We issued a cashier’s check to a customer for an escrow overage in 2018. The customer has not cashed the check and did not respond to a letter we sent notifying them of the outstanding check in June 2020. The customer also has a demand deposit account (DDA) with a negative balance that we charged off in October 2020. Can we apply the outstanding cashier’s check to the negative balance on the DDA instead of sending it to the State Treasurer? The amount of the check is beneath the threshold requiring customer notice under the Illinois Revised Uniform Unclaimed Property Act (RUUPA).

No, we do not believe you may apply the cashier’s check to the negative balance on the customer’s DDA to avoid remitting it to the Illinois Treasurer. Additionally, although you are not required to notify your customers of abandoned property valued at less than $50, you still must report and remit such property to the Treasurer under the Illinois RUUPA.

We do not recommend unilaterally applying the outstanding cashier’s check to your customer’s negative account balance without their consent or endorsement, which could put your bank at risk of liability for conversion. Illinois courts have stated that banks can be liable for conversion when they assume control, dominion, or ownership over customers’ funds wrongfully and without authorization. Further, if your bank applies the cashier’s check to the negative balance and then later refuses to pay the item when presented by your customer, you could risk a wrongful dishonor claim under the Illinois Uniform Commercial Code for your bank’s failure to pay a properly payable item.

For resources related to our guidance, please see:

Illinois RUUPA, 765 ILCS 1026/15-201 (“Subject to Section 15-210, the following property is presumed abandoned if it is unclaimed by the apparent owner during the period specified below: . . . (3) any instrument on which a financial organization or business association is directly liable, other than a money order, 3 years after issuance.”)

Illinois RUUPA, 765 ILCS 1026/15-501(a) (“[T]he holder of property presumed abandoned shall send to the apparent owner notice by first-class United States mail that complies with Section 15-502 in a format acceptable to the administrator not more than one year nor less than 60 days before filing the report under Section 15-401 if: . . . (2) the value of the property is $50 or more.”)

Illinois RUUPA, 765 ILCS 1026/15-603(a) (“Except as otherwise provided in this Section, on filing a report under Section 15-401, the holder shall pay or deliver to the administrator the property described in the report.”)

Illinois RUUPA, 765 ILCS 1026/15-401(a) (“A holder of property presumed abandoned and subject to the custody of the administrator shall report in a record to the administrator concerning the property. A holder shall report via the internet in a format approved by the administrator, unless the administrator gives a holder specific permission to file a paper report.”)

Cruthis v. Firstar Bank, N.A., 354 Ill.App.3d 1122, 1131 (5th Dist. 2004) (“Conversion is an unauthorized act that deprives a person of his property permanently or for an indefinite time. . . . To prove the tort of conversion, ‘a plaintiff must establish that (1) he has a right to the property; (2) he has an absolute and unconditional right to the immediate possession of the property; (3) he made a demand for possession; and (4) the defendant wrongfully and without authorization assumed control, dominion, or ownership over the property.’ Illinois courts have sustained a plaintiff’s cause of action for conversion against his or her bank.”)

Illinois UCC, 810 ILCS 5/4-402(a) (“Except as otherwise provided in this Article, a payor bank wrongfully dishonors an item if it dishonors an item that is properly payable, but a bank may dishonor an item that would create an overdraft unless it had agreed to pay the overdraft.”)

Illinois UCC, 810 ILCS 5/4-402(b) (“A payor bank is liable to its customer for damages proximately caused by the wrongful dishonor of an item.”)