We can charge up to three fees when a check is dishonored: (1) a returned deposit fee, (2) a redeposit fee, charged when the customer deposits the same check a second time, and (3) a second returned deposit fee if the redeposited check is dishonored a second time. Does Illinois law limit these fees for business or consumer customers? We charge the redeposit fee for business customers whether or not the check ends up being dishonored a second time.

Apr 1, 2019

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With respect to your returned deposit fees, Section 3-806 of the Illinois Uniform Commercial Code (Illinois UCC) limits them to $4.50 for commercial accounts, but not for consumer accounts. Section 3-806 expressly excludes “non-commercial checking or other non-commercial accounts,” which includes consumer accounts, from this limitation.

Similarly, in our view, you may charge a second returned deposit fee if a customer deposits the check a second time and the check is dishonored a second time. The $4.50 limit in Section 3-806 applies when “a check or other draft that is deposited into the account is dishonored upon presentment.” There is no language in this provision which suggests that the limitation can only be applied once when the check has been dishonored a second time.

As to the redeposit fee, there is no provision in the Illinois UCC that prohibits this charge, assuming it is provided for in your account agreement. However, while we see no issue charging this fee when the second deposit is honored, there could be a risk in the case of dishonorment that your business customer would argue that this fee has no purpose other than to cover the cost of returning the check — in which case, combined with the returned deposit fee, it would be deemed to exceed the statutory limit of $4.50. As this statutory limit is a nonuniform provision in the Illinois UCC that is found in only a handful of states, we have found no cases, commentary or other guidance that is dispositive of this question.

For resources related to our guidance, please see:

Illinois UCC, 810 ILCS 5/3-806 (“A fee or charge not to exceed $4.50 may be assessed to any person or owner of a commercial checking account or other similar commercial account where a check or other draft that is deposited into the account is dishonored upon presentment because of insufficient funds or because the drawer does not have an account with the drawee; provided, however, that, the limitation on the fee or charge specified in this paragraph does not apply to any fee or charge assessed to any bank or other depository institution or to any non-commercial checking account or other similar non-commercial account.”)

Illinois Banking Act, 205 ILCS 5/5e(b) (“The establishment of account service charges and the amounts of the charges not otherwise limited or prescribed by law is a business decision to be made by a bank according to prudent business judgment and safe and sound operating standards.”)