(a) Indorsement standards. A bank (other than a paying bank) that
handles a check during forward collection or a returned check shall
indorse the check in a manner that permits a person to interpret the
indorsement, in accordance with American National Standard (ANS) Specifications
for Physical Check Endorsements, X9.100-111 (ANS X9.100-111), for
a paper check other than a substitute check; ANS Specifications for
an Image Replacement Document, X9.100-140 (ANS X9.100-140), for a
substitute check; and ANS Specifications for Electronic Exchange of
Check and Image Data—Domestic, X9.100-187 (ANS X9.100-187), for an
electronic check; unless the Board by rule or order determines that
different standards apply or the parties otherwise agree.
(b) Liability of bank handling
check. A bank that handles a check for forward collection or
return is liable to any bank that subsequently handles the check to
the extent that the subsequent bank does not receive payment for the
check because of suspension of payments by another bank or otherwise.
This paragraph applies whether or not a bank has placed its indorsement
on the check. This liability is not affected by the failure of any
bank to exercise ordinary care, but any bank failing to do so remains
liable. A bank seeking recovery against a prior bank shall send notice
to that prior bank reasonably promptly after it learns the facts entitling
it to recover. A bank may recover from the bank with which it settled
for the check by revoking the settlement, charging back any credit
given to an account, or obtaining a refund. A bank may have the rights
of a holder with respect to each check it handles.
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(c) Indorsement by a bank. After a
check has been indorsed by a bank, only a bank may acquire the rights
of a holder—
(1) until the check has
been returned to the person initiating collection; or
(2) until the check has been specially
indorsed by a bank to a person who is not a bank.
(d) Indorsement for depositary
bank. A depositary bank may arrange with another bank to apply
the other bank’s indorsement as the depositary bank indorsement, provided
that any indorsement of the depositary bank on the check avoids the
area reserved for the depositary bank indorsement as specified in
the indorsement standard applicable to the check under paragraph (a)
of this section. The other bank indorsing as depositary bank is considered
the depositary bank for purposes of subpart C of this part.
