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30 Days or 24 Hours for Discrepancy, Who Loses

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I understand that a customer has 30 days from statement date to notify bank of any discrepancies, however a payer bank only has 24 hours to notify a depository bank of fraudulent items. Scenario: My bank is presented an item and it clears my customer's account, then a week later my customer calls and says they did not write the check and the signature must have been forged. The 24 hour reclamation period has expired but according to UCC 4-406 the customer notified me in a reasonable amount of time. What action can I take to receive credit for the item or do we credit the customer and take a loss?

Assuming that we're talking about a forged drawer's signature, in general the paying bank is the one that holds the bag in such cases. You are held to a higher standard because you're in the business of handling checks and your customers have to depend on your ability to tell the difference between real and bogus checks.

There are some limited cases in which a bank has successfully laid off the "blame" on its customer due to carelessness in securing checks, facsimile signatures, etc. But these usually involve business accounts.

Your customers are given more time to allow for delivery of the statement and for the fact they aren't in the business of banking.

And, by the way, in some states you can get away with shortening the statement examination period by saying so in your deposit contract. Some banks have successfully used 14 days.

First published on 08/16/04

First published on 08/16/2004

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