Dictionary of Banking Terms: third party check
third party check
- check or draft payable to someone other than the check writer (the maker of the instrument) or the person who initially negotiates the check by endorsing the back of the instrument.
- check transferred by endorsement exchanging it for cash at a bank teller. The Uniform Commercial Code allows transfer of a check to a new owner any number of times. In practice, however, multiple endorsed checks are uncommon, and banks may be reluctant to accept them without verifying signatures of endorsers.
- payable through draft. Credit Union share draft account often are paid by a commercial bank, which then debits the credit union's account after paying drafts presented for payment, as are drafts that are written against a money market mutual fund.
