Topic: Uniform Commercial Code
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We sometimes have customers who want to add an older teenager who is a minor to an account. Can a minor have joint ownership in a joint account, such as with a parent? Could the bank exercise a right of setoff in the parent’s other accounts for the minor’s overdrafts on the joint account? What identification should we require from the minor establishing a joint account with their parent?
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Yes, a minor can hold an account in joint ownership with another party, such as a parent. The Illinois Banking Act permits banks to open accounts for minors, “and the rules and regulations of such bank . . . shall be as binding upon such minor as if such minor were of full age and…
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One of our customers had set up automatic transfers from his checking account at our bank to make loan payments (for non-credit card loans). The customer has died. Can we continue withdrawing loan payments? What other procedures should we follow?
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We recommend reviewing your bank’s agreement with the customer that authorizes the automatic loan payments. If it provides that the customer’s debit authorization expires when the customer dies, your bank should cease debiting the loan payments. If your agreement is silent on this issue, your bank may be able to continue debiting the loan payments.…
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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…
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We have a customer who purchased a number of cashier’s checks dating back to 2014 that he has not yet delivered to the payees. Can we request that he redeem those checks or allow us to reissue them with more current dates?
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We believe that you may request — but not require — the customer to surrender the checks to your bank and have them reissued. The Illinois Supreme Court has recognized that the remitter of a cashier’s check remains the owner of the check until it has been remitted to the payee, and therefore the remitter…
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An auto loan borrower left his vehicle at a repair shop and failed to pay for the repairs. The repair shop has since moved the vehicle to a storage facility. The repair and storage fees are around $30,000, which exceeds the vehicle’s value. Are the liens for the repair and storage services junior to our lien? We have the vehicle title, which shows our lien, and we have not received any communications from the storage facility.
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The repair shop may be able to assert a common law artisan’s lien for its repair work, which would have priority over your bank’s earlier perfected security interest in the vehicle, but not for the storage fees. Illinois courts have held that a common law lien for repair services has priority over a secured lender’s…
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Our client services department spends a significant amount of time monitoring for restrictive legends on checks (such as “must be presented within 90 days”). Our deposit account disclosures state that we are not required to honor restrictive legends unless we have agreed to them in writing. Does that language protect us from liability with respect to monitoring for “two signatures required” endorsements? Would a commercial customer’s corporate resolution indicating that two signatures are required on all checks constitute “an agreement in writing”? Or would a separate contract be necessary?
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The Uniform Commercial Code (UCC) states that when an organization requires multiple signatures on checks, and a check of the organization is signed by only one signatory, the signature is considered “unauthorized.” Consequently, such a check would not be properly payable. If a bank made payment on the check, the customer could sue to have…
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We have a UCC financing statement that covers “all crops growing or to be grown,” and we have agreements with the borrower’s grain elevators to issue all checks to both us and the customer as co-payees. The borrower’s input suppliers do not have UCC financing statements covering the customer’s crops. Do we have priority over the input suppliers?
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Generally speaking, a perfected security interest in crops has priority over other unperfected security interests. We are not aware of any Illinois statutes that create a priority or superpriority lien for agricultural input suppliers (as in some other states). Consequently, we believe that this general rule would apply and that your bank would have priority…
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We want to change our bank’s name. Would that affect our UCC financing statements? Do we need to refile all of our statements with the bank’s new name?
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Generally, you are not required to update your financing statements. On a case-by-case basis, the UCC does recognize that equitable principles in a particular case could overtake this general rule. Such cases likely would be rare, and we would note that even after your name change, potential creditors would be able to identify that a…
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To perfect a purchase money security interest (PMSI) in inventory, we know that the Uniform Commercial Code (UCC) requires us to send an “authenticated notification” to other creditors with a conflicting security interest in the same inventory. What is an “authenticated notification”? What is the appropriate delivery method for the authenticated notification? Also, we know that the notification must be received “within five years before the debtor receives possession of the inventory.” Under this language, can a single financing statement and authenticated notification apply to all inventory that the borrower may purchase during that five-year period? Or do we need to file a separate financing statement and send a separate notice for each new piece of equipment the borrower purchases for resale during that five-year timeframe?
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Under the UCC, to “authenticate” a document generally means to sign it. With respect to delivering the authenticated (i.e., signed) notification, the UCC comments clarify that “either registered mail, return receipt requested, or the personal delivery of such notice, with receipt acknowledged in writing by the holder of the conflicting security interest, is obviously a…