A customer reviewed his monthly statement and discovered 3 drafts that were paid, he claims were unauthorized. The drafts were payable to 3 different payees, and all were verbally autorized. The names given on the account were all different and are certainly fake. Do we have any way to recover the funds once we miss the midnight deadline.

How ironic that two Pennsylvania posters asked essentially the same question in two different forums on the same morning (or is it more than mere coincidence?).

Anyhow, here's a copy of my response to the other post:

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There have been scores of posts on this topic on BOL. Click the SEARCH link above, select all forums and the entire phrase "unauthorized draft" and you will find lots of discussion on this.


Find out whether Pennsylvania has adopted versions of articles 3 and 4 of the Uniform Commercial Code that mention consumer drafts or something similar in the sections on Transfer and Presentment Warranties. The language will say that the party transferring or presenting the draft warrants that the consumer/customer on whose account it is drawn authorized the draft. If you find that language in your version of the UCC, the bank may be able to return the draft without entry and recover the loss.


The bank of deposit has to be in a state that has adopted this sort of language, as well.



Otherwise, it will be too late to return the draft because it will fall under the midnight deadline rule.



Suggestion: Before accepting your customer's word that the draft was not authorized, look at the serial number (if any) on the "preauthorized check." If it's in the range of check numbers the customer is using, there is a likelihood (not a certainty) that your customer authorized the draft and is now suffering from a belated case of "buyer's remorse." You may also be able to contact the issuer of the draft and listen to a recording of the telephone authorization, if it occurred.

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