IBA Compliance Connection

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We have been presented with a Bank Claim of Late Return from another bank for a check we rejected due to an unauthorized endorsement. Our customer made the check payable to a company. The customer informed us that the company did not authorize the endorsement on the check. The Claim of Late Return states that we must provide an affidavit within 20 business days if we dispute the claim. Should we obtain an affidavit from the payee company (who is not our customer)? Should we use the Federal Reserve Board’s Paying Bank’s Response to Claim of Late Return form to respond to the claim?

Mar 17, 2017

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Yes, we believe that you should obtain an affidavit from the payee company to contest the claim. In addition, you should use the Federal Reserve Board’s forms if the check was processed through the Federal Reserve check collection system.

To dispute a claim of late return on an item processed through the Federal Reserve check collection system, Federal Reserve Bank Services requires you to submit a Late Return Disclaimer to the Federal Reserve, which includes an Adjustment Request Form and a Paying Bank's Response to a Claim of Late Return Form.

In addition, if a customer notifies your bank that a payee’s endorsement was unauthorized, you or your customer should be able to obtain an affidavit from the payee, who can directly attest that the endorsement on the check is unauthorized. We recommend including such an affidavit with your other FRB forms.

For resources related to our guidance, please see:

Federal Reserve Bank Services, Late Return Disclaimer (“If you want to dispute a Claim of Late Return (LC), submit an LR to the Federal Reserve.”)
Federal Reserve Bank Services, Late Return Disclaimer (“Late Return Disclaimer (LR) – Drawee disputes the claim of late return.”)
Federal Reserve Bank Services, Late Return Disclaimer (“Submit an Electronic Case or Adjustment Request Form.”)
Federal Reserve Bank Services, Late Return Disclaimer (“Required Attachments – A legible copy of the completed Paying Bank's Response to a Claim of Late Return Form.”)