Check Signatures According to the Model UCC
If Bart Simpson wrote me a check for 1 cent, I’d be very concerned. Not so much because it is a waste of a drive to my credit union to cash. It is because I know he is a prankster cartoon character. And in law school, **Spoiler Alert,** I learned that cartoon characters are NOT real. At least most of them aren’t.
Some compliance professionals have reached out to NAFCU Compliance to inquire about check signatures. Particularly, when a company representative signs a check in an unfamiliar way, is it acceptable to cash?
First things first, the Model Uniform Commercial Code (UCC) sections will be used as a reference in this blog. Keep in mind that each state adopts its own version of the UCC. Some states UCC might be identical to the Model UCC or may have language that changes certain responsibilities of the parties from those contained in the model version.
While the Model UCC is very helpful standard in understanding how negotiable instruments work, for more accurate interpretations concerning UCC issues such as check signing, your credit union should examine acceptable check signatures under your state's own version of the UCC. Also be mindful that other laws may additionally affect check collection and payment, such as Regulation CC or other Federal Reserve rules, so multiple sources may need to be reviewed by outside counsel. Further, note that your credit union’s policies and contracts might address check cashing signatures, as well.
The Model UCC definition of signature includes more than just a generic handwritten signature, i.e., your “John Hancock.” According to §1- 201(37) and 3-401(b), a signature may be made manually or by means of a device or machine (including a stamp or electronic signature) and by the use of any name, word, mark or symbol executed with the intent to authenticate the item. In addition to the person’s own signature, the person can be represented by an authorized agent or representative who signs the item, which binds the represented person to the same extent as if it were a simple contract.
Intent at the time the signature is made seems to be the turning point of whether it is acceptable to cash a check signed (or stamped) with an “X.” Based upon the language of the Model UCC, the signature can be made by electronic signature and the use of any name executed with the intent to authenticate the item.
So, by way of an example: Bart Simpson (a real person) signs a check made out to Lisa Simpson (also a real person), with a pre-stamped signature stating: “DON’T HAVE A COW, MAN!” While this is indeed a very odd signature, which appears to be either a joke or potentially fraudulent, the credit union may still find it acceptable to cash this wasteful 1 cent check. That is, if Bart Simpson intended to authenticate the check and other federal/state laws are not violated.
One of the ways a credit union could verify intent of the signer is to check its account agreement (or policies). If the member or business has already agreed to sign its checks with “DON’T HAVE A COW, MAN,” then the risk of cashing a fraudulent check is not as high. If the language of the account agreement (or credit union policy) does not speak to how the member or authorized signer should authenticate a check, then a quick call to the member to verify the check may help alleviate any doubts.
In short, if your member intends to authenticate the check or negotiable instrument (absent a violation of relevant law), using any mark, symbol, or trade name, your credit union may find that acceptable to cash. If you are unsure if a signature is written by your member (or authorized signer), verify the check with your member. Lastly, your credit union’s state laws, policies, and agreements could address acceptable signature authentication for check-cashing purposes. Developing policies with local counsel to address this issue may enhance your member service.
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About the Author
JaMonika Williams joined NAFCU as regulatory compliance counsel in July 2022. In this role, JaMonika assists credit unions with a variety of compliance issues.