RESTRICTIVE ENDORSEMENTS AND

[Why Chat]

Some years ago there were several credit repair scams being promulgated that told people that there was a "legal" way to reduce their debts. They took fees for sending out small payments with accompanying letters and with "restrictive endorsements" on the checks. They were put out of business, MANY of the victims posted on the old "Cardreport" forum and Creditnet.

 

The TRUTH of the matter is that the ONLY way to use a restrictive endorsement to force a creditor to take a lesser amount is to FIRST send them an accord and satisfaction letter. Please note the word ACCORD, that means AGREEMENT. If they sign the letter and return it to the debtor, the debtor can THEN issue a check with a restrictive endorsement that refers to the SIGNED AND AGREED TO "accord and satisfaction".

 

To send a check out for a lesser amount than you are being billed for, with a "restrictive endorsement" and an accompanying letter will do NOTHING except have the $$ you paid applied to your account.

 

Here are some excerpted case-law comments, the last of which is in FLORIDA.

 

"An accord and satisfaction is an agreement reached between competent parties regarding payment of a debt the amount of which is in dispute. Limbaugh v. Merrill Lynch, Pierce, Fenner & Smith, 732 F.2d 859, 861 (11th Cir. 1984); O'Neal v. O'Neal, 284 Ala. 661, 227 So. 2d 430 (1969). There can be no accord and satisfaction 'without the intentional relinquishment of a known right.' Id. at 663, 227 So. 2d at 431.

 

 

 

 

"Like any other contract, a valid accord and satisfaction requires consideration and a meeting of the minds regarding the subject matter. Bank Indep. v. Byars, 538 So. 2d 432, 435 (Ala. 1988); Farmers & Merchants Bank of Centre v. Hancock, 506 So. 2d 305, 310 (Ala. 1987); Austin v. Cox, 492 So. 2d 1021, 1022 (Ala. 1986); Ray v. Alabama Central Credit Union,472 So. 2d 1012, 1014 (Ala. 1985)."

 

An accord and satisfaction would not result from payment of the check because of the absence of good faith by the payor in making the tender. Another example of lack of good faith is found in the practice of some business debtors in routinely printing full satisfaction language on their check stocks so that all or a large part of the debts of the debtor are paid by checks bearing the full satisfaction language, whether or not there is any dispute with the creditor.

 

Under such a practice the claimant cannot be sure whether a tender in full satisfaction is or is not being made.Use of a check on which full satisfaction language was affixed routinely pursuant to such a business practice may prevent an accord and satisfaction on the ground that the check was not tendered in good faith under subsection (a)(i)."

 

 

B. Accord and Satisfaction( From Florida Caselaw)

 

18

"An accord and satisfaction is the substitution of a new agreement between the parties in satisfaction of a former one,and arises when the agreement is executed and satisfaction has been made."

10 Fla.Jur.2d

 

Compromise, Accord, and Release

Sec. 1 (1979) (footnotes omitted). This affirmative defense involves a two-step approach. First, the parties must have fully intended to settle an existing dispute by forming a superseding agreement. Second, the parties must prove actual performance of the new agreement to satisfy the prior obligation. Gaslin v. Racal Data Communications, Inc., 468 So.2d 390,392 (Fla.Dist.Ct.App.1985).

 

In short, under Florida law an accord and satisfaction must contain the elements of a normal

contract, which include offer, acceptance, and consideration. See 10 Fla.Jur.2d Compromise, Accord, and Release Sec.4 (1979).

[HereKittyKitty]

Thanks, WC -- perfect timing, as usual.

[sedric1]

hah- perfect timing is right. thanks for the info.

i think im back to the drawing board.

[flacorps]

The cited case law entirely pre-dates UCC 3-311, which has been enacted in most states, and which requires no meeting of the minds but which does have a number of technical requirements.

 

Anyone who wants to use it needs to determine which version of it has been enacted in their state (there has been some tinkering, official and unofficial), and ideally would also take a look at both the official commentary to the ALI's formulation of the model statute and the existing case law in their state.

 

In an appropriate circumstance, no letter is even needed. Just a check with the proper notation and 90 days to allow that payment to "season".

 

The scammers who were sending a flat 11% (or whatever percentage) on each and every one of the debtor's debts willy-nilly of course never came close to fulfilling the statutory requirements to take advantage of UCC 3-311.

[centex]

It is also a requirement in some, if not all, areas that the check be sent to a designated address that is generally separate and distinct from the regular payment addresses...

