Topic: Uniform Commercial Code
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A customer requested a change of beneficiary for a payable on death (POD) account, and we mailed them a change in beneficiary form. Before we received the completed form, the customer died. A day later, we received in the mail the customer’s completed form designating a new beneficiary for the account. Who is the rightful beneficiary, the one in our system or the one on the form?
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Whether you have the authority to accept the change in beneficiary form depends on whether your bank knew of the POD account holder’s death before receiving the form. Also, if different beneficiaries are making conflicting claims to a POD account, your bank may wish to take advantage of an Illinois law that authorizes you to…
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Are e-signed loan documents valid and enforceable if they are signed after the date entered on the note or signed with a name other than the borrower’s full legal name? For example, a borrower electronically signs a note dated October 25 on October 26, or a note referencing a borrower named “Jonathan Doe” is electronically signed with the name “John Doe.”
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Electronic signatures generally are valid on most loan documents in Illinois, and we do not believe that signing a document after its stated date or with a shortened version of the borrower’s full legal name would invalidate the document. However, special requirements apply to electronic promissory notes that are negotiable instruments, as discussed in more…
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Our bank underpaid a check issued by a customer due to an encoding error, and the collecting bank has sent us a Federal Reserve adjustment to collect the remaining amount. However, in the time between paying the check and receiving the adjustment, our customer (the payor) died. The customer’s account was payable on death (POD), so we distributed the funds to the designated beneficiary and closed the account. The POD beneficiary then used the funds to open a new deposit account at our bank. Can we use funds from the beneficiary’s deposit account to pay the remaining amount?
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No, we do not believe you may charge the beneficiary’s account to cover the underpayment, as the funds in that account belong to the beneficiary, and the beneficiary did not authorize your deceased customer’s check. Under the Illinois Trust and Payable on Death Accounts Act, a POD beneficiary becomes the sole owner of a POD…
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Our customers have begun to receive Illinois tax rebate checks, and the checks made out to more than one person do not have an “and” between the names, which we typically see on checks requiring two signatures. Do both payees need to endorse these checks, and can the checks be deposited into an account belonging to only one of the payees?
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No, we do not believe both payees need to endorse checks that do not contain an “and” between the payees’ names and are ambiguous as to whether they are payable to the payees alternatively. We also believe the checks may be deposited into an account belonging to only one of the payees. The Illinois Uniform…
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We learned that one of our customers had three fraudulent checks drawn on his account after we alerted him that he had overdrawn his account. We believe that the checks are counterfeits and the fraudster forged our customer’s signature on them. The checks all were deposited at different banks. We returned the checks to the Federal Reserve four days after we paid them and received a claim of late return for one of them shortly after. The Federal Reserve says we have twenty days to respond to the claim. What is our best option for responding to the claim of late return?
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We believe your bank likely is liable for the check since you returned it after the midnight deadline. Your bank would have a defense to liability for the check only if the depository bank breached a presentment warranty to your bank or your customer’s negligence substantially contributed to the making of the forged check. Under…
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We are aware that when a check made out to multiple payees is ambiguous as to whether it is payable to the payees alternatively, it can be negotiated by any of the payees. Is this rule the same if the check is a government-issued check, such as a tax refund?
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Yes, we believe that the rule regarding multiple payees on a check applies to government-issued checks in the same way it applies to non-government checks. The Illinois Uniform Commercial Code (UCC) states that “if an instrument payable to 2 or more persons is ambiguous as to whether it is payable to the persons alternatively, the…
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What is the maximum returned check fee that a nationally-chartered bank is allowed to charge commercial and consumer deposit account customers in Illinois?
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We do not believe that there is a maximum returned check fee that a national bank may charge commercial or consumer deposit account customers in Illinois. Returned Check Fees for Consumer Deposit Accounts We are not aware of a limit on returned check fees for consumer deposit accounts under Illinois law. The National Bank Act…
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We originated a consumer mortgage loan to joint borrowers, who recently informed us that they have legally changed their names. Is there anything we need to do other than document this in the loan file? Should we be concerned that the borrowers’ names now do not match the loan documents?
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No, we do not believe you need to take any additional action to address a consumer customer’s name change after updating your internal loan file and verifying the name change, as your promissory note, mortgage, and current lien position would not be affected by a name change (subject to the caveat for blanket UCC financing…
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Are we required to reimburse our business customer if a check clears their account and is paid, but the intended payee claims they never received payment? The payee is refusing to provide us with an affidavit stating that they did not receive the check, and the bank of first deposit will not reimburse us without it. Additionally, when a customer notifies us of a potential improper payment, do we need to provide them with credit before receiving reimbursement from the bank of first deposit for breach of its presentment warranties? If we have to provide credit during our investigation, what is the time limit?
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We believe that whether you need to reimburse your business customer depends on the specific facts of the situation and your agreement with the customer. The Illinois Uniform Commercial Code (UCC) states that a bank may charge a customer account for an item that is “properly payable,” but it does not provide a specific timeframe…
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A customer with a Treasury check made out to her as the administrator for her deceased son would like to deposit the check into her personal account. The check appears to be for the son’s tax refund, and the customer has presented us with a copy of a certificate of voluntary administration issued by a New York county court. The certificate indicates that it is not valid without the court’s raised seal, and the copy does not have a raised seal. The customer also presented us with an IRS Form 56 (Notice Concerning Fiduciary Relationship), but we have not received a death certificate. Can we deposit the check into the customer’s account based on this documentation?
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No, we would not recommend permitting the customer to deposit a check made payable to her as the administrator for her deceased son into her personal account. We believe that New York law would prohibit such a transaction, and the transaction could potentially result in a breach of the Uniform Commercial Code (UCC) warranties. While…