Skip to content

Breach of Warranty Claims: Fictitious Checks (UCC)

Answered by: 

Question: 
Recently we have been receiving Breach of Warranty Claims for fictitious checks and/or forged maker signature checks drawn on the Bank's submitting the claims. My understanding is that under the UCC the paying bank has until its midnight deadline to return a check for these reasons. We initially denied the claims, but have now received demand letters stating that are in breach of warranty provisions. Along with these claims, banks are providing hold harmless agreements stating that their customer has filed formal complaints with law enforcement. From what I can ascertain they are attempting to use the warranty to claim that the creation of a fake check is an "alteration". We don't belong to a clearing house that allows warranty claims on fraudulent checks. Any insight you can provide is most greatly appreciated.
Answer: 

Based on your description of the sequence of events, it sounds like the drawee banks are fishing to try and pass the liability to your institution. There is no warranty that has been breached and the hold harmless is likely an attempt to get your institution to accept the late return and debit your customer for whatever funds may still be in the account.

The responsibility under the UCC to identify a counterfeit check belongs to the drawee bank.

First published on 11/19/2017

Filed under: 
Filed under compliance as: 

Banker Store View All

From training, policies, forms, and publications, to office products and occasional gifts, it’s available here:

Banker Store

hot right now

image description

Looking for effective, convenient training on a particular subject?

BOL Learning Connect offers more than 200 courses ON-DEMAND or on CD ROM from AML to Reg Z and every topic in between.

Search Topics