Topic: Automated Clearing House (ACH) Transactions
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Is there any Illinois law that addresses stop payment requests received orally?
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Yes, the Illinois Uniform Commercial Code (Illinois UCC) addresses stop payment requests received orally. The Illinois UCC generally provides that a stop payment order for any item drawn on a customer’s account is effective for six months. However, an oral stop payment order lapses after fourteen calendar days if it is not confirmed in writing…
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Can we place a hold on ACH deposits if we suspect there is fraud?
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We believe that you may be able to place a hold on deposited funds made by ACH debit transfers, subject to the terms of your agreement with the other financial institution, while your ability to place a hold on deposited funds made by ACH credit transfers would be limited to one day. However, we also…
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We have a client with multiple entities — one LLC per parcel of real property — that have staff turnover from time to time, which necessitates updating the ACH origination addendum and related documentation for each entity. Have you seen any examples of a parent company document listing other related entities or do you have any other suggestions to limit the paperwork for both the client and the bank’s operations department?
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No, we are not aware of an example of a parent company document that can be updated in lieu of individual ACH origination documentation for related entities. We polled our Compliance Division Advisory Committee, and none of the committee members recalled using such a document at their bank. One committee member noted that their bank…
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We have a question regarding the lookback period for multiple re-presentment non-sufficient funds (NSF) fees referenced in the FDIC’s Supervisory Guidance on Multiple Re-Presentment NSF Fees. We updated our disclosures to include new language on multiple re-presentments and sent a notice to our customers in August 2022. We subsequently updated our fee schedule to include the fee per re-presentment. Should we use the updated disclosure date or updated fee schedule date to determine our lookback period, and how far should our lookback go?
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We do not believe that the lookback period for providing restitution for multiple re-presentment NSF fees is tied to updated disclosures or fee schedules. The FDIC’s guidance on re-presentment NSF fees addresses the lookback period for restitution and states in a footnote that “institutions with challenges readily accessing accurate ACH data that self-correct this issue…
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Illinois has issued income and property tax rebates to some of our consumer customers through ACH transfers. Some of the deposit accounts these ACH transfers have been directed to are already closed. Can we use these rebates to offset customers’ outstanding loan payments and overdraft fees? We assume we will need to return the payments for closed accounts but would like to confirm that we can use the rebate amounts for accounts that are open.
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We believe that rebates that have been credited to currently active consumer deposit accounts at your bank may be subject to your bank’s right of setoff. However, we do not believe your bank may exercise a right of setoff in funds directed to accounts that have been closed. Under Illinois law, the right of setoff…
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Last December, we received a citation to discover assets for a business customer, and we placed a hold on their account and sent our answer to the citation. At the time, there was less than $5 in the account. The court date for the citation was continued multiple times until a date in June, when a turnover order was entered for the amount provided in our answer. The turnover order indicates that any funds in excess of the amount indicated in the order are to be returned to the account holder, that the freeze on the account is lifted, and that the citation is dismissed. However, we recently discovered that beginning shortly after we sent our answer to the citation, the customer received multiple ACH deposits from vendors, now totaling an amount in the five figures. No funds have flowed out of the account due to the hold. Should we alert the creditor’s attorney of the additional funds, or do we have no further obligation since the citation has been dismissed? The creditor’s attorney never asked us to update our answer.
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We do not believe you are required to notify the creditor’s attorney of the additional funds in your customer’s account, and we would caution against disclosing the current account balance or continuing to impose a hold without an active citation in place. A citation to discover assets acts as a lien on a judgment debtor’s…
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A consumer customer recently discovered that one of their monthly bills was being automatically paid out of a business customer’s account for over a year. The billing company is at fault, as the ACH entries they generated used the wrong account number. The business customer found out about the unauthorized payments from the billing company and is now threatening to sue us. How should we handle this situation? The business customer is asking for more information about the consumer customer.
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Your bank may have a claim against the originating depository financial institution (ODFI) that transmitted entries with an incorrect account number — but we recommend consulting with bank counsel before pursuing those claims, particularly because the business customer is threatening litigation. As to the business customer whose account was mistakenly debited, we recommend reviewing your…
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A customer submitted a check for deposit that was returned for insufficient funds. Per our policy, we automatically submitted the check a second time and it was again returned for insufficient funds. The customer went to the police to make a claim against the payor and was told they have no recourse under the criminal code since the check was resubmitted for payment within seven days of the first return. According to the police we would need to submit the check for payment again for the customer to have a case, but we believe Regulation CC prohibits a third submission. Are they correct?
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We believe that you may be able to submit the check for payment a third time as discussed in more detail below, either by submitting it for payment through the ACH system or by sending it as a collection item directly to the paying bank. The police are partially correct, since one method of proving…
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We have a checking account for a customer who recently passed away. We became aware of the death a month after it occurred. There are two beneficiaries on the account: the deceased customer’s adult son and the daughter of his second wife, who is a minor. There is a dispute between the beneficiaries’ families, and we are trying to protect the bank from liability. How do we handle distribution to the minor? Is the minor’s mother required to be appointed as guardian of her property? If we have to wait for court documents, do we have to wait to disburse the other half of the funds to the adult son? Additionally, there are ACH debit transactions that posted after the customer’s death. These transactions are consistent with patterns on the account when the customer was alive, but we are not sure whether the transactions belong to the deceased customer or his adult son, as they both have the same name.
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We believe that if the designated beneficiaries are making conflicting claims as to the relevant payable on death (POD) account, your institution should utilize the protections available under the Illinois Trust and Payable on Death Accounts Act and refuse to distribute the account proceeds until the beneficiaries provide a court order directing distributions from the…
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Can we remit abandoned property to the Illinois State Treasurer by a wire transfer or ACH debit? We usually send a check through FedEx but are wondering whether there is a more efficient way to do this.
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Yes, the Illinois Treasurer will accept payment by ACH. Their website instructs property holders to email requests for ACH instructions to [email protected] with your fax number so that they can fax instructions to your bank. Additionally, the Treasurer’s office provide a portal that also processes ACH debit payments. We believe that the Treasurer’s office wishes…