Topic: Article 3 – Uniform Commercial Code
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Are there any issues with charging an inactivity fee on checking and savings accounts under the new Illinois unclaimed property law? Can we charge inactivity fees on money orders and cashier’s checks by month?
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We are not aware of any prohibition against charging inactivity fees for checking and savings accounts, provided that the fees comply with the requirements in the new Illinois Revised Uniform Unclaimed Property Act (Illinois RUUPA). Under the Illinois RUUPA, inactivity fees must be authorized by a valid contract that specifies the time in which your…
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A customer brought a check to our bank for deposit that was payable to “Jane, as custodian for her minor son, John, until age 21.” Jane requested that the check be deposited into her personal account, and she endorsed the check with her name. Jane does not have a custodial account at our bank, and John does not have a deposit account. Also, John is 22 years old. Should we have deposited the check, or should we have requested that the customer obtain a replacement check from the drawer?
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We believe that your bank should have asked the customer to obtain a replacement check from the drawer in this scenario. Under the Uniform Commercial Code, your bank warranted that there were no missing indorsements when it forwarded the check to the payor bank for payment. The same presentment warranty also applied when your customer…
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One of our customers is complaining that we improperly cashed a cashier’s check payable to “John and Jane JTWROS.” It was issued in July of 2002, and we cashed it for John in August of 2002. The customer, Jane, is complaining that we cashed the check without her signature. We believe that only one signature was required because it was payable JTWROS. Does Jane have a claim?
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Under the Uniform Commercial Code (UCC), your customer had three years in which to bring a claim for conversion of the cashier’s check or for breach of a warranty by your bank. Without commenting on your bank’s conclusion that Jane’s endorsement was unnecessary, we believe that any claim she may have is no longer be…
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One of our commercial customers had several forged checks drawn on their account. One check was written on June 8. The check cleared our bank on June 13. The customer received a statement showing the check on June 30, and they notified us that the check was fraudulent on July 10. We returned the check to the depository bank (a credit union) on that day. The credit union submitted a late return claim to the Fed, which initially credited the credit union but reversed the credit after we submitted documentation. The credit union claims that we made a late return under Section 4-302 of the Uniform Commercial Code (UCC).
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We believe that the credit union is correct that the check was a late return under the Uniform Commercial Code (UCC), because your bank returned the check after the midnight deadline. As we understand the Fed’s process for late returns, it would have revoked its credit to the credit union if it could not obtain…
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We have a check payable to “John Doe, Mary Doe, Joint Tenants.” Do both John and Mary need to endorse the check, even though “AND” isn’t actually printed on the check?
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No, based on these facts, you do not need to obtain the endorsements of both John and Mary, notwithstanding that the check appears to have been made payable to both of them in their account held in joint tenancy. The Uniform Commercial Code (UCC) provides that when a check made payable to two or more…
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A customer deposited a large insurance proceeds check made payable to both our customer and his mortgagee bank (together, not alternatively). However, the check was missing the required mortgagee bank’s endorsement, and we are now concerned about fraud. Can we freeze the customer’s account while we investigate?
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Your bank may freeze the customer’s account to investigate suspected fraud associated with the account, provided your account agreement includes language effectively authorizing the bank to place a hold on the account’s funds when it is concerned about potential fraud. In general, your bank’s authority to freeze your customer’s account is governed by your account…
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What is our liability if we allow a non-customer to deposit a check into a customer’s account? One example of this situation occurs when a non-customer is a tenant of a customer and wishes to deposit a rent check into the customer’s account. In such a case, we would stamp the check and deposit it without the customer’s indorsement.
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We do not recommend depositing a check into your customer’s account without their knowledge and indorsement. Under the Uniform Commercial Code (UCC), your bank could be liable under its presentment warranties to the payor bank (the non-customer’s bank). When forwarding the check to the payor bank for payment, your bank is warranting that there are…
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Are there any Illinois or federal regulations that require us to cash checks drawn on our bank for noncustomers?
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No, we are not aware of any law that would require you to cash a check drawn on your bank when the check is presented by a noncustomer. However, you should review your account agreements to ensure that the bank has not directly or indirectly agreed to cash checks drawn by your customers and presented…
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When a customer withdraws funds by check, we require that the check be made payable to “cash” or to the individual who is withdrawing the funds, but we won’t cash a check made payable to our bank’s name (except for loan repayments and safe deposit box payments). Do you have any guidance to support why our policy is appropriate?
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Yes, Illinois law supports your bank’s policy regarding checks that are made payable to the bank. Under Illinois law, if a check is made payable to a bank and is presented to that bank, Illinois courts have found that the bank has a duty to negotiate the check according to the account owner’s wishes (because…
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Can our bank put an expiration date on cashier’s checks to prevent them from being held for long periods of time? If so, what is the minimum length of time before a cashier’s check expires?
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We do not recommend placing expiration dates on cashier’s checks. While we are not aware of any law or court decision that would expressly prohibit this practice, Illinois courts treat cashier’s check as “cash equivalents” once they have entered the stream of commerce. Needless to say, cash and cash equivalents have no expiration date. While…