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#2261380 - 10/21/21 04:58 PM Business Account - Fraudulent Checks
CSB98 Offline
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Joined: Dec 2003
Posts: 1,236
Wisconsin
We have a business account that has had multiple fraudulent checks written against it to the tune of almost $50,000. The bank has had to take this loss because we didn't receive notification from the customer until well past the 24-hour return deadline.

Our current account agreement states that the customer has 30 days from the day the statement was mailed to notify us of any discrepancies. Do we have any leeway in changing the number of days so that we can try to mitigate the losses?

If not, can we require customers to implement fraud protection strategies at their own cost - for customer that already have experienced fraud on their account (e.g. Positive Pay and/or ACH Alerts).

If a customer does not want to implement fraud protection, could we require them to sign a waiver of fraud protection and they assume all liability for future fraud losses?

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#2261385 - 10/21/21 05:51 PM Re: Business Account - Fraudulent Checks CSB98
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 77,258
Galveston, TX
A total waiver is going to be problematic and is something to address with your legal counsel. But if the customer does not want to use something like positive pay, you are more than able to send them down the street.
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#2261536 - 10/25/21 04:09 PM Re: Business Account - Fraudulent Checks CSB98
CSB98 Offline
Diamond Poster
Joined: Dec 2003
Posts: 1,236
Wisconsin
Any thoughts on whether we can change the timeframe for reporting fraud to the bank? Currently we have 30 days in our disclosures and we would like to change it to 24 hours so we can try to return the check within the return deadline.

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#2261537 - 10/25/21 04:19 PM Re: Business Account - Fraudulent Checks CSB98
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 77,258
Galveston, TX
ยง 4-103. VARIATION BY AGREEMENT; MEASURE OF DAMAGES; ACTION CONSTITUTING ORDINARY CARE.

(a) The effect of the provisions of this Article may be varied by agreement , but the parties to the agreement cannot disclaim a bank's responsibility for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack or failure. However, the parties may determine by agreement the standards by which the bank's responsibility is to be measured if those standards are not manifestly unreasonable.

Talk to your legal counsel as 24 hours might be considered manifestly unreasonable.
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#2261569 - 10/25/21 09:42 PM Re: Business Account - Fraudulent Checks CSB98
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 39,336
Cape Cod
A long time ago when I worked at a bank and had a generous library budget, I used to have a tome called "Brady on Bank Checks." It had all sorts of information on checks and articles 3 and 4 of the UCC and citations to court cases involving issues like this. When I last looked at Brady, courts were allowing banks to impose shorter customer reporting periods than specified in in UCC 4-406, and it looked like the line could be drawn tighter for business accounts. In some cases, 14 days was approved by a court, but the courts of one state would not have strong influence on the courts of another state. I also recommend consulting legal counsel conversant with what's going on in your state with respect to articles 3 and 4 (they might also have a current edition of Brady).

P.S. - Brady is now titled Brady on Bank Checks and Funds Transfers, and covers UCC articles 3, 4, and 4A. You can buy a print or electronic copy from Lexis Nexis for a mere $1348 or so.
Last edited by John Burnett; 10/25/21 09:46 PM.
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