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A customer has asked that we reimburse her for several check forgeries on her account. If our account agreement requires customers to notify us of forgeries within thirty days, are we liable for any of the checks for which the thirty day notice period has passed? – IBA Compliance Connection

A customer has asked that we reimburse her for several check forgeries on her account. If our account agreement requires customers to notify us of forgeries within thirty days, are we liable for any of the checks for which the thirty day notice period has passed?

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We do not believe that the bank would be liable for any forged checks if a customer failed to notify the bank of the forgeries within the thirty-day notification period. Under Section 4-406 of the Uniform Commercial Code (UCC), if a customer does not notify a bank about forged checks with “reasonable promptness,” the bank will not be liable to that customer for the checks (unless the bank failed to exercise “ordinary care”). 810 ILCS 5/4-406(e). Note that banks may narrow the definition of “reasonable promptness” in a deposit agreement, so that customers have only a certain time period in which to report forged checks. 810 ILCS 5/4-103(a). In fact, an Illinois court specifically upheld a thirty-day notification window in a recent case, Napleton v. Great Lakes Bank, N.A., 945 N.E.2d 111, 119 (1st Dist. 2011).