Drawees, on the other hand, are an entirely different matter. What is a drawee? According to Merriam Webster, a drawee is the party on which an order or bill of exchange is drawn, or the party (as a bank) on which a draft is drawn. According to Investopedia, a drawee is the party directed by the depositor to pay a certain sum of money to the person presenting a check or draft to be paid. This is all well and good with dealing with checks and banks; it's still straightforward. But what about credit card transactions? The credit card company is not drawing on funds deposited with it, unless it's a secured credit card. In that case it is the same as a bank, there is a pool of the person's money available to pay out against any claims against it.

 With an unsecured credit card, there is no pool of the person's money from which the credit card company can draw from. They will advance the money as long as it is not above the person's credit limit, and send the owner of the card a bill for the amount due later. The card owner can then pay the amount in full, pay a partial amount, or pay the minimum amount set by the credit card company. If the billed amount is not paid in total, the card owner is charged interest until the amount is paid off. A credit card is in many ways a loan; the card company advances the money based on the person's credit worthiness. Therefore, a credit card company is not a drawee. It is not drawing against deposited cash, it is extending a loan in anticipation of payment. While it is providing money based on the cardholder's use of the card, the payment will not bounce the way a check bounces when there are insufficient funds. A credit card company can rescind payment only once they have determined something is wrong with the account or the cardholder has not been making payments. 

 While it all sounds straightforward, in reality it is often more complicated. In Coast to Coast Auto Sales, Inc. v. Secura Ins., Inc., 2014 U.S. Dist. LEXIS 5028, Coast to Coast sold a Lexis and a Mercedes at two different times to a particular individual and each vehicle was financed through a different bank. The vehicles were sent to the given address in a different state. There were particular arrangements with the banks; with one bank the vehicle was to be delivered to the buyer at the dealership unless the bank approved a different delivery location, which it didn't. The other agreement required Coast to Coast to perfect the bank's security interest within thirty days, which it did not do. (To perfect a security interest is to notify the world that the secured party has an interest in the debtor's collateral, i.e. the vehicle. When the security interest is perfected, the bank maintains priority of payment above other creditors if the vehicle is repossessed and sold to pay outstanding debts.)  As Coast to Coast breached both sales agreements, it repurchased the contracts. After trying to contact the buyer, Coast to Coast filed a police report; it was discovered that there was no buyer by that name and the driver's license provided at the time of sale was fraudulent. The supposed buyer could not be found, nor were the vehicles recoverable. Coast to Coast then filed a claim under its insurance policy under false pretenses coverage. The carrier denied the claim, claiming that the loss was due to breach of the dealer agreements, and that coverage was excluded for losses in which a bank or other drawee fails to pay. The carrier agreed that the vehicles were taken under false pretenses, but maintained that was not applicable to the claim. The court reviewed policy language and determined that even though the interests had been transferred to the banks, the contracts were given back to Coast to Coast, and Coast to Coast still suffered a loss for the actual cash value of the vehicles due to the original false pretenses of the supposed buyer.  

 In Scott Hoffer Chevrolet-Geo v. Federated Mut. Ins. Co., 1997 U.S. Dist. LEXIS 9430 a sale was made and money was transferred, but the dealer never received the vehicle. When the claim for loss under false pretenses was filed, the carrier denied the claim stating that the insured never actually owned the vehicle since it never had possession of it. The court ruled that the dealership did indeed own the vehicle based on the sales agreement and the payment of funds for the vehicle, even though the vehicle was never seen. The court determined that coverage did apply.

 Titles establish legal ownership of vehicles, as can be seen in Nudi Auto Rv & Boat Sales v. John Deere Ins. Co., 328 Ill. App. 3d 523. In this case, the car dealer Nudi was purchasing vehicles through an intermediary, MK Auto Sales that bought vehicles at auction, sold them to others, then took the money from the sale back to the auction house to pay for the vehicles and receive the titles, which it then passed on to the buyer. Nudi purchased twenty-one vehicles from MK and paid for them; MK promised to have the titles within two weeks. MK went out of business and could not pay the auction houses; the auction houses did not release the titles and the auction houses wanted the vehicles back, forcing Nudi to pay again for vehicles it had already paid MK for. Nudi then filed a claim with its insurer for loss of the vehicles under false pretenses, since MK never had legal title to the vehicles. The carrier denied the claim, stating that MK did not sell vehicles with illegal titles; the sales process is well known in the auto industry and this is not an issue of false pretenses, but collection of funds. The trial court found for the carrier stating that even if MK did not have legal title a sale occurred;  Nudi appealed the case. On appeal, the court agreed with Nudi. The carrier claimed that coverage was intended for situations where a vehicle was lost due to deception and not poor business practices or an ordinary business risk, there must be an intentional act. The court however disagreed, and upon reviewing policy language pointed out sections of the policy that provided coverage for other than deceptive acts, such as confiscation of an auto by a governmental or civil authority. As MK never had the titles, and never paid for the vehicles, MK never had legal title to the vehicles even though the vehicles changed hands and an agreement to provide funds was made. The court found that Nudi had suffered a loss due to false pretenses and that the carrier must cover the losses.

 The understanding of exactly who is a drawee is complicated. In Lakeland Bank v. Wholesale Outlet, Inc., 2008 N.J. Super. Unpub. LEXIS 748 the case involved issues between the insured and the broker selling the policy, and issues surrounding false pretenses, the court also discussed drawees. The trial judge equated customers committing identity theft to a bank or other drawee who fails to pay, thus putting coverage for that loss under the exclusion. Wholesale appealed and argued that the judge misapplied the term drawee; the dishonest customers were not drawees, but drawers, as the terms are normally defined by law. The court agreed, and stated that a drawee is not the person causing a bank or financial institution to draw down funds from an account. Under Uniform Commercial Code, a drawee is a person ordered to make a payment, while the drawer is the person ordering payment. Further, the court quotes Black's Law Dictionary that defines "drawee as the person or entity that a draft is directed to and is requested to pay the amount stated on it." The drawee is the bank directed to pay a sum of money on an instrument, and an instrument is a check, money order, or other such document. The drawer is the one writing the check or draft that can later be presented to the bank for payment.

There are many ways in which fraudulent transactions can take place, and many involve false pretenses. People presenting themselves or a situation as something it isn't, and benefiting from it financially by taking a vehicle without paying for it or other such activity. It is a common enough issue within the world of auto dealers that false pretenses are excluded unless coverage is purchased by endorsement. Even so, sorting out the details can be difficult to understand.