LEGAL Q&A 46 DECEMBER 2025 www.goodnewsfl.org Good News • South Florida Edition As if individuals and small businesses don’t have enough scams to worry about, an oldie-but-goodie is increasingly rearing its ugly head: the restrictive endorsement, by which debtors attempt to manipulate the check payment process to slip free of money they owe you or your company. Let’s delve into the tactic and how to avoid getting tricked by it: Bill Davell: So what is a “restrictive endorsement?” Charles Tatelbaum: A “restrictive endorsement” governs the conditions in which a check is honored – an innocent form is the “for deposit only” restriction to protect the instruments from getting into the wrong hands. But another version is a tactic by which someone who owes you money – and disputes the debt – sends a check for less than the full amount owed, marking it “paid in full” or “payment in full.” Under a law that has been on the books since 1966, depositing that check may legally constitute “accord and satisfaction” – meaning that you, as the creditor, have (perhaps unwittingly) “accepted” the reduced payment as full and final settlement of the debt. BD: Why are restrictive endorsements such a big problem for small businesses? CT: First of all, because we’re seeing reports that this deceptive practice is on the rise, particularly among small and medium-sized businesses facing an economic squeeze. And with many economists forecasting a slowdown, the frequency of these schemes is expected to increase even further – a concern especially for vendors who issue credit for the holiday season, which comes due in early 2026. Second, not all businesses are sufficiently aware of the practice and prepared to deal with it. When they receive a check with a restriction, they don’t note the language or compare it carefully against the outstanding balance – and deposit it anyway. If the debtor can show there was a genuine dispute between the parties predating the check, once that “paid in full” check is deposited, courts typically view the debt as settled, even if the payment was only partial. Courts have even held against payees who crossed out the restriction and deposited the check, requiring specific language to negate the implied consent. The result? The creditor loses the remaining balance and may have no legal recourse. Moreover, businesses that use a lockbox system or other third-party processing service are even more vulnerable. In such arrangements, checks are received, endorsed and deposited in bulk, often by agents who have no knowledge of any disputes or the amounts actually owed. BD: So how do I protect myself or my business? CT: There are a number of options to pursue: 1. Ensure every client or customer contract clearly states that any restrictive endorsements on checks or other payment instruments will be considered invalid and unenforceable. Review all existing agreements to ensure they include such protective language. 2. Emphasize diligence within your accounts receivable or treasury operations. If your company processes high volumes of payments, it’s easy for restrictive endorsements to go unnoticed. Establish procedures for reviewing checks, training staff and flagging any suspicious endorsements before deposit. 3. Be especially vigilant and prepared when a debt dispute arises. In particular, when resolving a large, disputed debt, always consult with qualified legal counsel. Attorneys can help draft settlement communications that include specific disclaimers - preventing counterparties from later claiming that a partial payment was accepted as full satisfaction. Vigilance and sound legal preparation can make the difference between protecting your rights and inadvertently waiving them when debtors attempt to leverage restrictive endorsements to wriggle out of debt. By strengthening contract language, monitoring payment practices and working with qualified counsel, you and your business can stay one step ahead of this growing financial trap. Charles Tatelbaum is a director at Tripp Scott and chairman of the creditors’ rights and bankruptcy practice group. He also practices in the areas of complex business litigation, Uniform Commercial Code transactions, and lender liability litigation. If you have any topics you think may be of interest to our readers, we encourage you to email us at [email protected]. Don’t Fall into the “Restrictive Endorsement” Trap William “Bill” C. Davell Esq. The Good News provides a monthly column with important content having to do with topics from the legal community. This month Bill Davell discusses giving strategies with Charles Tatelbaum, a partner at Tripp Scott.
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