Who signs institutional checks?
December 11, 2009 1:34 AM   Subscribe

[Bureaucrat-filter]: Who signs checks that are issued by institutions? Who endorses checks that are deposited by institutions?

Let's say I work for Big State U. Because I don't use direct deposit, Big State U issues me a paycheck every two weeks. Whose signature is on the check? Is this a "real signature"-- that is, does the individual whose name is on the line hold any real legal liability, or is she just a stand-in for the institution? If the signature is "printed" on, is it pre-printed before the payee's name is printed?

When I, in turn, write out my check for tuition to Big State U, who deposits the check? Does that person actually have to sign on the back?

And if I want to find published information on check-writing, check-signing, and check-cashing procedures, where should I go? Do banks issue handbooks on this? Sorry, I'm clueless (and curious). Lots of questions here; thanks in advance for your answers.
posted by ms.codex to Work & Money (12 answers total) 4 users marked this as a favorite
The Cheques and Cheque Clearing corp has a lot of information about the history of cheques, how they evolved from bills of exchange.

In the UK, at least, the future of cheques is doubtful, as the payment system may be end of lifed.

To your specific questions:
  • does the individual whose name is on the line hold any real legal liability, or is she just a stand-in for the institution? -- typically he or she will be empowered to sign for the institution and, if operating in accordance with terms and conditions of their position, will be absolved of personal liability (e.g., endorse a cheque for valid business purposes, not a problem even if this purpose is disputed, write a cheque for personal use and there is a problem)
  • When I, in turn, write out my check for tuition to Big State U, who deposits the check? Does that person actually have to sign on the back? -- who deposits the cheque would vary by institution, however a little known fact - deposited cheques don't have to be endorsed
Yeh the mechanics of banking are fascinating, I always tell students at University if they want to make a good living, forget the Capital Markets / high finance track and focus on the nuts and bolts of banking; there will always be a demand for such expertise.

You now cheques in one form of another have been in use since Roman times (in about 100BC they were documented as using instruments called praescriptiones) and were also documented in use by the Persias ("á¹¢akks" ).

Its amazing how long these ideas have been floating about and have been in use. And now? As I mentioned, the future isn't looking too good for the printed cheque.
posted by Mutant at 2:09 AM on December 11, 2009 [1 favorite]

Nobody has to sign anything on the back of any check. I haven't signed the back of a check in twenty years (personal or business, in the UK, USA, Canada and Mexico).

It's a leftover from the days in which notes passed through many hands and few banks ("Here, have these six dollars promised by Steve, and these three promised by Leroy, and some coins from me. Now we're square.") These days, we trust banks more than people, so we think of checks as if they're actually money, but if you endorse a check and hand it to me, that's really just a small leftover of the above. In theory you've said "Okay, I am done with this, and now it's up to someone else to collect on this promise from ISSUER if they like, or trade it for other promises." But unless you're doing that, handing a check off to someone else, there's no good reason to sign the back of one.

Once every couple of years (or once every 30 or 40 visits), some bank teller asks me to sign the back of a check I am depositing. I make a confused face and ask her to explain why, and when she can't, she shrugs and deposits it anyway. If you look at checks you get back from paying utilities and such, you will see they are not signed by anyone, either.

The person who signs the front of a check is pledging the money. Legally and logically, that can be anyone recognized by the institution that's being asked by the writer to back the check. (A check is a promise, still today.) So when the signature is pre-printed or stamped, it's almost always by an articled officer, whether that's a President, a partner, a Chairman or a controller. Anyone whose signature the bank will officially recognize, per the bank's fraud-deterrent policies. This means that effectively it's someone with banking authority for the institution.

Now, in practice, they never check signatures anyway, of course, on the front or the back or anywhere. Nobody does. And I've signed enough checks and credit card slips as "Joe Somebody" in my day to promise that, too. Signature mismatches will show up and be noticed in a criminal investigation or a detailed audit, months or years later... but without one of those happening? Very very unlikely.

(A thousand years ago, I worked in check design and printing for banks, and learned many tiny trivial bits of info about them.)
posted by rokusan at 2:11 AM on December 11, 2009 [1 favorite]

"Bill of exchange" is a much smarter term to use than my lazy-ass "promise"... which I just made up mid-sentence... but that does sound confusingly similar to the slightly different "promissory note". It's probably even better to think of a check as a written instruction to the institution to give this person (or the bearer) $X from those holdings of mine you're keeping for me.

Really, a letter would work just as well:

"Dear BigBank, please give ms.codex $9000 from my account #133093, signed Rokusan."

A bank even today would honor that as a check, though they might charge you a fee for the hassle of making them do something in a non-standard way. This is why you hear stories of checks being written on any old thing, like a soggy bar napkin. Sure, there's a lot that's fancy about checks and their special paper and fancy magnetic ink and such, but none of it is actually mandatory.

Anyway, Mutant's info is accurate and probably less confusing than my sloppily-worded ramble. Typical 5am brain.
posted by rokusan at 2:22 AM on December 11, 2009

Checks are negotiable instruments (really, read that. It's not only fascinating, but will answer most of your questions. Particularly the section on US law and the UCC). Checks need to be signed by the "drawer," i.e. the person making them out, but not by the payee, i.e. the person to whom the check is made out, unless the payee is attempting to negotiate it, i.e. transfer that check to a third party. When the person attempting to deposit a check is not the person to whom the check is made out, signatures become important, but not until then.

