Whether to require customers to personally endorse checks made payable to themselves is a business decision for your bank. Requiring your customers to make these endorsements would protect your bank from liability in certain situations, as discussed below; however, you may decide to waive endorsement requirements for customers who present a low risk of fraud or for checks under a certain amount.  

Under the Uniform Commercial Code (UCC), your bank could be held liable for an unendorsed check, even if the check is payable to the customer who deposits the check. When your bank transfers a check to another bank through the collection process, your bank warrants to the transferor and the payor bank that the check has no missing or unauthorized endorsements, among other warranties. Consequently, your bank could be liable to a payor bank if your customer’s endorsement is missing from a check and the payor objects to the payment of the check for some reason.

For resources related to our guidance, please see:

• Illinois UCC, 810 ILCS 5/4-205(2) (“If a customer delivers an item to a depositary bank for collection:

1) the depositary bank becomes a holder of the item at the time it receives the item for collection if the customer at the time of delivery was a holder of the item, whether or not the customer indorses the item, and, if the bank satisfies the other requirements of Section 3-302, it may be a holder in due course; and

(2) the depositary bank warrants to collecting banks, the payor bank or other payor, and the drawer that the amount of the item was paid to the customer or deposited to the customer’s account.”)

• Illinois UCC, 810 ILCS 5/3-417(a)(1) and 810 ILCS 5/4-208(a)(1), Presentment warranties (“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 making payment or accepting the draft in good faith that: (1) the warrantor is or was, at the time the warrantor transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person entitled to enforce the draft; 2) the draft has not been altered; and (3) the warrantor has no knowledge that the signature of the purported drawer of the draft is unauthorized.”)

• Illinois UCC § 3-417 cmt. 2 (“Subsection (a)(1) in effect is a warranty that there are no unauthorized or missing indorsements.”)

• Illinois UCC § 3-417 cmt. 3 (“Subsection (a)(1) retains the rule that the drawee does not admit the authenticity of indorsements . . .”)

• Illinois UCC, 810 ILCS 5/4-208(b) (“A drawee making payment may recover from any warrantor damages for breach of warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled to receive from the drawer because of the payment. In addition, the drawee is entitled to compensation for expenses and loss of interest resulting from the breach. The right of the drawee to recover damages under this subsection is not affected by any failure of the drawee to exercise ordinary care in making payment. If the drawee accepts the draft (i) breach of warranty is a defense to the obligation of the acceptor, and (ii) if the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from any warrantor for breach of warranty the amounts stated in this subsection.”)