The general rule as to forged checks is that the customer is not liable. 810 ILCS 5/3-401, 3-403Wilder Binding Co. v. Oak Park Trust and Savings Bank, 135 Ill.2d 121,127 (1990). The reason is that since a forged check is unauthorized, it is not properly payable. 810 ILCS 5/4-401(a). If a bank improperly pays an unauthorized check, the customer can sue and have its account re-credited. Continental Cas. Co., Inc. v. Am. Nat. Bank and Trust Co., 329 Ill.App.3d 686, 698 (1st Dist. 2002), citing In re Ostrom-Martin, Inc., 188 B.R. 245, 252 (1995).

However, Section 4-406 provides banks with a major defense: If a customer does not alert the bank to the forgery with “reasonable promptness,” the bank will not be liable unless it failed to exercise “ordinary care.” 810 ILCS 5/4-406(e). Even if the bank did not exercise ordinary care, if the customer also was negligent, a bank would be liable only to the extent that it is comparatively negligent (unless the bank did not act in good faith in paying the check). Note that banks may narrow the definition of “reasonable promptness” in a deposit agreement, so that customers have only a thirty-day window in which to report forged checks. Napleton v. Great Lakes Bank, N.A., 945 N.E.2d 111, 118–119 (1st Dist. 2011)810 ILCS 5/4-103(a).

In addition, as another defense, Section 3-406 of the UCC states that a “person whose failure to exercise ordinary care substantially contributes to an alteration of an instrument or to the making of a forged signature on an instrument is precluded from asserting the alteration or the forgery against a person who, in good faith, pays the instrument or takes it for value or for collection.” 815 ILCS 5/3-406.