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How Long to Return Item on Paper Draft

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We have a customer that authorized a company to debit her account $800.00. The company sent a paper draft in the amount of $995.00. How long do I have to return the item?

What you have described sounds like it fits the definition of "remotely created check" (RCC) under Regulation CC. The bank that accepts a RCC for deposit, and each bank that subsequently transfers or presents it, warrants to each subsequent holder of the check and to your bank that the person on whose account the RCC is drawn authorized its issuance in the amount and to the payee stated on the RCC.

An RCC issued for more (or less) than the amount the depositor authorized is therefore unauthorized, and you need to obtain an affidavit from your depositor that the RCC was not authorized to be issued in the amount and to the payee appearing on the RCC. You have a year to make your claim against the depositary bank on a without entry basis.

If your bank had a defense to your customer's claim (as would be the case if your customer failed to notify you of the unauthorized RCC within a contractually-imposed deadline for such notification), the depositary bank has a defense to your claim on it.

If you received the RCC in a cash letter from the Federal Reserve, you can use the Fed's adjustment process within 90 days of the original cash letter date. Your bank will receive the adjustment within a couple of days.

First published on 10/17/11

First published on 10/17/2011

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