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Restrictive Endorsement, allowed in your State ?


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Are you considering making a payment to a CA with a Restrictive Endorsement?

Normally you add a section of fine print to the back of the check stating "Cashing of this check constitutes your acceptance of my restricted offer. Any and all future claims for this debt are null". You can also add a notation on the front that says "restricted endorsement: cashing constitutes agreement"

By going to the below listed link, and finding your state, and Consolidated Laws, and looking under the UCC( Uniform Commercial Code), Transfer/Negotiation - you will find the Section for "Restrictive Endorsement", and determine if your State allows checks with a Restrictive Endorsement...

Click Here!

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yes, I believe there has to be a dispute on the amount owed also, and it needs to be in writing.

For example, they are saying you owe $200 and you make the amount out for $195 and stipulate this in the letter you send then in advance (CMRRR), so that when they cash it, they are also accepting the new "agreement".

I know California is pretty good about RE. I had a CA explain to me in detail how to do this for a debt I had with them. Instead of putting it on the back though, he told me I could write the info in the "for" line on the front of the money order.

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Incidentally, from the state of TN:

24-7-106. Receipts and releases. —

All receipts, releases, and discharges in writing, whether of a debt of record or a contract under seal, or otherwise, shall have effect according to the intention of the parties thereto. However, the remittance and acceptance of a check or other instrument bearing on its face words that it is payment or satisfaction in full of a debt or obligation shall not be considered conclusive evidence of an intention that the debt or obligation for which the same is given be discharged or released; provided, that the remittee of such instrument tenders back to the remittor the funds represented by such instrument.

[Code 1858, § 3789; Shan., § 5570; Code 1932, § 9741; T.C.A. (orig. ed.), § 24-706; Acts 1983, ch. 456, § 1.]

Can someone translate? =)

Does this part:

"provided, that the remittee of such instrument tenders back to the remittor the funds represented by such instrument."

mean that the CA has to give me the money back if they do not accept it as endorsed?

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Absolutely, make certain there is an acceptable "Accord and Satisifaction" acceptable in your respective state.

Restrictive Endorsement and Accord and Satisfaction walk hand in hand.

Here is some further information... and Notice that some states are already listed as not being acceptable, namely, New York, Ohio, South Dakota, and West Virginia.


So many consumers half heartily fill out sample letters to collectors and collection agencies and find themselves in a whole lot of trouble. Before you begin to delve into "playing lawyer" you had better understand what your goal is and what tool to use. I am going to try and explain the difference between the two most common settlement tactics. Restrictive Endorsements and Accord and Satisfaction. It may sound confusing but basically a restrictive endorsement creates an accord and satisfaction by creating a contract that is binding between two parties but... there can be no accord without satisfaction (meaning the other party needs to accept, not be forced or deceived). Below are two scenarios to review.

Restrictive Endorsements: purpose and meaning

Before using a restrictive endorsement agreement, check with your State Attorney General, or a local attorney to see if this type of agreement is binding in your state and county. State laws vary.


When a creditor accepts payment with a restrictive endorsement, a legal agreement is binding your creditor to the terms specified on the payment instrument. Why use a restrictive endorsement agreement? Most creditors are happy to receive any form of payment; after all, this is why they are in business. To understand why this method works so well, put yourself in the position of a collection agency or creditor who received payment with a restrictive endorsement. First, you may be a position to receive a commission for the recovered funds. Second, you may feel no obligation to follow through with the terms in the letter. Odds are, your payment will be accepted without any reservations. In some states, a restrictive endorsement may not hold up. I.E.:creditor had the right to full funds and was cashing the payment that you owed. It is always best to send the agreement first, give the creditor time to object and then send your payment with a copy of the first letter. Do not send payments to lock boxes. Those will be processed as usual. Send it directly to the credit manager.

When to use a restrictive endorsement agreement?

As a general rule, mortgage lenders will not honor this form of payment nor will most creditors for secured debts where there is collateral involved. Unsecured debts are usually the target. This method is generally most effective with older accounts that have been turned over to collections. It will work however, with newer accounts if the collector "perceives" the account may be difficult to recover. Collection agencies only profit if they have successfully collected funds for their client. If your account has already been turned over for collections, the original creditor was unsuccessful after sending a series of demand letters, if the account is older than one year, your creditor "wrote" off the balance as bad debt and reported your debt as a financial loss. In this scenario, a restrictive endorsement is recommended. Your creditor has lost all hopes of keeping you as a customer and any funds they collect at this stage are considered a different kettle of fish.

