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Counterfeit Check Charge Bank Disclosure

Question: In one of your past issues on the Question and Answer page you addressed the problem of the bank that cashed a counterfeit check. When the bank had the check returned and tried to charge back the customer's account, the lawyer representing the customer pointed out to the bank that cashing the check, according to the Uniform Commercial Code, was "final payment" and the bank had no right to charge back the check.

In your answer you said that you "... never forgot that, and when it was my turn to be boss the agreement was changed!" I assume this referred to your bank adding language to their disclosure brochure that would allow them to charge back a cashed check. I'd like to add that to our disclosure. Can you tell me what the exact wording should be?

Answer: You have a good memory - that question was some months ago. The Uniform Commercial Code does say that cashing a check is "final payment" but our attorneys went beyond that section, making sure that it was in the area of the UCC that can be varied by agreement between the depositor and the bank. (Section 4-103)

The wording you are looking for would be similar to this: "If I owe you any money, either directly or indirectly, you may use the funds in my account(s) as payment upon such debt. If our account is a joint account, each joint owner hereby acknowledge your right to offset for the debt of any one or both of the joint owners."

This wording would not go into your disclosure, however. It would be placed in your depositor agreement under Terms & Conditions, under "Set Offs."

Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 8, 8/05

First published on 08/01/2005

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