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How do you verify a letter of credit?

What are the steps in verifying a letter of credit? Example, can I talk to the bank that issued it? For example Bank of America. The seller said there was no way to verify it.

Jill Williamson

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Answers (1)
William A. Price
Business Lawyer
DuPage County, IL

A letter of credit is issued by a bank or other financial institution, so what you need to know is what the bank or other institution is, and what the L of C is for. In international transactions, letters of credit guarantee payment once the buyer accepts delivery (inspection, customs, other conditions have been met and the goods are at the buyer's dock) or some similar condition. Unconditional letters are very rare. If you can verify the institiution issuing the L of C (usually one in your country, as the seller, or cashable through an institution there that has a correspondant relationship with the issuing bank), then verify the terms, and once all are done, you can be paid. Factors buy the letters of credit along with receivables.

Hope this helps,

Bill Price

William A. Price
Attorney at Law

Jul 10, 2011

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