Generally, your bank must return a check, including a forged check, by midnight on the next banking day after receiving the check, as required by the Uniform Commercial Code (UCC).

Regulation CC layers on additional requirements and exceptions to the UCC midnight deadline, which are designed to encourage banks to use expeditious means to return checks. In addition to the UCC’s midnight deadline, Regulation CC requires your bank (the payor bank) to return checks such that the depository bank normally would receive the returned check by 4:00 p.m. on the second business day following the banking day on which the check was presented. Under certain circumstances, Regulation CC extends the midnight deadline by one banking day, with longer extensions possible if your bank has used a “highly expeditious means of transportation” for the return (such as a courier service).

We should note that effective January 1, 2018, Regulation CC’s return requirements will be modified to encourage the use of electronic returns (among other considerations). The hour cutoff for returning checks will be moved up to 2:00 p.m. Additionally, if seeking an extension of the midnight deadline, your bank would have to return the check so that the depository bank actually (rather than “normally,” as under the current rule) receives the returned check before closing or 2:00 p.m., whichever is earlier. These amendments also eliminate the “highly expeditious means of transportation” extension of the midnight deadline.

In this case, where several weeks passed before your bank returned the checks, these return deadlines are almost certainly unavailable. Outside of the check return process, your bank still may make a claim against the depository bank under the UCC presentment warranties. When the depository bank presented the check to your bank, it made three presentment warranties: (1) there are no unauthorized or missing endorsements on the check, (2) the check has not been altered, and (3) the depository bank did not know that the drawer’s signature was forged. Here, it is unlikely that the depository bank breached any of these warranties, unless you can prove that it knew that the check was forged when it transferred the check to your bank.

We also note that your bank should assess whether a Suspicious Activity Report should be filed regarding these fraudulent check transactions.

For resources related to our guidance, please see:

• Uniform Commercial Code, 810 ILCS 5/4-302(a) (“If an item is presented to and received by a payor bank, the bank is accountable for the amount of: (1) a demand item . . . whether properly payable or not, if the bank . . . does not pay or return the item or send notice of dishonor until after its midnight deadline.”)

• Uniform Commercial Code, 810 ILCS 5/4-104(a)(10) (“‘Midnight deadline’ with respect to a bank is midnight on its next banking day following the banking day on which it receives the relevant item . . . .”)

• Regulation CC, 12 CFR 229.30(c) (“The deadline for return or notice of nonpayment under the U.C.C. or Regulation J (12 CFR part 210), or § 229.36(f)(2) is extended to the time of dispatch of such return or notice of nonpayment where a paying bank uses a means of delivery that would ordinarily result in receipt by the bank to which it is sent (1)On or before the receiving bank’s next banking day following the otherwise applicable deadline by the earlier of the close of that banking day or a cutoff hour of 2 p.m. or later set by the receiving bank under U.C.C. 4-108, for all deadlines other than those described in paragraph (c)(2) of this section; this deadline is extended further if a paying bank uses a highly expeditious means of transportation, even if this means of transportation would ordinarily result in delivery after the receiving bank’s next cutoff hour or banking day referred to above; . . . .”)

• Regulation CC,12 CFR 229.30(a) (“If a paying bank determines not to pay a check, it shall return the check in an expeditious manner as provided in either paragraph (a)(1) or (a)(2) of this section . . . A paying bank returns a check in an expeditious manner if it sends the returned check in a manner such that the check would normally be received by the depositary bank not later than 4:00 p.m. (local time of the depositary bank) of . . . [t]he second business day following the banking day on which the check was presented to the paying bank, if the paying bank is located in the same check processing region as the depositary bank . . . .”)

• As effective January 1, 2018, Regulation CC, 12 CFR 229.31(b)(1) (“Except as provided in paragraph (d) of this section, if a paying bank determines not to pay a check, it shall return the check in an expeditious manner such that the check would normally be received by the depositary bank not later than 2 p.m. (local time of the depositary bank) on the second business day following the banking day on which the check was presented to the paying bank.”)

• As effective January 1, 2018, Regulation CC, 12 CFR 229.31(g) (“The deadline for return or notice of dishonor or nonpayment under the UCC or Regulation J (12 CFR part 210), or § 229.36(d)(3) and (4) is extended to the time of dispatch of such return or notice if the depositary bank (or the receiving bank, if the depositary bank is unidentifiable) receives the returned check or notice (1) On or before the depositary bank's (or receiving bank's) next banking day following the otherwise applicable deadline by the earlier of the close of that banking day or a cutoff hour of 2 p.m. (local time of the depositary bank or receiving bank) or later set by the depositary bank (or receiving bank) under UCC 4-108. . . .”)

• Uniform Commercial Code, 810 ILCS 5/4-302(b) (“The liability of a payor bank to pay an item pursuant to subsection (a) is subject to defenses based on breach of a presentment warranty (Section 4-208) or proof that the person seeking enforcement of the liability presented or transferred the item for the purpose of defrauding the payor bank.”)

• Uniform Commercial Code, 810 ILCS 5/3-417(a)(1) and 810 ILCS 5/4-208(a)(1) (“If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment, and (ii) a previous transferor of the draft, at the time of transfer, warrant to the drawee that pays or accepts the draft in good faith that: (1) the warrantor is or was, at the time the warrantor transferred the draft, a person entitled to enforce the draft