Topic: Article 3 – Uniform Commercial Code
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Are we allowed to charge an insufficient funds fee in Illinois for consumer loan payments made by check that are dishonored? If so, what is the maximum amount we can charge?
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Illinois law allows banks to charge returned check fees for consumer loans, provided that the fee is properly disclosed and agreed to by the borrower. Additionally, we do not believe there is a maximum amount for returned check fees for loan payments, provided the fee is set according to your “prudent business judgment and safe…
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We are interested in charging a returned check fee for loan payments made by check that are dishonored. This fee would be charged on both the consumer and commercial side and would be applied only to new loans going forward. We are working on a new disclosure for this fee. However, we first want to know whether Illinois law allows this, and if so, whether there is a maximum amount that we can charge for this kind of fee.
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We believe that Illinois law allows banks to charge returned check fees for both consumer and commercial loans, provided that the fee is properly disclosed and agreed to by the borrower. Additionally, we do not believe there is a maximum amount for returned check fees for loan payments, provided the fee is set according to…
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More of our business customers are using electronic signatures when signing their paper checks. In the past, for facsimile signatures, we have had our business customers stamp the signature card and the resolution authorizing us to accept the facsimile signature with the actual facsimile stamp. What are we supposed to do for electronic signatures?
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We recommend including customers’ electronic signatures on their signature cards and resolutions authorizing you to accept electronic signatures. We also recommend reviewing your account agreements to ensure that they allow you to charge your customers for checks that they have signed electronically. Under the Illinois Uniform Commercial Code (UCC), banks may charge their customers for…
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Are the following fee caps still in place for Illinois chartered banks — the greater of $25 or actual costs for an overdraft or insufficient funds fee, and a returned check fee of up to $4.50 for commercial accounts? Are there any other fee caps we should be aware of?
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Yes, the fee caps you referenced are still in place. Regarding other fees, Illinois chartered banks generally may charge any fees agreed to by their customers, as discussed in more detail below. Section 3-806 of the Illinois Uniform Commercial Code (UCC) provides that any person who issues a check “that is not honored upon presentment…
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A customer with a trust account died, and the successor trustee has obtained an EIN and will be opening a new trust account. If the trustee has checks payable to the deceased customer’s estate, can they be deposited into the new trust account?
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Generally, a check made out to an estate should be deposited only into an estate account, and depositing the check into a trust account could result in a breach of the Uniform Commercial Code (UCC) warranties. We do not recommend accepting checks payable to the deceased customer’s estate for deposit into the new trust account,…
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To deter money orders and certified checks from being abandoned, may we print “VOID AFTER 120 DAYS” on them? We want to encourage payees to cash them as soon as possible.
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We do not recommend placing expiration dates on money orders and certified checks. As to certified checks, the Illinois Uniform Commercial Code (UCC) requires banks to honor certified checks they have issued and subjects them to potential liability for wrongful dishonor. While a bank generally is not obligated to pay a check presented six months…
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We have an elderly customer who seems to be the victim of a home improvement scam. The scammers want her to wire money to a fake healthcare company. We refused to send the wire, but our customer withdrew a cashier’s check for the same amount from one of our tellers, who was unaware of the situation. I know that we cannot normally stop payment on a cashier’s check, but this is blatant fraud. Our customer is adamant that the transaction is legitimate. Is there any way that we can prevent this fraud from occurring?
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You are correct that your bank cannot stop payment on the cashier’s check without risking liability for the check. We believe that you should instead file a suspicious activity report (SAR) and report the scam as potential elder financial exploitation to the Illinois Department of Aging. As a general rule, once a cashier’s check enters…
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We are considering moving from paper loan files to scanned loan files on our core system. Besides the original promissory note and security agreement, what other loan documents should we keep in paper form?
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Generally, you do not need to retain hard copies of documents that have been scanned electronically, but there are important exceptions to this general rule. We do not recommend shredding originals of certain negotiable instruments, including documents that qualify as notes under Article 3 of the Uniform Commercial Code (UCC) — such as negotiable mortgage…
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We are beginning to image our in-house loan files (including notes and mortgages) and our deposit-related records, such as signature cards. Once a document has been scanned, can we destroy the original, or should we retain it for a certain period of time? Should we stamp the documents with a “scanned” stamp or “true and certified copy” stamp?
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Generally, you do not need to retain hard copies of documents that have been scanned electronically, but we do not recommend scanning and shredding certain negotiable instruments, including documents that qualify as notes under Article 3 of the Uniform Commercial Code (UCC) — such as negotiable mortgage notes. The general rule under Illinois law is…
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We are looking into using Docusign for loan documents. Are electronic signatures made with Docusign legally binding in Illinois, and do you have any tips on using electronic signatures?
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We believe that electronic signatures are generally valid on most loan documents in Illinois, with the exception of promissory notes — special requirements apply to electronic promissory notes that are negotiable instruments. The general rule under Illinois law is that electronic signatures have “the same force and effect under the laws of this State” as…