funds from your account if it was rejected, so less risky. But every team member has a limit to their discretionary authorization, and apparently the check is beyond a teller’s where you go (ours is $50).

18

This is a little off topic, but might be interesting. I use several different aliases for different purposes and on occasion need to have a check made out to one of them. The “person” it’s made out to however is encumbered by the small legal deficiency of not actually existing.

No problem. I simply change into that persona much like Roger on American Dad and sign the check in that “person’s” name. Then I go to the bank and make an additional endorsement before depositing it. I’ve never had a problem.

19

DO NOT DOUBT THE COMPREHENDING OF THE UCC. It addresses all possible human scenarios. It is all-regulating.

See UCC 3-110 and 3-404.

20

“Oh, okay, wait a sec, she’s right out in the car; I’ll have her sign it. Be right back!”

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