What is a Third Party Check?
A third-party check is written to one person or company, but deposited into the account of another company or person. Banks and other financial institutions may be reluctant to accept theird party checks unless they can verify each endorser's signature.
If a debtor endorsed a check from one of their customers and turned that check over to your company in settlement of an outstanding A/R balance, it would be a third party check. Your company would be the holder in due course of that check, but your company may have trouble depositing it since it is payable to your debtor rather than to your company. For this reason, some creditor companies refuse to accept third party checks for COD payments. Others refuse to accept or deposit them at any time.
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