Pub. 11 2014 Issue 4

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S Winter • 2014 15 is something ambiguous that the court created without any guidelines. In reality, the bank would not only have to inquire, but would have to be able to document that upon inquiry the person was properly granted authority to receive cash or pur- chase cashier's checks using such check payable to the bank. You can see the obvious impossibility of documenting such inquiry. So, in summary, the bank cannot take a check payable to the bank and deposit it into an account of any party but the maker because of UCC §3-307. The bank cannot take a check payable to the bank in exchange for cash or cashier's checks because of the court created "common law.” Banks should require all checks made payable to the bank to be applied to the account owner’s debt to the bank. This applies whether the check is from a corporation, LLC, partnership, trust, IRA, club, association or almost any other kind of account. It also applies when a check is drawn on an individual’s account if someone other than that individual is presenting the check. For instance, if a check is drawn onMr. Smith’s personal account made payable to the bank but is presented to the bank by Mr. Smith’s son, then the same law applies. Because the presenter is a representative acting on behalf of Mr. Smith, the bank could have liability to Mr. Smith if Mr. Smith’s son uses the check to purchase a cashier’s check and then uses the cashier’s check to benefit someone other than Mr. Smith. A bank can take a check payable to the bank from a customer if it is used for the benefit of the account owner, such as payment of a loan, tax deposit or purchase of items a bank sells. For a customer to receive cash back or purchase cashier's checks from a bank, the customer should make the check pay- able to "Cash" or payable to the person presenting such check. It is also acceptable to make the payee "Purchase of Cash from ABCNational Bank" or "Purchase of Cashier's Checks fromABC State Bank." Though I personally would have logically believed that cash or cashier's checks were items sold by a bank and a bank should be able to accept checks payable to the bank for purchase of cash or cashier's checks, the courts have ruled that such logic is not only incorrect but results in negligence of the grossest kind. It is best to heed the rulings of the court. Therefore, we highly encourage banks to implement a rule that tellers are ABSOLUTELY PROHIBITED from accepting checks payable to the bank except for payment of a debt the account owner owes to the bank. n For more information, please give us a call at (785) 228-0000. visit us online! www.nmbankers.com www.nmbankers.com www.facebook.com/pages/New-Mexico-Bankers-Association/371559049590485