Topic: Article 3 – Uniform Commercial Code
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We have a customer who purchased a number of cashier’s checks dating back to 2014 that he has not yet delivered to the payees. Can we request that he redeem those checks or allow us to reissue them with more current dates?
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We believe that you may request — but not require — the customer to surrender the checks to your bank and have them reissued. The Illinois Supreme Court has recognized that the remitter of a cashier’s check remains the owner of the check until it has been remitted to the payee, and therefore the remitter…
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Our client services department spends a significant amount of time monitoring for restrictive legends on checks (such as “must be presented within 90 days”). Our deposit account disclosures state that we are not required to honor restrictive legends unless we have agreed to them in writing. Does that language protect us from liability with respect to monitoring for “two signatures required” endorsements? Would a commercial customer’s corporate resolution indicating that two signatures are required on all checks constitute “an agreement in writing”? Or would a separate contract be necessary?
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The Uniform Commercial Code (UCC) states that when an organization requires multiple signatures on checks, and a check of the organization is signed by only one signatory, the signature is considered “unauthorized.” Consequently, such a check would not be properly payable. If a bank made payment on the check, the customer could sue to have…
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Our commercial customer issued a paycheck to an employee. The employee deposited the item via remote deposit and then took the item to a check cashing business. We returned that deposit attempt as a duplicate item. The check casher is sending collection letters to our customer asserting that our customer is responsible for paying the item, citing 810 ILCS 5/3-302 and 720 ILCS 5/17-1A. Isn’t the employee responsible for the check casher’s loss?
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Based on the facts as described, we believe the check casher is the holder in due course of the original check and is correct in demanding payment from your customer. In addition, the check casher also has the right to demand payment from your customer’s employee. Under the rules of the UCC, both would be…
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Many years ago, a customer purchased a cashier’s check naming his sister as the remitter and the Social Security Administration (SSA) as the payee. The remitter does not have an account with us. We are still gathering facts, but we believe that the remitter never delivered the check to the SSA. It has remained in her desk drawer since 2003. Now she has sent us a demand letter from her attorney insisting that she is entitled to receive a refund on the cashier’s check. We found a note indicating that we reissued the check in 2004, but we have not found a declaration of loss or any other records regarding the possible reissuance. Is the remitter entitled to a refund on the original check?
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We recommend consulting with an attorney, but in our view, the remitter likely is entitled to a refund for the amount of the cashier’s check. The Uniform Commercial Code (UCC) does not directly address whether a remitter is entitled to a refund when she decides not to deliver the check to the payee. However, the…
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We charge an insufficient funds (NSF) fee for deposited items that are returned by the payee bank. Section 3-806 of the Illinois version of the Uniform Commercial Code states that “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 . . . .” Does this $4.50 limit on returned check fees in Illinois apply to both commercial and consumer accounts?
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The Illinois Uniform Commercial Code (UCC) limits insufficient funds or returned check fees to $4.50 for commercial accounts, but it does not limit these fees for consumer accounts. For commercial accounts, the fees can be no higher than $4.50, but this limit expressly does not apply to “non-commercial checking or other non-commercial accounts,” which would…
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Are there any Illinois or federal laws affecting how we can collect debts from a co-signer of a loan, versus a guarantor? Does one provide better risk coverage than the other?
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Yes, in most cases a lender’s collection rights will differ based on whether it is collecting from a cosigner or a guarantor, and in the case of a guarantor, whether the guarantor is a “guarantor of collection” or a “guarantor of payment.” In many cases, it is preferable for a lender to require a cosigner…
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Two months ago, we learned that several forged checks had been drawn on a customer’s account (the depository bank alerted us that the checks were suspicious). We received the police report regarding the theft of the customer’s checkbook a few days later. Once we learned of the forgeries, we returned four checks to the depository bank. That bank has since sent those checks back to us stating that our return was untimely; we had returned the checks about three weeks after receiving them. How long do we have to return items once we are notified of a forgery?
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Generally, your bank must return a check, including a forged check, by midnight on the next banking day after receiving the check, as required by the Uniform Commercial Code (UCC). Regulation CC layers on additional requirements and exceptions to the UCC midnight deadline, which are designed to encourage banks to use expeditious means to return checks.…
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One of our customers is claiming that her daughter stole several checks from her checkbook and forged her signature on checks totaling $800. The customer lives with her daughter and told us that her daughter is a felon and a drug addict. Do we have to reimburse our customer? She notified us about the forgeries within the 30-day deadline established in our account agreement, but we believe that she failed to properly guard her checkbook. This is her second claim of fraud, with the first claim involving her grandson’s unauthorized use of her debit card. Also, can we contact the individual (a local businessman) who cashed the forged checks?
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You need to reimburse a customer for forged checks if the customer alerts you to the forgery with “reasonable promptness.” In this case, your customer fulfilled her notice obligation by alerting you about the forged checks within the 30-day notice period established in your account agreement. However, your bank is not obligated to reimburse the…
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We have a potential business customer that performs property repairs. The customer would like to deposit checks issued by insurance companies for the property repairs. The checks are payable jointly to the business and the homeowner. The business obtains limited power of attorney (POA) documents from the homeowners authorizing it to endorse and deposit the checks. Can we rely on the POA for these deposits, without the homeowner’s endorsement? Should the POA be notarized? Should the business endorse as power of attorney for the homeowner?
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Yes, your bank may rely on a power of attorney document that grants your business customer the authority to endorse a check on a homeowner’s behalf. In fact, the Illinois Power of Attorney Act requires you to comply with an agent’s directions that are in accordance with the agent’s POA document, “and any person who…