[flacorps]

It is also a requirement in some, if not all, areas that the check be sent to a designated address that is generally separate and distinct from the regular payment addresses...

 

A quick gloss on this ... the payment must go to the designated address or be directed to a particular person if the creditor has provided notice to the debtor that A&S payments must go there. Otherwise, the other addresses to which payments may be sent are fair game.

 

You can count on most major CC issuers to have the separate A&S address worked into their agreements.

 

Many, many other creditors will omit to use such a provision.

[flacorps]

I just want to add that the UCC 3-311 check is a powerful technique with a broad ambit, and it bypasses a lot of rather chaotic case law that accreted in most states prior to the UCC adding the provision in the early to mid '90s.

 

Properly used it will allow the honest, overcharged debtor to potentially save thousands upon thousands of dollars.

 

It could also be misused to improperly deny a creditor a large chunk of their debt because it provides a substantial affirmative defense that a court could accept on fairly thin factual evidence. Faced with launching a case that already has a hole in the hull, many creditors might just punt.

 

If the latter cases start to outnumber the former, no doubt the committee will revisit the provision and the states will be urged to adopt a less liberal formulation.

[sedric1]

The way I did this was (with very minimal knowledge i may add),

 

1. i mailed the executive of the bank with the envelope addressed to him.

2. i enclosed a check that stated on the front - not to cash unless in agreement with my enclosed letter

3. addressed my entire dispute with the debt and enclosed information at the end that stated what the purpose of the check was / and again not to cash unless in full agreement with a settlement / deletion.

 

I'm pretty sure I dont have much of a case for more than a phone argument, but i will continue searching the specific laws of missouri and north carolina just in case im wrong.

[flacorps]

sedric1, it's better than just doing nothing.

[edm]

How does this work for other states? Texas? Calif?

[sedric1]

sedric1, it's better than just doing nothing.

 

 

yea it was worth a shot still so no regrets from me. the debt is basically sitting right now because the CA that was collecting was DVed and settled out of the picture. the OC is basically sitting on the debt and not sure the status of the accounts.

every single time i call (which is several times a week now), the first question i ask them is "what is the current status of the debt"? and i get all sorts of answers. two things remains the same though.. they dont seem to want to settle any less than 40% (no deletion included), and I have no intentions of accepting that.

I still plan to mail a letter to the OC to initiate my argument with them.

It reads "Thank you for accepting the terms of my attached letter. Per the check that was cashed, i anxiously await a confirmation letter and full deletion..."

 

It seems that there is an intention of sending this account to a CA (a 10 day process according to them- which has now turned into 3 months). The way I see it, the next CA wont be able to validate either - seeing that the OC cant even get my basic account details straight on a routine phone call.

[flacorps]

Texas has it:

http://tlo2.tlc.state.tx.us/statutes/docs/...00.htm#3.311.00

 

So does Cali:

 

3311. (a) If a person against whom a claim is asserted proves that

(1) that person in good faith tendered an instrument to the claimant

as full satisfaction of the claim, (2) the amount of the claim was

unliquidated or subject to a bona fide dispute, and (3) the claimant

obtained payment of the instrument, the following subdivisions apply.

 

( Unless subdivision © applies, the claim is discharged if the

person against whom the claim is asserted proves that the instrument

or an accompanying written communication contained a conspicuous

statement to the effect that the instrument was tendered as full

satisfaction of the claim.

© Subject to subdivision (d), a claim is not discharged under

subdivision ( if either of the following applies:

(1) The claimant, if an organization, proves that (A) within a

reasonable time before the tender, the claimant sent a conspicuous

statement to the person against whom the claim is asserted that

communications concerning disputed debts, including an instrument

tendered as full satisfaction of a debt, are to be sent to a

designated person, office, or place, and ( the instrument or

accompanying communication was not received by that designated

person, office, or place.

(2) The claimant, whether or not an organization, proves that

within 90 days after payment of the instrument, the claimant tendered

repayment of the amount of the instrument to the person against whom

the claim is asserted. This paragraph does not apply if the

claimant is an organization that sent a statement complying with

subparagraph (A) of paragraph (1).

(d) A claim is discharged if the person against whom the claim is

asserted proves that within a reasonable time before collection of

the instrument was initiated, the claimant, or an agent of the

claimant having direct responsibility with respect to the disputed

obligation, knew that the instrument was tendered in full

satisfaction of the claim.

