Tom McCutcheon – Attorney at Law
Q: I was contacted by my bank as to the amount of money that I had in my account. I think they wanted me to use their investment firm, but they told me that if someone stole my checks, they could do a lot of damage. If someone stole my checks, forged my name and used them, am I responsible for those checks?
Anxious and Worried
A: The Uniform Commercial Code (UCC) is a code for doing business that is uniform throughout the United States. The UCC is divided into a series of chapters which cover sales, leases, negotiable instruments, security interests and other business related laws.
Under the UCC provision that regulates bills and notes, banks are required to recognize their customer’s signature. Truly this is an archaic requirement in an age where checks are processed by computer. Nevertheless, if a bank pays a check over a forged indorsement, the bank has breached its duty to its customer and the bank is responsible to restore the money to the customer’s account.
There are a few “buts” to the rule. The customer must take adequate safeguards to prevent the theft of their checks. The customer must timely review their bank statements and recognize that a forgery has taken place. If multiple bank statements over a period of months go by and during those months if multiple forged checks are reflected on these monthly statements, the bank should only be responsible for those checks that were improperly paid on the first monthly statement.
Further, if the person who stole the checks is caught, you must agree to prosecute and assign your right to the bank after they return your money to your account. If it is someone who has regular access to the place where the checks are kept, the bank would only be responsible the first time.
So while the law is clear that the bank is responsible for only honoring checks that are actually authorized and signed by the account holder or account owner, there are equal responsibilities that the account holder has to the bank in terms of diligence in detecting fraud after it has occurred.
Buckle up and drive safely.
McCutcheon & Hamner, P.C.
2210 Helton Drive
Florence, Alabama 35630
Telephone: 256-764-0112
Facsimile: 256-764-1124
