IBA Compliance Connection

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We use an Affidavit of Alteration, which customers use to report forgeries and alterations, including a forgery of the customer’s signature on an endorsement. However, I don’t think customers should use this form to claim that a payee’s endorsement was forged on the customer’s check. Should we use the Affidavit of Alteration form in those cases?

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We recommend modifying your Affidavit of Alteration form in cases involving a payee’s forged endorsement on a check, or using a separate form entirely.

We agree that in most instances, a customer will not be able to verify that a third party payee’s endorsement was forged. But if a customer notifies your bank that a payee’s endorsement was forged, the customer should be able to obtain an affidavit from the payee, who can directly attest that its signature was forged on the check’s endorsement. This affidavit likely would be required when making a claim with the depository bank for breach of its presentment warranties due to the forged endorsement.

There are a number of “affidavit of forged endorsement” forms available online, and one example is available here: http://www-bfs.ucsd.edu/dis/pdf/formb.pdf.

For resources related to our guidance, please see:

  • Uniform Commercial Code, 810 ILCS 5/3-417(a)(1) and 810 ILCS 5/4-208(a)(1) (“If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment, and (ii) a previous transferor of the draft, at the time of transfer, warrant to the drawee that pays or accepts the draft in good faith that: (1) the warrantor is or was, at the time the warrantor transferred the item, a person entitled to enforce the item . . . .”)
  • UCC § 3-417 cmt. 2 (“Subsection (a)(1) in effect is a warranty that there are no unauthorized or missing indorsements.”)
  • Federal Reserve Financial Services, Collection of Cash Items and Returned Checks, page 31 (“20.3 Claim of Forged or Missing Indorsement or Alteration. A bank that believes it has a claim for breach of warranty based on an altered check, a forged indorsement, a missing indorsement or an unauthorized indorsement against another bank should deal directly with that other bank. A bank that believes it has such a claim against a Reserve Bank should give the Reserve Bank prompt notice of such a claim and should submit the claim to the Reserve Bank together with appropriate documentation, including an affidavit of forged or unauthorized indorsement or alteration. . . .”)