Topic: Uniform Commercial Code
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One of our commercial credit analysts was told that we need to verify all business names with the Public Organic Record from the Illinois Secretary of State (at a $25 fee) and that a Certificate of Good Standing provided on the Secretary of State’s website is not sufficient.
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If a debtor is a “registered organization” (as defined under the Uniform Commercial Code (UCC)), we agree that a Certificate of Good Standing is not sufficient to verify the name of a debtor to be used on a UCC-1 Financing Statement. However, as noted below, not all businesses are “registered organizations.” Under the 2010 UCC…
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If a customer makes an “X” for her signature on her account agreement (due to a stroke), is that a legal signature on the account agreement?
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Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021.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. Yes, we believe the customer may mark an “X” as her legally binding signature. From…
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We were told that banks can accept stop payment orders over the phone, without the customer’s signature, provided that we send the customer a copy of the stop payment order. How can a stop payment order be valid if it is not signed within fourteen calendar days of giving the order?
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We believe that you could alter your account agreements to eliminate the requirement that customers send written confirmations of oral stop payment orders. The Uniform Commercial Code (UCC) does not require a signature on stop payment orders, but you should check your existing account agreements and confirm that your policies do not require a signature…
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We often receive checks drawn on our business accounts that are endorsed with “for deposit only,” without a signature or the customer’s account number. Should we be paying those checks?
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Because you have the guarantee of the depositary bank, we do not believe it is necessary to require endorsements with signatures or account numbers. When a depositary bank sends a check written by one of your customers for collection, that bank is warranting to you (and to your customer) that it has paid the check…
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Is it a best practice to monitor obituaries in case we see that any customers have died?
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Whether your bank wishes to monitor obituaries is strictly a business decision, and we are not aware of any legal requirements to monitor for customer deaths. Note that an account holder’s death does not automatically revoke a bank’s authority to pay checks drawn on the account. The UCC provides that a bank may continue to…
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Can we deposit a check made jointly to a customer and to a non-customer?
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You may allow the customer to deposit any check that is “properly payable” under the Uniform Commercial Code (UCC). If a check is made out to two people alternatively (payable to John or Jane), then only one of the payees needs to endorse the check. But if a check is made out to two people…
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I identified an issue with one of our vehicle loans. The borrower is married, but she never legally changed her last name to her husband’s name. However, her vehicle title (gifted by a family member) shows her name incorrectly, with her husband’s last name. As a result, our loan officer executed all of the loan documents using an incorrect name, as shown on the vehicle title, instead of the borrower’s legal name, as shown on her driver’s license. Should we have the customer re-sign the loan documents using her legal name? Should we refile our lien on the vehicle?
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In our view, whether your customer should re-sign the loan agreements and correct the vehicle’s certificate of title is a business decision. In general, customers should sign loan agreements and security agreements using their proper legal names, in order to remove any potential hurdles to enforcing the agreements. The most prudent route here would be…
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Can a check deposited in a business account be endorsed over to the business or does the check deposited in a business account have to be made out to the business itself and not endorsed over to the business?
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There are some risks in accepting checks that were endorsed to your customer by the payee of the check. Whether a check is made out to an individual or to a business entity, the bank may be risking liability to the payee of the check when allowing a customer to deposit such checks, as discussed…
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We are double checking our compliance with the new UCC Article 9 rules that went into effect at the beginning of the month. In regards to filings that were in place before the July 1, 2013 changes, can we amend them as they expire or do we need to amend all of prior our filings now?
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A good general rule is to shoot for updating your UCC-1 Financing Statements within one year to reflect the recent Article 9 revisions as to naming individual and business debtors. Under the recent Article 9 revisions, valid financing statements filed in Illinois will remain in effect until they would have lapsed under the previous version…