Topic: Uniform Commercial Code
-
A deposit customer recently notified us of a large amount of forged checks paid over the past several months. Our account agreement requires the customer to notify the bank of any forgeries within 30 days. Are we liable for the forged checks?
—
by
We do not believe that your institution will be liable for any forged checks that were not reported within the 30 days specified in your account agreement. Under the Uniform Commercial Code (UCC), a customer will be liable for any forged checks that are not reported with “reasonable promptness” (provided that the bank acted in…
-
What is considered acceptable notification that a bank must provide to a customer who receives a wire transfer?
—
by
In most cases, the required notification and method of notification will depend on your account agreement. The general rule under the Illinois Uniform Commercial Code (UCC) is that when you receive a wire transfer that instructs you to credit a customer’s account, you must notify the customer “before midnight of the next funds transfer business…
-
Can we file a UCC filing statement to perfect a security interest in a baseball card collection? What verbiage is required?
—
by
We believe that you may perfect a security interest in the baseball cards by filing a financing statement, as would be done with any other security interest in personal property. See 810 ILCS 5/9-310(a). The financing statement should describe the baseball cards, as it will become effective only if it “indicates the collateral covered” (among…
-
A Uniform Transfers to Minors Act (UTMA) account beneficiary has reached the age of 21 and wants to cash a check that is payable to the custodian (“to Sue Doe, custodian for John Doe”). Do we need the custodian to endorse the check before cashing it?
—
by
We believe you should require the custodian of the UTMA account to endorse the check before cashing it. In addition, you should contact and remind the custodian that the custodian now has an affirmative duty under the UTMA to transfer the account to its beneficiary, since he or she has reached the requisite age or…
-
Are we required to provide customers with a copy of the wire confirmation receipt that we receive after an outgoing wire is sent through Fedwire?
—
by
We are not aware of any law or rule that would require you to provide a copy of the actual wire confirmation. You should, of course, check your account agreements, which may require you to provide the receipt or some other notification for outgoing wires. Regulation J, which governs funds transfers through FedWire, does not impose…
-
We currently require our commercial deposit account customers to report unauthorized checks within 30 days. Can we shorten that timeframe, or is 30 days the minimum?
—
by
We are not aware of any UCC provisions or court cases that would prevent you from shortening the notification window for unauthorized checks, particularly for your commercial customers. Under Section 4-406 of the Uniform Commercial Code (UCC), if a customer does not notify a bank about forged checks with “reasonable promptness,” the bank will not…
-
When a depositary bank sends us a check issued by one of our customers with an improper endorsement — for example, a check made out to a business that is endorsed by an individual (John Smith) rather than by the business (ABC Company by John Smith) — should we pay the check?
—
by
If the check is payable to a business, and the improper endorsement does not change the check’s payee (i.e., it is an endorsement in blank), your bank most likely could rely on the depositary bank’s presentment warranties, as discussed above. While your customer could argue that your bank should not have paid a check with…
-
What is our liability for paying or permitting the deposit of unendorsed checks? Our current policy is to return checks that are missing the payee’s endorsement on the back, which upsets some of our customers. We’re considering a new policy of calling customers to ask if we should pay these checks.
—
by
While there is some risk in allowing customers to deposit checks that are not endorsed by the payee, there is less risk when paying unendorsed checks that are drawn on customer accounts. Payment of Unendorsed Checks Drawn on Customer Accounts When a depositary bank sends your bank a check for collection, the depositary bank has…
-
Do we need to require customers to bring in a physical copy of a certificate of deposit (CD) receipt if we have switched to book entry CDs?
—
by
Typically, “book-entry” CDs do not require physical presentment to the issuing bank. However, your bank’s book-entry CD agreements and your written policies for them should address the procedures for redeeming these CDs. As you have indicated, your bank has switched from traditional CDs to uncertificated CDs that are labeled as “non-transferable” and “non-negotiable.” These CDs…
-
A customer made a loan payment to our bank with a check drawn on another bank. The check was returned NSF. Our loan officer knew that the customer was receiving a direct deposit at the other bank and presented the check to that bank and asked for a cashier’s check. The other bank refused to issue a cashier’s check, and said that we would have to represent the check through normal channels. Is the other bank correct for doing this and why?
—
by
We are not aware of any law or rule that would require a financial institution as a payor bank to issue a cashier’s check for the amount of the check that was originally returned for insufficient funds. The Uniform Commercial Code (UCC) states that a bank may only charge a customer’s account for items that…