Topic: Uniform Commercial Code
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Can we permit a blind customer to use a rubber stamp to sign checks?
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Yes, you may permit the customer to use a stamp of her signature to sign her checks. The Uniform Commercial Code (UCC) expressly states that a signature may be made by means of a device or machine. The UCC comments further clarify that “[a] signature may be handwritten, typed, printed, or made in any other…
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We have a customer who wants an auto loan. The customer has good credit, but is subject to a federal tax lien. If we make the loan (secured by the car), what is our priority in relation to the tax lien?
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The federal tax lien would have priority over your secured interest in the car. A security interest takes priority over a previously recorded tax lien only if the secured party does not have “actual notice or knowledge” of the tax lien at the time the security interest is created, which is not the case here.…
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We refinanced a mortgage loan that is secured by a manufactured home and the underlying land. The original lender had taken a mortgage in the underlying land, notated its lien on the manufactured home’s title, and filed a UCC-2 form for the manufactured home. That lender released its mortgage and removed its lien from the title, but it has not released its UCC lien. We have had no luck working with the lender — they appear not to understand (they just keep resending the mortgage release instead of a UCC release). Can the borrower file something to release the UCC lien?
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Yes, the borrower (or even your bank) may file a termination statement regarding the UCC lien, provided that the borrower is entitled to the termination, and, if your bank files it, the termination statement indicates that the borrower authorized the filing. Once a secured obligation has been satisfied, the UCC requires the secured party to…
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A customer ordered a cashier’s check from us for a real estate loan closing. The attorney at the closing shipped the check using UPS next-day shipping, but UPS has lost the package. The customer would like us to reissue the check. Can we reissue the customer’s cashier’s check?
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Yes, your customer may request a reissued cashier’s check after presenting a declaration of loss for the original cashier’s check. However, this approach carries some risk for your customer, as the declaration of loss will not become effective until 90 days have passed from the date of the original cashier’s check. The Uniform Commercial Code…
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We use an Affidavit of Alteration, which customers use to report forgeries and alterations, including a forgery of the customer’s signature on an endorsement. However, I don’t think customers should use this form to claim that a payee’s endorsement was forged on the customer’s check. Should we use the Affidavit of Alteration form in those cases?
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We recommend modifying your Affidavit of Alteration form in cases involving a payee’s forged endorsement on a check, or using a separate form entirely. We agree that in most instances, a customer will not be able to verify that a third party payee’s endorsement was forged. But if a customer notifies your bank that a…
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We have two deposit customers who recently died. The first customer’s estate is represented by an executor. Can we permit the executor to deposit a check made out to the decedent into an estate account? The second customer was a joint accountholder with his wife. Can the wife deposit a check made out to the decedent into the joint account?
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Yes, an executor has the authority to endorse and deposit checks made out to the decedent into the estate’s account. In the second situation, however, we do not recommend permitting the wife to deposit the check into the account (which is no longer a joint account), unless fewer than ten days have passed since your…
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Do we need to obtain ink or wet signatures on stop payment orders? Do we need a written acknowledgment of stop payment orders?
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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 believe that you may accept electronic signatures for stop payment orders. Both Illinois…
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One of our bank board members owns a business. The business mailed a check to a vendor. Forty days after the check was cashed, the vendor notified the business that the vendor did not receive the check. The business customer requested a copy of the check that was cashed and discovered it had been altered. Is the business customer liable for the fraudulent check? Should the payor bank give the business customer credit for the check? Can the business do anything to receive provisional credit or is that subject to bank procedure?
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Based on the facts provided, it is difficult for us to determine who is liable for the altered check, and we recommend that your board member review his account agreement with the payor bank and consult with an attorney to assess the various factors discussed below. In general, a payor bank that pays a fraudulently altered…
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When another lender has an existing security interest perfected by a UCC-1 financing statement that covers all of the debtor’s commercial assets, would that apply also to the warehouse receipts from a grain elevator? Or could we, as the second lender, obtain priority by taking possession of the warehouse receipts? The elevator itself is the borrower and owns the grain covered by the warehouse receipts.
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If the other lender’s financing statement covers the grain, we do not believe that you can obtain priority over the other lender’s security interest in the warehouse receipts or in the underlying grain. But if there is a defect in the other lender’s financing statement, or if it does not cover the grain, then it…
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How long do we have to file a UCC financing statement after making a purchase-money loan secured by farm or construction equipment?
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We are not aware of any deadline for filing a UCC financing statement for a purchase-money loan secured by farm or construction equipment. However, unless you file your financing statement within 20 days after the debtor receives the equipment securing the loan, you risk losing your priority over other creditors. While the rules of priority…