The Check Guide - October 2009, By Gene Eldering

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TABLE OF CONTENTS

1. FORGED MAKER CHECKS...1

A. General Rule...1

B. Payor Bank Defenses...2

C. Depositary Bank Defenses...13

2. FORGED PAYEE CHECKS...14

A. General Rule...14

B. Depositary Bank Defenses...17

3. ALTERATIONS...29

A. General Rule...29

B. Material v. Immaterial Alterations...29

C. Right to Enforce Altered Check...31

D. Payor Bank Defenses...31

E. Depositary and Collecting Bank Liability...36

4. FORGED/ALTERED CHECK CLAIM PROCEDURE...38

A. Obtain an Affidavit of Forgery/Alteration...38

B. Obtain Copies of the Forged/Altered Checks...42

C. Determine the Circumstances of the Loss...42

D. File a Suspicious Activity Report and Report Suspected Elder Financial Abuse...42

E. Provisional Crediting, Suspension and/or Closure; Tolling Agreements...43

F. Taking Action...47

G. Adverse Claims and Disputes...60

5. TIMING ISSUES...68

A. Midnight Deadline...68

B. Stop Payment Orders, Knowledge, Setoff and Legal Process...76

C. Chargeback...77

D. Federal Reserve Challenge Procedure...78

6. CHECK KITES...80

A. Definition...80

B. Elements...80

C. General Rule...80

D. Discovering the Kite...81

E. Interrupting the Kite...81

F. The Aftermath of a Kite...82

7. STOP PAYMENT ORDERS...84

A. General Rule...84

B. Proof of Damage...84

C. Subrogation...84

D. Holder in Due Course...85

8. MISENCODED CHECKS...89

A. General Rule...89

B. Damages...89

C. Defenses...89

9. DEATH/INCOMPETENCE OF CUSTOMER...90

A. Death...90

B. Incompetence...90

C. Knowledge of Death/Incompetence...90

D. Bankruptcy...90

10. SUBSTITUTE CHECKS...92

A. General Rule...92

B. Bank Warranties...92

C. Bank Indemnity...93

D. Consumer Rights...93

11. “FULL PAYMENT” CHECKS...96

A. General Rule...96

B. Exceptions...96

12. ACCOUNT TERMS THAT PROTECT THE BANK...97

13. DEFINITIONS...108

14. UCC INDEX...113

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Published In: Civil Procedure Updates, General Business Updates, Consumer Protection Updates, Criminal Law Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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