The FOLLOWING VERBIAGE MUST BE WRITTEN ON THE ACTUAL PAYMENT INSTRUMENT. Even if you shorten it, make sure the necessary wording of settlement and restrictive are on the back of the check above where the person would endorse it. We recommend a Cashiers Check from your local bank or credit union...as you can have them copy the check after it has been processed and returned to the bank. Keep a copy!!!!


By accepting these funds, you agree this account is paid in full without protest and that you will remove this account with each credit bureau. Your cashing of this check constitutes that you have previously agreed to my offer. No collection activity may be attempted any further from you or your assignees and my credit reports will reflect this change.

By sending a check with this verbiage, you are offering in no uncertain terms to settle the debt and be done with it permanently. If the creditor cashes the check knowing it has a restrictive endorsement on the back, they have to abide by terms. Some creditors may write on the back 'Cashed under protest" so that they can continue to collect the balance. To avoid this, make sure you send an offer letter first and once they agree in writing, you send the check w/wording above. We don't recommend that you arbitrarily send a check like this until you have gotten the creditor to agree prior. Doing so may jeopardize your position. Some courts see a restrictive offer as nothing more than paying part of a debt you owe while other courts consider for a restrictive offer to be enforceable, there must be an offer, an acceptance of that offer, and some consideration.

Accord and Satisfaction

A term of contract law by which one party, having complied with its obligation under a contract, accepts some type of compensation from the other party (usually money and of a lesser value) in lieu of enforcing the contract and holding the other party to their obligation. This discharges the contract. The definition cited by lawyers is usually that found in British Russian Gazette & Trade Outlook Ltd. v. Associated Newspapers Ltd. (1933) 2 K.B. 616: "Accord and satisfaction is the purchase of a release from an obligation arising under contract or tort by means of any valuable consideration, not being the actual performance of the obligation itself. The accord is the agreement by which the obligation is discharged. The satisfaction is the consideration which makes the agreement operative."

In the settlement of a legal dispute, the agreement to settle is called an "accord." Actual exchange of the consideration is called a "satisfaction." Thus, Accord & Satisfaction. Under the common law, the creditor has two options: reject the offer or cash the check. The full settlement check constitutes an offer and when the creditor cashes the "full payment" check concerning a bona fide dispute of an unliquidated or disputed claim, the debtor is released from any further legal obligation under the common law. A creditor cannot avoid an accord and satisfaction by reciting a reservation of rights on the reverse side of the check, or by crossing out the "paid-in-full" language on the check.

Nevertheless, a number of states, including New York, Ohio, South Dakota and West Virginia, had rejected this position. These courts hold that the common law rule places the creditor in a disadvantageous position and permits the debtor to practice extortion. When a check for a lesser amount marked "paid-in-full" is submitted to a creditor and the debt is not disputed, deposit of the check by the creditor will not discharge the debt. But what happens if the debtor claims that the account was disputed and someone else in the corporation knew about the dispute? This situation often arises where a debtor mails a check to a large corporation and the department receiving the check is different from the department which charged the debtor.

This dilemma is addressed by U.C.C. section 3-311, which clearly states that a debtor cannot use a paid-in-full check to discharge a claim if:

1. the payee is an organization.

2. if the organization has communicated to the other party that an offer of full payment is to be sent to a particular person, office, or place.

3. the check was not received by the designated person, office, or place.

The "paid-in-full" check is treated as a partial payment and not an offer to settle unless it meets the above requirements. Unfortunately this rule is not absolute, because the debt will be settled if the recipient of the check had knowledge of the dispute. The purpose of the section is to prevent an accord and satisfaction from taking place when a check is sent to an automated collection center or a large corporation and is cashed without inspection. This section Copyright © 2001, 2002 Winston & Winston P.C.

Bottom line?

An Accord and Satisfaction and Restrictive Endorsement are considered one in the same by many because the end result is usually... to pay less than the full amount and...one hopes to create an accord and satisfaction through their restrictive endorsement. Be careful what you read and study many web sites for help. You can also ask the FTC what the difference is and get an answer via email or regular mail. Bottom line is do your homework with A&S and RE's and remember state laws vary. What may work in one state may not work in another.

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