So, for example, one time my roommate needed to pay me his share of rent and utilities, but he didn't have a bank account locally, and his only money at the time was a pair of checks sent my his parents. So he endorsed them over to me by signing the back, I deposited them in my account, kept what he owed, and gave him the rest in cash. That's called "negotiation," and it's why checks are technically negotiable instruments, i.e. they can be transfered from person to person as rokusan describes above, though he is correct that hardly anyone does this anymore. Unless you want to negotiate a check in this way, endorsing the back is entirely optional. Some banks tellers will insist, though as has been mentioned above, not many, and most will cave if questioned.

But unless the person making out the check signs it, no one can cash it, not even the person it's made out to. This is an essential element, and why checks from corporations still have someone's "signature" on them.

Which brings us to the subject of corporations and negotiable instruments. Corporations aren't natural persons and can only act through agents. So when you get a check from a corporation, whether that be a university or normal business, the person whose signature is on the front is some officer of that corporation authorized to disburse corporate funds. That person is probably not liable for the check because of the theory of agency. Though it is possible to accidentally assume personal liability if an agent isn't careful, agency law is sufficiently well-established and well known that this doesn't happen very often, and would represent a pretty bone-headed move.

The agent in question needn't actually sign the check in person. A printed signature is just fine, because the law has adapted to permit electronic signatures, i.e. basically manifestation that one intends to adopt the document in question.
posted by valkyryn at 6:02 AM on December 11, 2009

Typically certain officers of a corporation are empowered to do things like sign contracts, checks, etc. At my company, vice presidents are all technically able to do so, but anything over $x requires approval at higher levels. But for the most part, no one actually signs anything. They have a scan of your signature on file and print it on the check along with all the other information.
posted by electroboy at 6:39 AM on December 11, 2009

People are given signing authority on behalf of coprorations. I sign checks (cheques) for my company, but have no relationship to the bank account they come from, and no liability for the company's debts.

Also, most checks/cheques are signed by computers these days.
posted by blue_beetle at 7:22 AM on December 11, 2009

A check signing machine can be found here. I often deposit unendorsed checks for my mother when she is out of town; I just write "deposit only" and the account number in the space for endorsement; many institutions have stamps made for that purpose.
posted by TedW at 7:57 AM on December 11, 2009

I sign checks (cheques) for my company, but have no relationship to the bank account they come from

Hmmm. When I became the treasurer of a non-profit organization I had to go to the bank with the old officer and sign a signature card authorizing me to sign checks for that account. In addition, we had to bring with us some meeting minutes which showed something like "membership of organization ABC voted in CathyG as new treasurer" and a date. The bank made a copy of that and kept it on file.

This was for both a Scout troop and a PTA, at 2 different banks. Both in the state of Texas.

Maybe it's different for large corporations who have a more automated paying system - ours was just like your home checkbook (if anyone still has one).
posted by CathyG at 8:03 AM on December 11, 2009

I work for a big state U. My check gets an auto pen signature of the state treasurer. When we get a check we stamp "For Deposit Only - NAME OF MY DEPARTMENT - NAME OF BIG STATE U." on the back. We then take it to the bursar's office, I have no idea what they do with it then.
posted by nestor_makhno at 8:18 AM on December 11, 2009

CathyG, that was more for the bank's purposes than for any other reason. They just want to be sure that they have a verified list of people who can access the organization's account with them. The law is the same, but the practice for small businesses tends to involve a few extra verification steps because of the nature of the situation.
posted by valkyryn at 11:09 AM on December 11, 2009

I used to work for a payroll company and in our set up documents we had the signatory sign in a box that was scanned into their account. When the paychecks were printed the signature was printed on the check at the same time. It was not a pen and ink "real" signature but it is still negotiable.
posted by magnetsphere at 2:54 PM on December 11, 2009

I used to work for a large scientific laboratory and got reimbursement checks for when I had to travel for work. While I was there, they changed the way they printed the checks--at first, they had a facsimile signature of some person on the signature line (no idea who; I didn't care as long as I got my money), but they later switched to checks with "(Large Scientific) Laboratory" on the signature line, in very neat cursive. I have no idea why, and neither did anyone else there.

Most institutions, when depositing checks, have some kind of stamp for the back of the check that gives the name of the institution, the account to which it's to be deposited, and the phrase "For Deposit Only". That last part is important because it forbids the bank that recieves the check to do anything but credit it to a deposit account. If you just sign the back of the check, it's essentially the same as cash. (Whether any bank would actually give you cash for it is another question.)

It's good practice to write or stamp "For Deposit Only" on the back of a check you want to deposit to make it harder for anyone to do nefarious things with it if they steal it. You can get such stamps at any office-supply store.

Also, definitely read that Wikipedia article to which valkyryn linked; that and the resources cited therein will most likely tell you more than you ever wanted to know.
posted by tellumo at 11:30 AM on December 12, 2009

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