Unauthorized Paper Draft/ When Do We Recredit Acct

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Question:

A company has created a paper draft drawn on one of our depositor's accounts saying it was authorized by our customer, but the customer claims it was not. We are, of course, beyond the midnight deadline, but I plan to send the check without entry with a forgery affidavit to the depositing bank. Do I have to re-credit the customer's account immediately, or can I wait for the depositing bank's response?

Answer:

There is nothing in Regulation CC that prescribes when you must recredit your customer. If you received this item in a cash letter from the Federal Reserve, you should use the Fed's Adjustment Service to make your claim, rather than go without entry. You will find the Fed's instructions and requirements in their Check Adjustments Quick Reference Guide.

If you use the Fed's service, I'd recommend crediting your customer on the day you receive the credit to your Fed account for the claim, which will usually be the day after you make the claim. If you cannot use the Fed's service, you can decide whether you will wait until you hear from the depository bank to learn of their intentions. Remember that when you go bank-to-bank, there's a possibility that depository bank will deny your claim based on its belief that the check was actually authorized (the originating company may provide documentation of that fact), or that your bank should not have accepted the claim (perhaps because of delayed notice from your customer).

First published on BankersOnline.com 11/20/06