When You Cannot Identify the Depository Bank

From time to time, you may decide to return a check for which you cannot identify the depositary bank. This could happen when a depositary bank fails to follow the indorsement standards we looked at earlier, or where a subsequent bank in the forward collection process obscures the depositary bank’s indorsement, or in any number of other circumstances. When you are unable to identify the depositary bank, you have two choices: (1) you can go ahead and “expeditiously” send the check to a returning bank which agrees to handle it expeditiously in the hopes that the returning bank will be able to identify the depositary bank; or (2) you can send the check to any bank which handled it during forward collection. [12 CFR 229.30(b) and Commentary, 12 CFR 229.30(b)-1 and -2] A bank that handled the check during forward collection should be able to check its internal records to trace the source of the check.

If you choose the second option, to send the check to a bank which handled it in forward collection, and if you advise that bank that you are unable to identify the depositary bank, then the requirement that you “expeditiously” return the check does not apply. [12 CFR 229.30(b)] Furthermore, the bank to which you send the check does not have to agree to handle it expeditiously. However, the midnight-deadline rule and the extensions that Regulation CC adds to it (see above) still do apply. [Commentary, 12 CFR 229.30(b)‑5] And your notice to the bank explaining that you are unable to identify the depositary bank must be conspicuous. [Commentary, 12 CFR 229.30(b)-2] For example, you could put a stamp to that effect on each check if the checks are commingled with others or if you have sorted out the checks for which the depositary bank is unidentified, you could put a single notice on the cash letter. These checks cannot be prepared for automatic return (as QRCs).

The option of sending the check to a forward-collection bank and avoiding the expeditious-return requirements is not available to you, though, if the reason you are unable to identify the depositary bank is because the indorsement is obscured by language or markings on the back of the check for which Regulation CC holds you responsible. [Commentary, 12 CFR 229.30(b)-4] You are responsible for any markings on the reverse side of a check that are present at the time the check is issued. The depositary bank is responsible for markings that appear after that. [12 CFR 229.38(d)(1)] This means that if your customer uses checks with printing on the back or a carbon band on the back, for example, and the printing or carbon band obscures the depositary bank’s indorsement causing you to be unable to identify the depositary bank, the second option is not available to you and you are still subject to the expeditious-return requirements. You are responsible for those types of reverse side markings since they are present on the check at the time it is issued. (If a check is payable through one bank but payable at another, the markings on the back of the check at the time of issuance are the responsibility of the payable at bank, rather than the payable through bank. [12 CFR 229.38(d)(2)])