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Midnight Deadline for Forged/Altered Items?

It has been my understanding that a bank has up to a year to return items in the event the item is altered or the endorsement forged. I have another bank stating that the midnight deadline applies. Could you please provide clarification. I am located in Florida.

by Brian Crow:

Your midnight deadline applies to items you are returning through the Fed. If you are presented with a claim of forged endorsement or alteration, you may submit a without entry claim to the bank of first deposit claiming a breach of presentment warranties under your state's Uniform Commercial Code based on its statute of limitations.


by John Burnett:

Alterations and forged indorsements have different deadlines. It's a Uniform Commercial Code issue, and may require looking at other parts of the state law. If yours is the paying bank, you will look at Florida's UCC. In Florida's version of section 4-406 of the UCC (Title XXXIX Chapter 674, section 674.406 -- Customer's duty to discover and report unauthorized signature or alteration), we find that there are various timing requirements but, in paragraph (6), we read "Without regard to care or lack of care of either the customer or the bank, a customer who does not within 180 days after the statement or items [reflecting payment of the check] are made available to the customer (subsection (1)) discover and report the customer’s unauthorized signature on or any alteration on the item or who does not, within 1 year after that time, discover and report any unauthorized endorsement is precluded from asserting against the bank the unauthorized signature or alteration."

That sets a bar on claims by your depositor. If your bank honors a claim made by your customer after the applicable deadline, you won't be entitled to enforce a warranty claim against the depositary bank.

Straight returns are limited by the midnight deadline. These include returns of checks unpaid due to stop payments, overdrafts, a forged drawer's signature and other problems the bank can readily detect from the face of the check or from the account status (a return for post-dating or for a stale date would also fall into the group of returns that need to meet the midnight deadline). When the depositary and paying banks are both subject to a Fraudulent Check warranty provision of a check clearinghouse (ECCHO, for example) the paying bank may be able to return a fraudulent check (counterfeit or forged drawer signature) within a more extended deadline under limited circumstances.

Breach of warranty claims aren't returns of a check. They are claims made against the depositary bank when the paying bank believes the depositary bank breached a warranty (e.g., the presentment or transfer warranties in §§ 4-207 and 4-208 of the UCC) when there is an allegedly forged indorsement (or missing indorsement) or the warranty made under § 4-205 when there is no payee indorsement.

Check with local legal counsel concerning the time limit for a breach of warranty claim.

First published on 12/15/2019

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