Topic: Uniform Commercial Code
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How do you recommend that we conduct UCC searches in Illinois? The Secretary of State’s office told us that we have to mail in search requests and submit either a blank check or a photocopy of a credit card for payment; is there a more efficient way to submit and pay for lien search requests?
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The Illinois Secretary of State does offer free, online UCC searches at http://www.ilsos.gov/uccsearch/, but the free search results are uncertified. The Secretary of State requires a UCC-11 form and payment for certified search results. As an alternative to submitting search requests to the Secretary of State directly, you might consider using a third party to…
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An elderly customer purchased a $9,000 cashier’s check. She came in the next day to request a stop payment, as she now believes that she was defrauded — she had received a telephone call from someone claiming to be with Publisher’s Clearinghouse, who told her that she had won and needed to send in a $9,000 cashier’s check to withdraw her winnings. Can we stop payment?
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No, we do not believe that you should stop payment on the cashier’s 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 under the Uniform Commercial Code (UCC) if…
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A customer submitted a stop payment order using an incorrect check number. As a result, we paid the check. We are attempting a manual return today. What is our potential liability if the return is rejected?
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We cannot predict how a court would allocate liability between your bank and the customer without additional facts. It may be possible to argue that your bank should not be held liable due to the customer’s failure to provide the correct check number, but it will depend on the facts of the situation. The Uniform…
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We provided a line of credit to a farmer who used the proceeds to plant his crops on rented land. We recently found out that he has not paid his cash rents and the landlord is threatening him with a lawsuit. As the lender, does our bank face any liability for the farmerâs unpaid rent? Also, we have a security interest in the crops on the rented land, for which we filed a UCC financing statement. What if the landlord also filed a financing statement for those crops? Do we have priority over the landlord?
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First, although we cannot provide legal advice, we are not aware of any liability that your bank might face for your borrower’s breach of his rental agreement with his landlord. Under Article 9 of the Uniform Commercial Code, the fact that your bank has a security interest in your borrower’s crops does not subject you…
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A corporate customer requested that we refuse to honor checks they have written that are more than nine months old. Is that legal?
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Yes, you may decline to honor checks that are more than nine months old. Under the Uniform Commercial Code “a bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, which is presented more than 6 months after its date, but it may charge…
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What is our potential liability for a check with four payees that was deposited in a customer’s account? The check has four endorsements, but we did not see the endorsements happen and did not verify the signatures. Could we be liable for an unauthorized endorsement? What is the statute of limitations for a claim?
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Under the Uniform Commercial Code (UCC), your bank could be liable under its presentment warranties to the payor bank if one of the indorsements turns out to be unauthorized. When forwarding the check to the payor bank for payment, your bank is warranting that all of the check’s indorsements are authorized. In the event one…
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We use the Thumbprint Signature Program® offered through the IBA. A non-customer came in to cash a check, and we requested her thumbprint. She refused saying that it is illegal to require a thumbprint. I assume she is wrong, but how do I respond?
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You are correct that requesting thumbprints from non-customers prior to cashing their checks is not illegal. Neither Illinois nor federal law prohibits this practice, and it is a simple way to reduce check fraud. The OCC has implicitly endorsed fingerprinting programs, provided that they are applied consistently and non-discriminatorily. We also note that a bank…
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Three years ago, a small business customer purchased a cashier’s check in the amount of $5,500 payable to a car dealer for the purchase of a car. The car sale fell through and the cashier’s check was never presented to the dealer. Subsequently, the company went through bankruptcy and closed its account with us. Now the president of the company would like us to reissue the check to her personally. Can we do that? I don’t want any trouble with the bankruptcy court.
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We believe that you may reissue the cashier’s check, but only if the request comes from the company’s bankruptcy trustee or a successor-in-interest to the trustee. 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…
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One of our Interest on Lawyer Trust Account (IOLTA) customers has been depositing checks made out to the lawyer’s business clients into his IOLTA, without endorsements from the businesses. Do the IOLTA rules permit these deposits? Should we require that the checks be endorsed by the payees before depositing them?
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Yes, we recommend that you require IOLTA customers to obtain endorsements on checks made out to third parties before depositing them (as you would with any other customer). Otherwise, your bank is risking liability to the payor bank under your presentment warranties. When sending a check for payment to the payor bank, your bank is…