Topic: Uniform Commercial Code
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Do we have only four months to amend our UCC-1s if a debtor changes their name?
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If a loan is secured by a “blanket” financing statement, and the borrower has changed its name, the bank must amend the financing statement with the new name within four months in order to retain perfection over any after-acquired property. 810 ILCS 5/9-507(c).
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If we filed a UCC financing statement with incorrect punctuation in the name of the debtor, do we need to file amendments?
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Legally, differences in the punctuation of an organization’s name in a UCC financing statement should not affect the validity of the financing statement (as explained below). However, we believe it is a best practice to include punctuation and to ensure that it matches a business’s name exactly (which would require examining the organization’s most recent…
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If a customer got married, adopted a new last name, and moved out of state, should we require the customer to sign new signature cards, loan agreements, and so on? Some loans and accounts are in the customer’s individual name, others are in the names of the customer’s businesses.
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While you will likely be able to enforce any existing agreements against the customer, we believe it would be a best practice to require the customer to sign new signature cards and any other agreements that she signed individually (including signature cards, safety deposit box agreements, loan agreements, individual guarantor agreements, and security agreements such…
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A customer has asked that we reimburse her for several check forgeries on her account. If our account agreement requires customers to notify us of forgeries within thirty days, are we liable for any of the checks for which the thirty day notice period has passed?
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We do not believe that the bank would be liable for any forged checks if a customer failed to notify the bank of the forgeries within the thirty-day notification period. 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…
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A customer came with a check made out to an insurance company that was endorsed to the customer, but it has a red stamp stating “cancelled endorsement.” Can we accept this check?
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Because the check has two red flags — it’s a third party check, and the endorsement has apparently been cancelled — we recommend sending the item for collection.
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Are there any laws in Illinois that regulate how we post checks for payment?
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You are correct that federal law does not require any particular check posting order, and Illinois law is equally permissive (provided that the bank complies with its own deposit agreements). However, as we discuss below, the FDIC has issued guidance that seems to discourage the use of high-to-low posting orders (without explicitly condemning the practice).…
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If a customer would like to take out a loan secured by securities, how should we perfect our security interest in the securities?
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This can be done using a type of agreement known as a “Control Agreement for Uncertificated Investment Property.” The purpose of this agreement is for a lender (such as your bank) to perfect its security interest in a specific kind of loan collateral—uncertificated securities.• The agreement has three parties: (1) the brokerage firm, (2) the…
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Can we use a demand deposit account (DDA) as collateral for a loan?
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First, we note that the Regulation Z disclosure you mentioned would not apply to a business loan. 12 CFR 1026.1(c)
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When are we required to release a security interest on a titled vehicle if the same vehicle is used to secure multiple loans?
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We believe that you would not be required to release the certificate of title on a vehicle until all loans secured by the vehicle are fully satisfied (not just when one loan secured by the vehicle is satisfied). The Vehicle Code requires that you deliver a release of the security interest and the vehicle’s certificate…