Restrictive Endorsements

Restrictive endorsement refers to adding a fine print at the back of the check with the comment ???cashing of this check refers to acceptance of my restricted offer. Therefore all future claims made on this debt will become null.??? You can also specify ???restricted endorsement: cashing constitutes endorsement' at the front of the check. It is better to first inform the creditor or the collection agency about this offer and then keep a follow up after 20 days and ultimately pay it off. You will know the reactions from your lenders during this gap.

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Thanks so much. This at least gives me other options.
I hope someone else uses your reply to help them.

Wizeone, it's nice that you will be able to use this reply for good use. Any creditor or collection agency must honor the settlement deal if the restrictive endorsement is written on the check. Be sure to send your letters through certified mail with return receipt requested. As I always say, keep all papers documented in a file for records. You will be able to prove your part of the story if there is a requirement at the later stage.

David,

If I was to settle on a credit card with a balance of 706.00 and offered 1/2, and used the above letter and wrote on the check this payment constitutes paid in full, and if you cash this check, you are accepting payment in full, do they actually have to accept it? I know if you settle, they report you to the IRS and you get a 1099 form to file with your taxes, because good ole Uncle Sam considers it income.

Brat

It depends on the state laws because not all the states will offer this restrictive endorsement. It can also happen that some collection agency will cash the check and will still keep collecting on the amount. Read your state and creditors' state UCC code to avoid this pitfall and know the legal procedure. It is also necessary to read the terms and conditions in the contract because most of the creditors mention in the beginning that they won't accept any reduced payoff and restricted endorsement. It might go against you if you write such check knowing the fact that it is not mentioned in the contract.

Also, if restricted endorsements are applicable in your state, do not send these offers in lockboxes because there are chances that they will be left unattended for most of the time.

Help, I can't find if restricted endorsements are applicable in Ohio.

Nat,

You can contact Attorney General's Office in Ohio to verify the state laws regarding restrictive endorsement. Here is the website of Ohio Attorney General, visit them for more help-

http://www.ag.state.oh.us/

Generally speaking, a restrictive endorsement is not binding. The endorser is in control of his own endorsement and can simply cross out the restrictive language if he wishes. There is some case law that indicates that doing so, and then cashing the check may constitute fraud, but you want a legally binding accord and satisfaction, not an opportunity for a new lawsuit.

The Uniform Commercial Code contains a provision called "accord and satisfaction by instrument". I suggest you look up that entry in the state code where you live (it would probably be wise to look it up for the state where the other party is located, too, if different), to see what you've got to do. The UCC has been enacted in all 50 states, even Louisianna (which resisted for the longest time, as the UCC was not part of the Code Napolean), but there are some variations from state to state. The most important thing to watch out for is the address to which you have to send the check. The restrictive endorsement / "paid in full" memo is NOT EFFECTIVE if you send it to the wrong address. Check the statute.