Topic: Authorized Signers
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We have a consumer deposit account with an authorized signer. The authorized signer endorsed and cashed a check that was payable to the authorized signer (not to the account owner) using this account. The authorized signer signed the back of the check, without specifically endorsing it to the account owner. If the check is returned to us for insufficient funds, under a stop payment order, or another reason, can we charge the check amount back to the account, even though the authorized signer is not the account owner? Our account agreement states that the account owner “is responsible for any transactions of the authorized signer” and that we have no obligation to monitor account transactions to ensure that they are on the owner’s behalf.
No, under this scenario, we do not believe that your bank could assess a returned check fee or setoff the returned check amount against the account associated with the authorized signer. In the situation described here, the check would have been made payable to the authorized signer and endorsed by the authorized signer, but it…
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Can an authorized signer obtain information about the account, including account balance and statements?
We think the answer depends on the language in your account agreement, signature card or other document establishing the authority for the authorized signer to draw on the account. In our view, it would be inappropriate and perhaps unlawful to share account balances and statements with an authorized signer without the account owner having expressly…
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We recently discovered that an authorized signer on one of our business customer’s accounts is a felon and will have to serve several years in jail. Should we notify the account owner or take any other action? Should we pretend we don’t know?
In our view, you should not take any action with respect to your information that the authorized signer is a felon. Generally speaking, federal and state laws do not prevent a felon (even one in prison) from being an authorized signer on a bank account, and we believe it would be prudent for a variety…
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A trust would like to open a business account. There are two trustees, but they would like to appoint two other individuals to serve as authorized signers. We do not know what relationship those individuals have with the trust. The trust agreement authorizes the trustees to delegate purely ministerial duties. Can the authorized signers open accounts in the name of the trust? What documentation should we require?
We recommend that one or both trustees open the account, naming the trust’s business as the account owner. We think that the trustee (or trustees) opening the account should be an authorized signer, but the other two non-trustee individuals also may be designated as authorized signers. The Illinois Trusts and Trustees Act limits the types…
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Do we need to obtain identifying information from real estate companies when they open escrow accounts to hold funds for pending real estate transactions? Also, do we need identifying information from the employees who will be authorized signers on the accounts?
Yes, we believe that your bank should collect identifying information about companies that open escrow accounts. For purposes of its customer identification program (CIP), your bank must collect identifying information about each of its “customers,” which in this case would be the company establishing an escrow account. Interagency guidance confirms that a real estate agent…
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Does any law or regulation prohibit a bank from allowing a corporation’s owner to cash a check made out to the business?
We are not aware of any statute or regulation that prohibits this practice, but your bank could incur some risk if the owner does not have the authority to endorse and cash checks made payable to the corporation. Without evidence of this authority, the bank could be liable to the corporation under any number of…
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Under Illinois law, can a joint account have an authorized signer, or is a power of attorney document required in order to allow a non-owner to transact on the account? Can a joint account have more than one authorized signer?
We are not aware of any Illinois law prohibiting joint accounts from having one or more authorized signers. In addition, we are not aware of any requirement for a joint account owner to execute a power of attorney in order to allow a non-owner to transact on the account as an authorized signer.
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We received a citation to discover assets naming an individual who is the authorized signer on a corporate account at our bank. While the account is a business account, we do not have a tax ID number attached to the account (which predates the Customer Identification Program requirements), and we have been accepting the authorized signer’s social security payments as deposits into the account. When responding to the citation, should we name the corporate account? Are the social security funds protected?
Based on the information you have provided to us, it appears that the citation to discover assets does not cover the corporate account. The citation indicates that the individual is the debtor, not the corporation. Generally, a corporation’s assets are separate from an individual’s assets, even if that individual is an authorized signer on the…
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We received a non-wage garnishment summons for an individual who maintains a corporate account at our bank. The individual, not the corporation, is named as the debtor. The only account he has is the corporate account. He is president of the corporation and one of two authorized signers on the account. Do we have to freeze the corporate account?
Although we cannot provide legal advice, we do not believe you are required to freeze any assets in the corporate account. Based on the information you have provided, the summons indicates that the individual is the debtor, not the corporation. Generally, a corporation’s assets are separate from the assets of its individual officers. Consequently, the…