Topic: Article 4 – Uniform Commercial Code
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A customer ordered a cashier’s check from us for a real estate loan closing. The attorney at the closing shipped the check using UPS next-day shipping, but UPS has lost the package. The customer would like us to reissue the check. Can we reissue the customer’s cashier’s check?
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Yes, your customer may request a reissued cashier’s check after presenting a declaration of loss for the original cashier’s check. However, this approach carries some risk for your customer, as the declaration of loss will not become effective until 90 days have passed from the date of the original cashier’s check. The Uniform Commercial Code…
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We have two deposit customers who recently died. The first customer’s estate is represented by an executor. Can we permit the executor to deposit a check made out to the decedent into an estate account? The second customer was a joint accountholder with his wife. Can the wife deposit a check made out to the decedent into the joint account?
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Yes, an executor has the authority to endorse and deposit checks made out to the decedent into the estate’s account. In the second situation, however, we do not recommend permitting the wife to deposit the check into the account (which is no longer a joint account), unless fewer than ten days have passed since your…
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Do we need to obtain ink or wet signatures on stop payment orders? Do we need a written acknowledgment of stop payment orders?
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Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021. Please note that this change may affect the continued accuracy of this guidance as it pertains to the ECSA. No, we believe that you may accept electronic signatures for stop payment orders. Both Illinois…
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One of our bank board members owns a business. The business mailed a check to a vendor. Forty days after the check was cashed, the vendor notified the business that the vendor did not receive the check. The business customer requested a copy of the check that was cashed and discovered it had been altered. Is the business customer liable for the fraudulent check? Should the payor bank give the business customer credit for the check? Can the business do anything to receive provisional credit or is that subject to bank procedure?
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Based on the facts provided, it is difficult for us to determine who is liable for the altered check, and we recommend that your board member review his account agreement with the payor bank and consult with an attorney to assess the various factors discussed below. In general, a payor bank that pays a fraudulently altered…
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One of our customers recently deposited a check dated September of 2014. We attempted to collect the check twice, and the payee bank returned it for insufficient funds (NSF) both times. The payor bank then called and asked us to reimburse its customer for the NSF fees that it charged to its customer, since the check was “stale.” Is that required?
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No, we do not believe your bank is required to reimburse the NSF fees paid by the drawer of the check. While the UCC requires banks to pay checks that are deposited within six months of the check’s date, it also permits banks to pay checks that are older than six months (provided that the…
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When we receive returned mail from a customer’s address, and make several attempts to contact the customer for an updated address, do we need to continue mailing account statements?
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No, you are not required to continue mailing periodic statements in this situation. In fact, it may be advisable to discontinue mailing periodic statements to an address that you know to be incorrect, to prevent the statements and the personal financial information contained in them from falling into the wrong hands. We recommend monitoring the…
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One of our commercial customers reported several checks as forgeries promptly after receiving its account statement. The customer’s employee had stolen the checks and forged them. Should we file a police report? If the customer receives restitution from its employee, would we be entitled to receive that restitution?
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Since a police report already has been filed regarding the forgeries, the question becomes whether the bank should file a suspicious activity report, which would be required if the total dollar amount of the forgeries exceeds $5,000. Also, under the Uniform Commercial Code (UCC), in most circumstances, you will need to reimburse the customer for…
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What is your recommended record retention period for stop payment orders on checks? My opinion is that we need to retain them for six months after they expire, but we have been holding them for six years.
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We believe that the standard industry practice is to retain stop payment orders on checks for six months after the order has terminated. This corresponds with the IBA Guide to Record Retention, which recommends retaining stop payment orders for six months after termination (unless the stop payment relates to a preauthorized electronic fund transfer, in…
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A customer purchased a cashier’s check seven years ago. The named payee has not cashed the check, and we do not even know whether the customer has delivered the check to the payee. Can we contact the customer before remitting the check as unclaimed property? And can the customer place a stop payment order on the check and request that the check be reissued?
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Yes, you are required to contact your customer before reporting the cashier’s check as unclaimed property. And no, the customer cannot issue a stop payment order on the cashier’s check if it already has been presented to the payee. However, if the cashier’s check has not been presented to the payee, the customer can surrender…
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For how long should we retain deposit account statements and copies of checks?
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You should retain deposit account statements for at least five years and copies of checks for at least seven years. The FinCEN’s Bank Secrecy Act regulations require you to retain deposit account statements for five years after they are created. The Uniform Commercial Code requires financial institutions to retain checks, or legible copies of checks,…