Topic: Article 3 – Uniform Commercial Code
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We had a customer who wrote a check to a company for a large amount, and the check was deposited and cleared yesterday; however, while the check was made out to the company, an individual signed the check. Can we ask the depositing bank to guarantee the endorsement? If so, what is our deadline for making that request?
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Typically, if your bank suspects that an endorsement is forged or is otherwise unauthorized, you must send notice of dishonor to the depositing bank by the midnight deadline established in the Uniform Commercial Code. You also must return the check in an “expeditious manner” to the depositing bank using the two-day/four-day test established in Regulation…
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The Illinois UCC limits the fee for deposited checks returned dishonored on commercial checking accounts to $4.50. Does the Illinois Banking Act provision that allows banks to use their business judgment in setting fees and charges override this restriction? What about the “wild card” provision that puts state banks on parity with national banks?
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Section 5e of the Illinois Banking Act, which recognizes that the setting of account fees is a business decision (subject, of course, to the account agreement), does not override the $4.50 returned check fee limit on commercial accounts set forth in the Illinois Uniform Commercial Code. Section 5e states that the amount of a service…
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Does Illinois allow banks to charge for a returned check charge or dishonored item fee on a consumer loan? Most states are $25.00.
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Section 3-806 of the Illinois Uniform Commercial Code (UCC) provides that the person writing a check is “liable in the amount of $25, or for all costs and expenses, including reasonable attorney's fees, incurred by any person in connection with the collection of the amount for which the check or other draft was written, whichever…
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A customer’s son stole her checkbook and forged her signature to cash several checks. The customer notified us of the forgeries within 30 days from the date of her account statement, as required by our account agreement. Since the bank missed its 24-hour deadline for returning the checks, is the bank liable to the customer for the forged checks?
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In general, a bank on which a check is drawn that does not return a check before its midnight deadline is liable for the check, but your bank may have a few defenses against liability. In the context of a forgery, you will need to reimburse the customer for the amount of a forged check…
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Is there any guidance regarding commercial customer liability for fraudulent checks, or do we just need to address liability in our terms and conditions?
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Commercial customer liability for check is addressed in the Uniform Commercial Code (UCC), as well as your account agreement. Articles 3 and 4 of the UCC, which outline customer liability for check fraud, apply to both individual and commercial customers. We have included several relevant provisions regarding liability in our resources section below. In addition,…
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One of our Interest on Lawyer Trust Account (IOLTA) customers has been depositing checks made out to the lawyer’s business clients into his IOLTA, without endorsements from the businesses. Do the IOLTA rules permit these deposits? Should we require that the checks be endorsed by the payees before depositing them?
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Yes, we recommend that you require IOLTA customers to obtain endorsements on checks made out to third parties before depositing them (as you would with any other customer). Otherwise, your bank is risking liability to the payor bank under your presentment warranties. When sending a check for payment to the payor bank, your bank is…
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Can we permit a blind customer to use a rubber stamp to sign checks?
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Yes, you may permit the customer to use a stamp of her signature to sign her checks. The Uniform Commercial Code (UCC) expressly states that a signature may be made by means of a device or machine. The UCC comments further clarify that “[a] signature may be handwritten, typed, printed, or made in any other…
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A customer ordered a cashier’s check from us for a real estate loan closing. The attorney at the closing shipped the check using UPS next-day shipping, but UPS has lost the package. The customer would like us to reissue the check. Can we reissue the customer’s cashier’s check?
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Yes, your customer may request a reissued cashier’s check after presenting a declaration of loss for the original cashier’s check. However, this approach carries some risk for your customer, as the declaration of loss will not become effective until 90 days have passed from the date of the original cashier’s check. The Uniform Commercial Code…
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One of our bank board members owns a business. The business mailed a check to a vendor. Forty days after the check was cashed, the vendor notified the business that the vendor did not receive the check. The business customer requested a copy of the check that was cashed and discovered it had been altered. Is the business customer liable for the fraudulent check? Should the payor bank give the business customer credit for the check? Can the business do anything to receive provisional credit or is that subject to bank procedure?
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Based on the facts provided, it is difficult for us to determine who is liable for the altered check, and we recommend that your board member review his account agreement with the payor bank and consult with an attorney to assess the various factors discussed below. In general, a payor bank that pays a fraudulently altered…