A person purporting to be Ronald Wilder phoned American General Financial Services (American) requesting a loan. Wilder’s credit was excellent, so American said it needed his prior two years’ tax

A person purporting to be Ronald Wilder phoned American General Financial Services (American) requesting a loan. Wilder’s credit was excellent, so American said it needed his prior two years’ tax returns and asked what he wanted to do with the loan proceeds. The person said he wanted to renovate property he owned and faxed the tax returns and loan application. An $18,000 loan was approved. At American’s office the person presented a driver’s license with the person’s photo but with Wilder’s information. After signing the loan documents, the person left with a check for $18,000. He went to State Security Check Cashing Inc. (State) and presented the same driver’s license. Considering the amount of the check “large,” State’s employee phoned State’s compliance officer. He told her to verify the date of the check, name of the payee, address of the licensee, loan paperwork, and whether the check matched other checks State had cashed from American. She confirmed these and cashed the check with the officer’s approval. The next business day, American learned of the forgery and stopped payment on the check. State, claiming it was a holder in due course, sued American for payment. American argued that State had not taken the check in good faith. Who should win?


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