Yes, a bank may shorten the notification period for unauthorized check transactions. The UCC requires customers to notify a bank regarding an unauthorized check with “reasonable promptness” and permits banks to narrow the definition of “reasonable promptness” in their deposit account agreements.

There are several court cases in Illinois and in other states in which the court has upheld varying notification windows as reasonable. For example, an Illinois court has upheld a thirty-day notification window, and a Wisconsin court has upheld an even shorter fourteen-day notification window. Both cases dealt with consumer deposit accounts; for commercial deposit accounts, we think you would have even stronger arguments supporting a shorter notification window in the account agreement.

For resources related to our guidance, please see:

• UCC, 810 ILCS 5/4-406(c) (“If a bank sends or makes available a statement of account or items pursuant to subsection (a), the customer must exercise reasonable promptness in examining the statement or the items to determine whether any payment was not authorized because of an alteration of an item or because a purported signature by or on behalf of the customer was not authorized. . . .”)

• UCC, 810 ILCS 5/4-103(a) (“The effect of the provisions of this Article may be varied by agreement, but the parties to the agreement cannot disclaim a bank's responsibility for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack or failure. However, the parties may determine by agreement the standards by which the bank's responsibility is to be measured if those standards are not manifestly unreasonable.”)

• Napleton v. Great Lakes Bank, N.A., 945 N.E.2d 111, 118–19 (1st Dist. 2011) (“Here, the parties agreed pursuant to the terms of the Account Agreement that plaintiff was required to timely discover any unauthorized transactions and notify the bank in order to preserve his claim. . . . because plaintiff failed to notify the bank of the forgery within 30 days, the trial court did not err in finding that plaintiff had no claim against defendant.”)

• Borowski v. Firstar Bank Milwaukee, N.A., 579 N.W.2d 247 (Wis. Ct. App. 1998) (“The only reported case that we were able to find that addresses the precise question at issue here, Parent Teacher Ass’n v. Manufacturers Hanover Trust Co., 524 N.Y.S.2d 336, 341-342 (N.Y. Civ. Ct. 1988), approved a reduction from one year to fourteen days without regard to whether or not the bank was negligent. . . . Based on the foregoing, we conclude that the fourteen-day period is not ‘manifestly unreasonable’ . . . .”)