A third party check is one in which the party that wrote the check, the  party that is the payee on the check, and the party that is negotiating the check (depositing or cashing, are  different parties or individuals).  The third party check is in written to the name of one person, but it is subsequently cashed or deposited into the account of another.  In order to have the check written in the name of one person and cashed or deposited into the account of another, the checks is essentially endorsed twice.  Because the person cashing or depositing the check is neither the maker nor the original endorser of the check, this is considered a third party check.

An example of a third party check is one that drawn on ABC Bank and made payable to John Smith, who endorses the check and gives it to Joanna Brown, who then endorses the check for deposit to her account.

Unfortunately for consumers that have or use a third party check will find that many banks will not accept third party checks for deposit.  There is no law that requires a bank to accept third party checks, in fact, the Uniform Commercial Code allows for the transfer of a check to a new owner.  However, most businesses and banks do not accept these checks and therefore third party checks are fairly uncommon.

Banks set their own policy on how and whether they will accept a third party check.  With multiple endorsements on the check, the bank usually has no way to verify the first endorsement and therefore will generally refuse to accept these checks to be cashed or deposited.  If the bank does accept a third party check, the bank may require the payee to be present to verify the payee’s identity and signature.

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