Topic: Uniform Commercial Code
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We sent an affidavit of altered check to a bank that cashed a check issued by our customer. The depository bank is now claiming under Regulation CC (12 CFR 229.38(i)(2)) that the presumption of alteration has been overcome because the check had an unauthorized signature of the drawer, making it a forgery and not an alteration. The signature on the check does not match the signature the drawer provided on the fraud affidavit, and the drawer cannot verify that the signature on the check is theirs. We believe this is because the customer’s signature was traced back onto the check after it was stolen from a U.S. postal box and washed, so it is not an exact match. Do we have grounds to sue the depository bank for violating the presentment warranties? Additionally, are there any time frames we should be aware of? We supplied an affidavit of alteration in August 2020 and did not get a response from the depository bank until April 2021.
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We cannot comment on whether you have grounds to sue the depository bank. If a court were to conclude that the disputed check was altered rather than forged, we believe that the depository bank could be held liable for violating its presentment warranties — but that outcome depends on whether you can prove that the…
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We recently had a non-customer call and request a copy of a check payable to her from December 2015 that her sister deposited into an account at our bank. We have a letter from the non-customer requesting that we allow the sister (our customer) to deposit the check, a copy of the non-customer’s driver license, their endorsement on the check, and the check stub. Do we have any obligation to provide the non-customer with a copy of the check?
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No, we do not believe any federal or state laws or regulations would require you to provide a copy of a check to a non-customer. The Uniform Commercial Code (UCC) requires that banks “maintain the capacity to furnish legible copies of items until the expiration of 7 years after receipt of the items,” but the…
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We have an account for a corporation that has been on our records for many years. We recently learned that this corporation (Customer, Inc.) was merged and consolidated into another corporation years ago, and the acquiring corporation subsequently opened a limited liability company (LLC) with a similar name (Customer, LLC). We have maintained the original account and have been accepting checks made payable to the name of the original corporation, the new LLC, and the acquiring corporation. Obviously, some of these checks are wrongly endorsed. Could we request that someone with authority provide us with a statement that would allow this practice to continue without recourse? Additionally, do we need to go through the process of closing and reopening a new account for this customer and conduct Bank Secrecy Act due diligence again? And, could this practice potentially present an issue with filing future Suspicious Activity Reports (SARs)? Finally, is it possible for a tax identification number to remain the same after a merger? We currently only have an Employer Identification Number (EIN) on file from the original corporation and are not sure whether this would be the same for the LLC.
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Yes, we believe it is possible to enter into a written agreement with the new LLC that would protect you from liability for the incorrectly endorsed checks (that have been endorsed in the name of the original corporation, presumably by an individual identified by the original corporation as its authorized signer). However, an agreement between…
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A business customer wrote a check to one of their vendors that was negotiated and cleared their account. One month later, the customer learned that their vendor did not receive the check. Apparently, a fraudster intercepted the check, created a business with the same name as the payee in another state, and used the check to open an account at another bank. The check was not altered. Who holds the liability for this check, can it still be returned, and do we need to credit our customer for the amount? Our customer notified us of this issue within sixty days of discovering it, as required by our account agreement.
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We believe you will need to credit your customer for the check. However, we believe your bank is entitled to demand repayment for the check from the depository bank, since it appears to have breached its warranty to you that the check did not have a missing or unauthorized endorsement. Under the Illinois Uniform Commercial…
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An international bank has wired funds to one of our customers. We believe that the wire was fraudulent and that the customer could possibly be a party to the fraud. If the international bank decides to recall the wire, may we send back the funds without the customer’s permission if the customer insists that the wire was not fraudulent? We currently have the funds frozen.
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In certain narrow circumstances described below, we believe that you may send the funds back to the originating bank without the customer’s permission — but there is no guarantee that you will be able to recover the funds from your customer after refunding the originating bank. Under the Uniform Commercial Code (UCC), once your bank…
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Can a bank charge non-customers transaction fees when cashing an economic impact payment (EIP) Visa prepaid card or an EIP check?
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We do not believe that the Visa rules permit you to charge fees for manually cashing an EIP debit card, although you may be able to charge certain ATM fees if the card is cashed at an out-of-network ATM. As for cashing an EIP check, we believe that the same rules under the Uniform Commercial…
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For a business checking account designated as “two signatures required for withdrawal” on the signature card, who is responsible for ensuring transactions that are not “on-us” adhere to this designation?
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We believe that a court could conceive the “two signatures required for withdrawal” language on your signature cards as your bank assuming the responsibility to enforce a multiple signature requirement. However, the Uniform Commercial Code (UCC) also requires your customers to examine their banks statements and notify your bank of any unauthorized instruments within the…
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We discovered that a cashier’s check issued on behalf of our customer was deposited and cleared at another institution, without the payee’s official endorsement. The check’s payee said that they do not bank with the other institution and the other institution stated that we need to submit a forged endorsement case so they can research it. How should we submit such a case? We have an “Affidavit of Alteration or Other Fraudulent Act” form, but we do not know whether the customer or the bank should sign and complete it, since it was a cashier’s check drawn on our bank’s account. Additionally, are there any Illinois Uniform Commercial Code (UCC) provisions we should consider?
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We believe that the “Affidavit of Alteration or Other Fraudulent Act” form should be signed and completed by your institution, as the relevant cashier’s check is a draft drawn by your bank against its own account. Your bank’s “Affidavit of Alteration or Other Fraudulent Act” form states that an account owner must sign and complete…
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We have a customer who would like to move funds from a personal checking account to an irrevocable child’s trust naming himself as the only trustee. What is our liability if he uses the money for personal use? Are we obligated to monitor withdrawals that the trustee transacts in the trust account? The customer has told us his intent is to shield the funds from the child’s other parent, and we know that the customer will continue to use the funds like it is his own account, even though it is under the child’s trust ownership.
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First, we recommend obtaining a Certification of Trust from the customer to verify that your customer is a trustee of the trust with authorization to manage the trust’s bank account. Under the Illinois Trust Code, a bank cannot be held liable for acting in reliance upon a certification of trust unless the bank has actual…