Edited April 15, 2008 by flacorps

[flacorps]

A gloss is needed with respect to California. As of the late '90s, there was a problem in that a conflicting statute had been interpreted to create problems in the application of UCC 3-311 (in laymen's terms, it didn't always work in situations the framers had envisioned it working)

 

http://llr.lls.edu/volumes/v33-issue1/hull.pdf

 

I do not know whether the situation in California is different today. Perhaps a California expert will chime in.

[Andromeda76]

Thanks Whychat! I am considering using this method with a CA.

[flacorps]

Thanks Whychat! I am considering using this method with a CA.

 

Why Chat is not a believer in the accord & satisfaction check.

 

I am a believer (2 successes with no further payments, one settlement that required further payment, but still w-a-a-a-y below what the other guy originally wanted, and one in the hopper now that I'm pretty confident will turn out my way).

 

Keep in mind that UCC 3-311 is not a get-out-of-jail-free card ... there are specific factual and technical requirements that must be met, and it is not guaranteed that if it is enacted in a particular state that its provisions will necessarily dominate other state statutes that may be on the books, or that the case law will be favorable to its use in the manner intended by the drafters. (laymen's translation: Your Mileage May Vary)

[Andromeda76]

Thanks Whychat! I am considering using this method with a CA.

 

Why Chat is not a believer in the accord & satisfaction check.

 

I am a believer (2 successes with no further payments, one settlement that required further payment, but still w-a-a-a-y below what the other guy originally wanted, and one in the hopper now that I'm pretty confident will turn out my way).

 

Keep in mind that UCC 3-311 is not a get-out-of-jail-free card ... there are specific factual and technical requirements that must be met, and it is not guaranteed that if it is enacted in a particular state that its provisions will necessarily dominate other state statutes that may be on the books, or that the case law will be favorable to its use in the manner intended by the drafters. (laymen's translation: Your Mileage May Vary)

 

 

OOOPPPPSSSS!

 

I did some research on this a few weeks ago, I understand the pros and cons. Accord and Satisfaction method would actually work for me in my situation.

 

Congrats on your success thus far!

[chriswufgator]

Thanks Whychat! I am considering using this method with a CA.

 

Why Chat is not a believer in the accord & satisfaction check.

 

I am a believer (2 successes with no further payments, one settlement that required further payment, but still w-a-a-a-y below what the other guy originally wanted, and one in the hopper now that I'm pretty confident will turn out my way).

 

Keep in mind that UCC 3-311 is not a get-out-of-jail-free card ... there are specific factual and technical requirements that must be met, and it is not guaranteed that if it is enacted in a particular state that its provisions will necessarily dominate other state statutes that may be on the books, or that the case law will be favorable to its use in the manner intended by the drafters. (laymen's translation: Your Mileage May Vary)

 

I guess his form letters may be helpful to some, but WhyChat gets pretty myopic with his legal viewpoints. They are maybe 80% there, but still always seem to have something missing.

 

FWIW, you're not the only one who's noticed this. I have tried to correct him before, but he has convinced himself I'm some random salamander to avoid addressing the issue. I've seen centex correct him before as well. IMO, anyone taking contract advice from him should do so with a grain of salt.

[flacorps]

FWIW, you're not the only one who's noticed this. I have tried to correct him before, but he has convinced himself I'm some random salamander to avoid addressing the issue. I've seen centex correct him before as well. IMO, anyone taking contract advice from him should do so with a grain of salt.

 

I value Why Chat's input even when she disagrees with me. Patton said if everyone is thinking the same than someone isn't thinking.

 

Even where an unaltered version of UCC 3-311 unquestionably rules the statutory roost and case law is in good alignment with its text, the following problems can crop up:

 

1. Judge can say the amount sent or the way in which it was sent negates good faith (and the burden is on the debtor to prove good faith).

 

2. Judge could say that the dispute wasn't bona fide.

 

3. Judge could find that the writing on the check wasn't conspicuous enough.

 

So even if you arguably meet all the technical requirements, the judge has three safety valves that you pretty much can't do anything about except by sending as much money as you can, making the basis for your reduction as clear as possible and something that is not done at your whim (and also by disputing earlier rather than later), and making sure that your text on your check is hard to miss.

 

Appellate courts tend not to disturb judges' findings of fact unless they are clearly dopey.

