Topic: Article 4 – Uniform Commercial Code
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What are the consequences for our bank if one of our employees signs a cashier’s check for an amount higher than they are authorized to sign (for example, where an employee has authority to sign up to $10,000 but signs a cashier’s check for $50,000)? What if the employee steals and writes a cashier’s check? In either of these cases, can the check be returned? We tell our customers that they must wait ninety days and sign an affidavit of loss before we can put a stop payment on a cashier’s check.
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We do not believe your bank would be able to return or stop payment on an unauthorized cashier’s check if presented by a holder in due course, unless it sent notice of dishonor before your midnight deadline, on the next banking day after the check was received. As a general rule, a bank may not…
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One of our elderly customers deposited a cashier’s check, which she believes was sent by someone who promised to marry her. We called the issuing bank before making the funds available from the deposit, and they confirmed that the cashier’s check was legitimate. About a month after the deposit, the customer requested a wire to send the funds, which we have not yet executed. We have frozen the customer’s account, which still contains the majority of the funds from the deposited cashier’s check, and reported the potential elder financial exploitation of our customer. Is there any chance that the deposited cashier’s check could be returned?
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First, we do not believe that the issuing bank could return the cashier’s check. The Illinois Supreme Court has held that a cashier’s check is the equivalent of cash. In Illinois, as a general rule, once the cashier’s check enters the stream of commerce, the issuer is liable under the UCC if it refuses to…
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We have a business client who had a fraudulent check go through on their account. We are having a difficult time meeting the next day midnight deadline for returned checks. Can you confirm that we must comply with the midnight deadline? May we require business customers to notify us immediately of any fraud on their account once they receive their statement?
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Yes, banks generally must return checks by midnight on the next banking day after receiving the check, as required by the Illinois Uniform Commercial Code (UCC). However, federal Regulation CC permits an extension of the UCC midnight deadline under certain circumstances. A paying bank may send the returned check directly to the depository bank by…
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Can a check be stamped “account closed” and given back to the holder of the check without being processed?
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Yes, we believe that your bank may reject the deposit of a check if you are aware that the drawer’s account has been closed (presumably because it is an “on-us” check). The Uniform Commercial Code (UCC) requires banks to accept customer deposits that are “properly payable,” but a check drawn on a closed account does…
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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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Are there any Illinois State laws regarding original check retention? Can we image a check and destroy the original as soon as we know we have a clear electronic image? I am not aware of any federal regulations requiring retention of an original check and I want to make sure Illinois law is the same.
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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 are not aware of any required retention periods for original checks in…
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The executor for an estate has presented us with a check payable to “Jane Doe, as Executor of the Estate of Julie Doe, deceased, acting with full authority under the Independent Administration of Estates Act, Superior Court of California.” She wishes to deposit the check into her personal account under her name, not an estate account. The check represents funds from the sale of the decedent’s house, and the executor tells us that the estate already has closed. Can we allow her to deposit the check into a personal account?
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No, we do not recommend permitting the customer to deposit a check made payable to her as the executor of an estate into her personal account. This transaction could result in a breach of the Uniform Commercial Code (UCC) warranties. When delivering the check to the payor bank for payment, the UCC would require your…
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Our bank sends checks to the family in order to honor deceased customers. If such a check never is cashed, even after we attempt to contact the deceased customer’s family, what procedures should we follow?
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If such a check remains uncashed and undeposited for three years, your bank must report the check to the Illinois Treasurer as unclaimed property. Under the new Illinois Revised Uniform Unclaimed Property Act (Illinois RUUPA), a check on which your bank is directly liable will become reportable as unclaimed property when three years have passed…
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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 sometimes process withdrawal tickets without a customer’s signature. They instead are filled out by a banker and state “Per (Banker Name)” or “Per Phone Conversation” on the signature line. In some cases, the teller makes out a cashier’s check for the withdrawal, and in other cases, the teller withdraws cash, and the cash sits at the bank until the customer comes in. Should we be accepting these withdrawal tickets?
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We are not aware of any law or regulation prohibiting this practice, but there is a risk a customer could claim that a withdrawal ticket was unauthorized and demand a refund. If your bank does not have a written request corresponding with these withdrawal tickets, it may be difficult to prove that they were authorized…