Topic: Article 3 – Uniform Commercial Code
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What rules apply when a business customer seeks restitution from a bank after an employee of the customer stole money from the customer’s deposit account? In this case, an employee forged checks that were made out to “CASH.”
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Employees who make checks out to “CASH” present a special problem that has been addressed in several Illinois cases. These cases have held that banks are potentially liable for failing to detect forgeries when employees cash out checks drawn on his or her employer’s account that are made out to “CASH.” See, e.g., Mutual Service…
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Is there a cap on returned check fees under Illinois law?
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Section 5e of the Banking Act states that “[n]otwithstanding the provisions of any other law in connection with extensions of credit” banks may charge any fees, provided that the bank sets the fees based on its “prudent business judgment and safe and sound operating standards.” 205 ILCS 5/5e. There are some laws unrelated to extensions…
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May a bank adopt a policy of not checking for multiple signatures on checks?
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The risk in adopting a policy of not checking for multiple signatures is that customers may have rights to reimbursement under the UCC if you pay fraudulent checks that have only one signature (and customers might also sue for breach of contract unless your deposit agreements state that you will not check for multiple signatures).…
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Are banks responsible for verifying signatures on checks to prevent the payment of forged checks?
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Customer vs. Bank Liability Under the UCC, banks are not responsible for verifying signatures on checks, but a payor bank will be liable to a customer for paying a forged check if the customer informs the bank of the forgery with “reasonable promptness.” The general rule as to forged checks is that the customer is…
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What information is required to be included on checks? Some of our businesses are submitting checks that do not include the name of the bank on which the check is drawn (though they do include the bank’s routing number).
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Please note that this answer discusses the requirements of the Check Printer and Check Number Act before it was amended in 2014. For a current version of the law, please see 205 ILCS 690/10. Under the Uniform Commercial Code, a check is defined as an unconditional order to pay a fixed amount of money payable on…