According to Uniform Commercial Code, who is responsible for the resulting loss and/or liability for a late return check? Can a bank put a hold on the balance of a checking account to recover part of the money paid?
The simple answer is that the paying bank (perhaps we should say the "non-paying bank"?) -- the bank on which the check is drawn -- is accountable for the amount of the check in the event of a late return. There may be clearinghouse agreements that modify that general rule for certain types of returned checks. This may be the case with regard to counterfeit or forged checks, for example. Whether a bank can hold the balance of an account to recover funds deposited by check (when that check is returned late) will largely depend on the deposit agreement with its customer.
BankingQuestions.com is a free service made possible by the generous support of our advertisers. Advertisers are not responsible for site content. Please help us keep BankingQuestions.com FREE by supporting our advertisers. When you see an ad for a product or service you may have an interest in, click through to learn more.
Accounts
Article
Q&A
Podcast
Video
Blog
Discussions
PDF
Powerpoint
The simple answer is that the paying bank (perhaps we should say the "non-paying bank"?) -- the bank on which the check is drawn -- is accountable for the amount of the check in the event of a late return. There may be clearinghouse agreements that modify that general rule for certain types of returned checks. This may be the case with regard to counterfeit or forged checks, for example. Whether a bank can hold the balance of an account to recover funds deposited by check (when that check is returned late) will largely depend on the deposit agreement with its customer.
