Topic: Uniform Commercial Code
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The daughter of a deceased customer has presented a small estate affidavit and a will naming her as the executor. The deceased customer was receiving monthly checks as part of a personal injury claim settlement that are supposed to continue for the next twelve months. The daughter would like to withdraw the funds in the account but keep the account open so that it may continue to receive the monthly checks. Can we allow the daughter to make a partial withdrawal from the account while keeping the account open for these deposits?
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Provided the combined future monthly settlement payments together with all other estate assets do not exceed $100,000, we believe your bank may rely on the small estate affidavit and honor withdrawals made from the decedent’s account by the executor of the small estate (the affiant). In our view, whether your bank should keep the decedent’s…
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When a customer with a personal deposit account at our bank seeks to cash a check made out to a trust account, our general policy is not to cash the check. Typically, the trust account is held at another bank, the customer is the trustee, and the check is made out to the “John Doe Trust,” or to “John Doe as Trustee for the John Doe Trust.” We also would not deposit a check made out to a trust or a trustee into the customer’s personal checking account. Customers frequently do not understand why we will not cash or deposit these checks since it is “their money and their trust.” Can you please advise what laws or rules support our policy?
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There are two answers to your question. Your policy of not cashing and depositing these checks is supportable under the Uniform Commercial Code (UCC), but you also could be protected by the Fiduciary Obligations Act (FOA) when cashing or depositing them under certain conditions. The UCC places a bank on notice of a potential breach…
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Are we authorized to put a stop payment on a cashier’s check payable by our bank that has not yet been submitted for payment? We discovered that one of our customers had purchased the cashier’s check as the result of a scam.
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No, we do not believe that your bank may stop payment on the cashier’s check without risking liability for the check. The Illinois Supreme Court has held that a cashier’s check is the equivalent of cash. As a general rule, once a cashier’s check enters the stream of commerce, the issuer (your bank) is liable…
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We can charge up to three fees when a check is dishonored: (1) a returned deposit fee, (2) a redeposit fee, charged when the customer deposits the same check a second time, and (3) a second returned deposit fee if the redeposited check is dishonored a second time. Does Illinois law limit these fees for business or consumer customers? We charge the redeposit fee for business customers whether or not the check ends up being dishonored a second time.
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With respect to your returned deposit fees, Section 3-806 of the Illinois Uniform Commercial Code (Illinois UCC) limits them to $4.50 for commercial accounts, but not for consumer accounts. Section 3-806 expressly excludes “non-commercial checking or other non-commercial accounts,” which includes consumer accounts, from this limitation. Similarly, in our view, you may charge a second…
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We have a consumer account that has repeatedly been overdrawn. The customer does not seem interested in covering the overdraft. What notice must we provide to close this account? Our account disclosures do not specify a timeframe for closing an account.
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In general, we recommend providing at least thirty days’ notice before closing an account if neither your account disclosures nor account agreement specifies a timeframe to provide notice before closing an account. Given the risk of further overdrafts in this situation, your bank may wish to stem its losses by freezing the account until the…
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We financed an LLC’s bulk sale purchase of farm equipment inventory owned by a corporation and filed a blanket financing statement covering the LLC’s existing and later-acquired equipment. Within one month of the sale, a creditor of the corporation filed an amendment to its blanket lien, identifying the LLC as the debtor. After a bulk sale occurs, can the seller’s creditor maintain its lien position in the sold assets, and for how long can its priority be maintained as to future creditors who also file blanket financing statements on the same equipment?
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Farm Equipment Sold by the Corporation to Your Borrower (the LLC) We believe that the original creditor can maintain its lien position in the sold farm equipment indefinitely, as long as it files continuation statements for its original financing statement (and provided that no intervening events cause its security interest to lapse — for example,…
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When a business customer informs our bank that it requires two signatures for check endorsement, we explain at the time the account is opened that we do not monitor for dual endorsements and advise the customer that it is their responsibility to review their checks for two signatures. However, the corporate authorization resolution form that we provide to our business customers when opening an account includes a field to list the number of signatures required to endorse a check. Even though we advise the customer that we do not monitor checks for multiple signatures, the customer can select a two-signature requirement in this field. Should we discontinue this practice of marking the customer’s request for dual endorsements when our policy is to not monitor for multiple endorsements?
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Yes, we recommend discontinuing the practice of accepting a customer’s request for a two-signature authorization on their corporate authorization resolution when your bank’s policy is to not monitor for multiple endorsements. The Uniform Commercial Code (UCC) provides that when an organization requires multiple signatures to endorse checks, and a check of the organization is endorsed…
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When we receive our daily cash letter from the Fed, we review all checks of $2,500 and above for an endorsement. If the checks are not endorsed by the payee or stamped “All Prior Endorsements Guaranteed” by the depositing bank, we return the check. Is it our responsibility as the payor bank to check the endorsements? Who is held liable when there is no endorsement or a fraudulent endorsement — the depository bank or the payor bank?
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A payor bank does not have a duty to review checks received from a depository bank for missing or unauthorized endorsements. The Uniform Commercial Code (UCC) places the ultimate risk of loss for the payment of a check with a missing or unauthorized endorsement on the depository bank. Under the UCC, a depository bank warrants…
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We were presented with a check made payable to “husband and wife.” The husband has signed the check, but the wife has not. The husband would like to deposit the check into a business account for his LLC. The wife has consented to this deposit via text message. Can we deposit this check into the account for the LLC, or is a dual indorsement required?
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Whether to deposit this check into the LLC’s account is a business decision for your bank to make, mindful that depositing the check with just the husband’s endorsement technically poses some risk, as the check is not considered “properly payable” if both payees have not endorsed the check over to the LLC. When a check…
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We filed a UCC-1 financing statement in July 2018, covering the assets of an LLC that changed its name on August 1, 2018. Do we need to file a UCC-3 financing statement amendment as to the debtor’s name to maintain our perfection date?
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Your bank’s July 2018 financing statement remains effective to perfect a security interest in the assets acquired by the LLC before its name change and within fourth months thereafter. The UCC provides that your “financing statement is not rendered ineffective if, after the financing statement is filed, the information provided in the financing statement becomes…