Topic: Article 4 – Uniform Commercial Code
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Are we required to reimburse our business customer if a check clears their account and is paid, but the intended payee claims they never received payment? The payee is refusing to provide us with an affidavit stating that they did not receive the check, and the bank of first deposit will not reimburse us without it. Additionally, when a customer notifies us of a potential improper payment, do we need to provide them with credit before receiving reimbursement from the bank of first deposit for breach of its presentment warranties? If we have to provide credit during our investigation, what is the time limit?
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We believe that whether you need to reimburse your business customer depends on the specific facts of the situation and your agreement with the customer. The Illinois Uniform Commercial Code (UCC) states that a bank may charge a customer account for an item that is “properly payable,” but it does not provide a specific timeframe…
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Our business customer sent a very large check (in the six figures) to one of their vendors, and the check was deposited, but their vendor says they did not receive it. We sent the bank of first deposit a presentment warranty letter asking for the money back. The bank of first deposit told us that it would take 30–90 days to research, and that they need an affidavit from the payee (our customer’s vendor) stating that they did not receive the check or deposit it. Are there any time limits regarding how long the bank of first deposit has to conduct its investigation, and are we required to provide them with the affidavit they requested?
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We do not believe the Illinois Uniform Commercial Code (Illinois UCC) or any other state or federal law specifies a deadline for a depository bank’s response to a claim for the breach of a presentment warranty. Additionally, we are not aware of any requirement that your bank provide an affidavit when making your claim for…
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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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A customer submitted a check for deposit that was returned for insufficient funds. Per our policy, we automatically submitted the check a second time and it was again returned for insufficient funds. The customer went to the police to make a claim against the payor and was told they have no recourse under the criminal code since the check was resubmitted for payment within seven days of the first return. According to the police we would need to submit the check for payment again for the customer to have a case, but we believe Regulation CC prohibits a third submission. Are they correct?
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We believe that you may be able to submit the check for payment a third time as discussed in more detail below, either by submitting it for payment through the ACH system or by sending it as a collection item directly to the paying bank. The police are partially correct, since one method of proving…
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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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Our customer reported that a check they issued was stolen and washed, changing the payee and amount of the check. The customer reported the fraud to us two weeks after the check had cleared. Are we liable to our customer for paying the altered check, and do we have a claim against the bank of first deposit?
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We believe you must reimburse your customer for the amount paid on the altered check and that you have a claim against the bank of first deposit for breach of its presentment warranties. Under the Illinois Uniform Commercial Code (UCC), banks may charge their customers only for items that are properly payable — meaning authorized…
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We recently had a non-customer call and request a copy of a check payable to her from December 2015 that her sister deposited into an account at our bank. We have a letter from the non-customer requesting that we allow the sister (our customer) to deposit the check, a copy of the non-customer’s driver license, their endorsement on the check, and the check stub. Do we have any obligation to provide the non-customer with a copy of the check?
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No, we do not believe any federal or state laws or regulations would require you to provide a copy of a check to a non-customer. The Uniform Commercial Code (UCC) requires that banks “maintain the capacity to furnish legible copies of items until the expiration of 7 years after receipt of the items,” but the…
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We have an account for a corporation that has been on our records for many years. We recently learned that this corporation (Customer, Inc.) was merged and consolidated into another corporation years ago, and the acquiring corporation subsequently opened a limited liability company (LLC) with a similar name (Customer, LLC). We have maintained the original account and have been accepting checks made payable to the name of the original corporation, the new LLC, and the acquiring corporation. Obviously, some of these checks are wrongly endorsed. Could we request that someone with authority provide us with a statement that would allow this practice to continue without recourse? Additionally, do we need to go through the process of closing and reopening a new account for this customer and conduct Bank Secrecy Act due diligence again? And, could this practice potentially present an issue with filing future Suspicious Activity Reports (SARs)? Finally, is it possible for a tax identification number to remain the same after a merger? We currently only have an Employer Identification Number (EIN) on file from the original corporation and are not sure whether this would be the same for the LLC.
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Yes, we believe it is possible to enter into a written agreement with the new LLC that would protect you from liability for the incorrectly endorsed checks (that have been endorsed in the name of the original corporation, presumably by an individual identified by the original corporation as its authorized signer). However, an agreement between…