Please help...I've been told by our compliance officer that bank in Illinois cannot charge more than $4.50 on deposited items returned. I don't agree but can't find how to prove it. Can you please share with what you know or any insight you may have on this fee category. Thanks in advance for your help.

fg

Section 806 of Article 3 of the Illinois Uniform Commercial Code provides as follows (note the last paragraph):

"Sec. 3-806. Any person who issues a check or other draft that is not honored upon presentment because the drawer does not have an account with the drawee, or because the drawer does not have sufficient funds in his account, or because the drawer does not have sufficient credit with the drawee, shall be liable in the amount of $25, or for all costs and expenses, including reasonable attorney's fees, incurred by any person in connection with the collection of the amount for which the check or other draft was written, whichever is greater, and shall be liable for interest upon the amount of the check or other draft at the rate provided in subsection (1) of Section 4 of the Interest Act. Costs and expenses shall include reasonable costs and expenses incurred in the nonlitigated collection of the check or other draft.

A person who undertakes a nonlitigated collection against the person who issued a check or other draft that is not honored upon presentment shall make a written demand by certified mail, return receipt requested, delivered to the last known address of that person in order to become eligible for any costs and expenses in excess of $25. The written demand shall demand payment within 30 days of the mailing of the demand and shall include notice of liability for the costs and expenses.

A fee or charge not to exceed $4.50 may be assessed to any person or owner of a commercial checking account or other similar commercial account where a check or other draft that is deposited into the account is dishonored upon presentment because of insufficient funds or because the drawer does not have an account with the drawee; provided, however, that, the limitation on the fee or charge specified in this paragraph does not apply to any fee or charge assessed to any bank or other depository institution or to any non-commercial checking account or other similar non-commercial account." 810 ILCS 5/3-806.

This last paragraph was placed into Illinois law at the initiative of the Illinois Retail Merchants Association back in 1986. Initially, this provision prohibited the assessment of any returned check fee on a commercial account. The Illinois Bankers Association initiated legislation that bumped this flat prohibition to a $4.50 cap in the early 90's. To my knowledge (although I haven't checked in years), only New Jersey has a similar law.

Note that this deposit account fee restriction almostly certainly is pre-empted for national banks. However, for competitive reasons, many national banks in Illinois voluntarily comply with the provision.

Also note that this restriction only applies to commercial accounts, not to consumer accounts.

Bruce Jay Baker, Executive Vice President & General Counsel, Illinois Bankers Association
Visit us at http://www.ilbanker.com

Thanks very much Bruce.