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#833313 - 10/12/07 12:39 PM Check Encoding Errors & the UCC
banker1976 Offline
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The written dollar amount on a customer's check was "Fifty Hundred dollars" (which theoretically is five thousand dollars) and the dollar amount in the box was written at $500. The check was processed for $500 but later a $4,500 adjustment was made to the account since technically the "Fifty hundred" in the written amount is correct at being $5,000 (because isn't "Forty nine hundred" the same as $4,900 and "Fifty one hundred" the same as $5,100?) Anyway is there any where specifically in the UCC that states a bank pays a check based on the written amount and not the numerical amount? I've searched some of the UCC but didn't have much luck in finding out information.
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#833343 - 10/12/07 12:56 PM Re: Check Encoding Errors & the UCC [Re: banker1976]
Andy_Z Offline
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This should be what you're after.

http://www.law.cornell.edu/ucc/3/article3.htm#s3-114

3-114. CONTRADICTORY TERMS OF INSTRUMENT.

If an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers.
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#903110 - 02/12/08 02:51 PM Re: Check Encoding Errors & the UCC [Re: Andy_Z]
MadisonCali Offline
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Originally Posted By: Andy Z
This should be what you're after.

http://www.law.cornell.edu/ucc/3/article3.htm#s3-114

3-114. CONTRADICTORY TERMS OF INSTRUMENT.

If an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers.


So if a customer comes in to dispute the amount on the check, and you can clearly see why it was processed the way it was (in accordance with UCC 3-114), do you just send the customer back to recoup the funds they 'say' they are owed from the person they wrote the check out to?
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#903181 - 02/12/08 04:08 PM Re: Check Encoding Errors & the UCC [Re: MadisonCali]
CheshireAliCat Offline
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We have a written policy, which includes that paragraph of the regulation, stating that if the difference is less than a dollar to go by the written amount, and if more than the amount, we will request the maker to write a new check, (or the payee, if that is who we are doing business with,) to request a new corrected check.

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#903375 - 02/12/08 06:33 PM Re: Check Encoding Errors & the UCC [Re: CheshireAliCat]
Anonymous
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MadisonCali, I have had this happen several times and I usually try to help our customer by contacting the bank, explaining what happened and see if their customer deposited the check for the 'written amount' or was it encoded that way in proof after the fact and an 'adjustment' given to their customer. Most of the time this has happened, the check was deposited for the numerical amount as well and proof encoded for the written amount. The other bank(s) contacted their customer to confirm the amount and returned the 'adjustment' to our customer.

You could do the same thing and see if the other bank will help you out, if not, it would be up to your customer to get with the payee to recoup the funds.

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#903396 - 02/12/08 06:47 PM Re: Check Encoding Errors & the UCC [Re: ]
MadisonCali Offline
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The other bank is a 'big' one that I doubt will be helpful (from past experience). I'll give it a shot, though, and proceed as you suggested.

Thanks!
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#903916 - 02/13/08 02:53 PM Re: Check Encoding Errors & the UCC [Re: MadisonCali]
John Burnett Offline
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The depositary bank is responsible for encoding errors. UCC 4-209.

If the check is under-encoded, the check's drawer holds extra funds, and has no incentive to pursue the error unless pushed by the payee. The payee is not covered by the warranty in 4-209, but is entitled to full payment from the drawer on the underlying transaction.

If the check is over-encoded, the drawer has a strong incentive to pursue the error with the paying bank, which has a warranty claim under 4-209 against the encoding (depositary) bank.
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#904519 - 02/13/08 10:48 PM Re: Check Encoding Errors & the UCC [Re: John Burnett]
MadisonCali Offline
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The issue here that I was confused about is that I don't really believe it's an encoding error. It's encoded using the written amount, and the box/numerical amount could go either way.

The customer is just saying it should've been the smaller amount (of course), and I was wondering if we even had to pursue it, because I know the depository bank will leave it the way it is.

As well they should, really, because it was encoded correctly according to UCC 3-114.
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