Topic: Article 3 – Uniform Commercial Code
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One of our customers is a corporation, and it recently changed its name. Some of their vendors are paying them under the former business name. How should we handle deposits of these checks?
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We believe that you should treat the business’s former name as a fictitious name, because the business no longer exists under that name. Under the Uniform Commercial Code (UCC) fictitious payee rule, if “the person identified as payee of an instrument is a fictitious person,” then the check can be indorsed “by any person in…
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Can we deposit a check made jointly to a customer and to a non-customer?
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You may allow the customer to deposit any check that is “properly payable” under the Uniform Commercial Code (UCC). If a check is made out to two people alternatively (payable to John or Jane), then only one of the payees needs to endorse the check. But if a check is made out to two people…
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After a customer deposited a check in an account at our bank, the payor bank called to say that the check was forged. Which bank is liable for the loss?
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We do not believe that a bank that paid a forged check could hold the bank in which the check was deposited liable for its losses. In other words, the bank in which a forged check was deposited generally is not liable for the forgery. In general, a bank on which a check is drawn…
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Can we charge a returned check fee to consumers and commercial accounts, and is there a maximum fee?
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Under the Uniform Commercial Code, returned check fees may not exceed $4.50 for “a commercial checking account or other similar commercial account.” 810 ILCS 5/3-806. As to consumer accounts, we are not aware of any limitations on returned check fees that would apply to banks. Under Illinois law, there are very few limitations on fees…
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Can we charge a fee to any non-customer who presents a check for cashing, particularly when the check is drawn on an account at our bank (for example, a payroll check for a business customer)?
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We are not aware of any limitations on check cashing fees in Illinois law. We do recommend that you review your account agreements to see if the fee is disclosed; this will ensure that you do not run into problems with non-accountholders who refuse to pay the check cashing fee when the check was written…
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Does Illinois have a statute of limitation for enforcing certificates of deposit?
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Illinois has retained the UCC limitations period. UCC Section 3-118, subsection (e), states: An action to enforce the obligation of a party to a certificate of deposit to pay the instrument must be commenced within 6 years after demand for payment is made to the maker, but if the instrument states a due date and the…
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Do we have any defenses if a customer reports forgeries that are over a year old?
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The general rule as to forged checks is that the customer is not liable. 810 ILCS 5/3-401, 3-403
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Has there ever been any prohibition against charging business customers (or customers in general) returned check fees?
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In Illinois, the answer is yes as to commercial accounts. The UCC caps returned check fees on commercial accounts at $4.50. 810 ILCS 5/3-806. As to consumer accounts, that rule does not apply. Instead, the general rule from the Banking Act applies, which is that banks may charge any fees “subject only to the provisions…
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If an employee forges a check with the name of the authorized signer, would the bank be liable?
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The general rule as to forged checks is that the customer is not liable. 810 ILCS 5/3-401, 3-403