Why do credit unions frequently refuse to cash third party checks?
A. If a check is paid directly to you by the drawer, and you take it to your credit union, the credit union can verify that the signature on the check endorsing it for cash or deposit is indeed your signature. The credit union has a relationship with you and can make a decision about whether to allow you to cash the check on the spot or require you to deposit it and wait till it clears before you can withdraw cash against it. Under the Uniform Commercial Code, the law governing the rights of banks and credit unions and their customers, the last endorser on the check guarantees that all prior endorsements are genuine. In the case of a third party check, you as the last endorser therefore guarantee to your bank that the drawer’s signature and the payee’s signature endorsing it to you are genuine. If one of these signatures is not genuine, and your credit union allowed you to cash the check, the credit union is stuck and is legally permitted to charge you for the amount it paid you. Needl
