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?
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?
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?
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?
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)?
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?
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?
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?
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?
The general rule as to forged checks is that the customer is not liable. 810 ILCS 5/3-401, 3-403