[chriswufgator]

FWIW, you're not the only one who's noticed this. I have tried to correct him before, but he has convinced himself I'm some random salamander to avoid addressing the issue. I've seen centex correct him before as well. IMO, anyone taking contract advice from him should do so with a grain of salt.

 

I value Why Chat's input even when she disagrees with me. Patton said if everyone is thinking the same than someone isn't thinking.

 

Even where an unaltered version of UCC 3-311 unquestionably rules the statutory roost and case law is in good alignment with its text, the following problems can crop up:

 

1. Judge can say the amount sent or the way in which it was sent negates good faith (and the burden is on the debtor to prove good faith).

 

2. Judge could say that the dispute wasn't bona fide.

 

3. Judge could find that the writing on the check wasn't conspicuous enough.

 

So even if you arguably meet all the technical requirements, the judge has three safety valves that you pretty much can't do anything about except by sending as much money as you can, making the basis for your reduction as clear as possible and something that is not done at your whim (and also by disputing earlier rather than later), and making sure that your text on your check is hard to miss.

 

Appellate courts tend not to disturb judges' findings of fact unless they are clearly dopey.

 

That's still a far cry from making absolute statements that restrictive endorsements don't work, wouldn't you say?

[flacorps]

That's still a far cry from making absolute statements that restrictive endorsements don't work, wouldn't you say?

 

A&S checks are controversial, and the commentators argue that UCC 3-311 doesn't go far enough to make them airtight as an appropriate tool for an honest debtor to employ.

 

Why Chat states a rule of thumb.

 

I'm pointing out a path through a very tricky maze ... one that it may be very difficult for a consumer to negotiate successfully ... meanwhile even a flawed effort may look imposing enough that it gives the consumer a good result.

 

YMMV

[Andromeda76]

Flacorps,

 

I'm familiar with the A&S method, especially for my state (Illinois) and the CA's state (Florida). But I'm having a hard time determining who would you send this too?

 

I am thinking along the lines, of a person who actually handles your account or a PR person. Am I correct? Or in this situation it wouldn't matter?

[flacorps]

Flacorps,

 

I'm familiar with the A&S method, especially for my state (Illinois) and the CA's state (Florida). But I'm having a hard time determining who would you send this too?

 

I am thinking along the lines, of a person who actually handles your account or a PR person. Am I correct? Or in this situation it wouldn't matter?

 

Assuming a reasonably intact version of UCC 3-311 was enacted in IL and there are no bizarre interpretations of it in case law, you need to look at the agreement that controls the debt. It may have a specific address for A&S checks that you must use (ignoring the CA, if that's the case). Or such a notation may have been on an invoice.

 

If there's no such place designated, any payment address (at the OC or CA) is fair game.

[Andromeda76]

Assuming a reasonably intact version of UCC 3-311 was enacted in IL and there are no bizarre interpretations of it in case law, you need to look at the agreement that controls the debt. It may have a specific address for A&S checks that you must use (ignoring the CA, if that's the case). Or such a notation may have been on an invoice.

 

If there's no such place designated, any payment address (at the OC or CA) is fair game.

 

 

Cool. Nope, no documentation that states that. Illinois has no weird interpretation of it in case law, the cases that I were able to find the judge agreed with the debtor.

 

I already sent a PFD that received no response yet (I'm waiting to July 2). Then I'm going to send my A&S letter with the check.

 

Thanks!

[chriswufgator]

That's still a far cry from making absolute statements that restrictive endorsements don't work, wouldn't you say?

 

A&S checks are controversial, and the commentators argue that UCC 3-311 doesn't go far enough to make them airtight as an appropriate tool for an honest debtor to employ.

 

Why Chat states a rule of thumb.

 

I'm pointing out a path through a very tricky maze ... one that it may be very difficult for a consumer to negotiate successfully ... meanwhile even a flawed effort may look imposing enough that it gives the consumer a good result.

 

YMMV

 

If you really get right down to it, WhyChat is stating more than a rule of thumb...he's stating a legal opinion that restrictive endorsements aren't valid.

 

I know for a fact that this isn't the case here in FL, notwithstanding the caption from a 30-year old case that he posted in this thread, and I suspect the same holds true for many other states as well. Pretty much everything in the law is a tricky maze, that's not a particularly legitimate excuse for doling out inaccurate info.

[edm]

Even in the excellent OP point: it is important to have a bona fide dispute. So you cannot agree that the creditor prior figurses are correct ---in fact it seems the safest course to repeatedly claim that it is not--- and then just send a lower amount of check as settlement.