Without Recourse

In general: phrase meaning that credit risk, or risk of nonpayment, is assumed by the buyer, rather than the seller, of a promissory note or the holder of a negotiable instrument. In negotiable instruments law, the endorser of a check or draft cannot be held accountable for payment to subsequent holders in the event the Maker or Drawer fails to pay, if the endorsement contains the words "without recourse." Such an endorsement is a qualified endorsement under Article 3 of the Uniform Commercial Code. See also Holder in Due Course.

Banking:

1. Financing arrangement or dealer Floor Planning in which the dealer's liability is limited to warranties about the quality of the installment contracts, which the lender purchases at a discount. Defective installment contracts are not charged back automatically to the dealer. A nonrecourse plan may, however, require the dealer to assist in repossessions and collections of delinquent accounts. See also Nonrecourse Loan.

2. Language in a Secondary Market sale of loans, certificates of deposit, and so on, in which the seller is under no obligation to reimburse the investor for any losses suffered. Transactions where the buyer can ask for compensation are regarded by bank regulators as financings and do not qualify as sales of assets; the loans or deposits involved must remain on the seller's balance sheet.

Finance: financing agreement in Asset-Based Lending common in Factoring whereby the lending institution cannot charge back unpaid invoices caused by the account debtor's financial instability.

Words used in endorsing a Note or bill to denote that the holder is not to look to the debtor personally in the event of nonpayment: the creditor has Recourse only to the property. A form of exculpation. Same as Nonrecourse. See Endorsement, Exculpatory Clause.
Example: Abel insisted that the Mortgage to the seller be without recourse. In the event that the value of the property declines, Abel may lose the property but he loses nothing else.