Thursday, April 18, 2024

September 2012 Legal Briefs

  • Stopping Payment on Cashier’s Checks
  • "Safe Harbor" Provision in Reg E’s Remittance Transfers Rule
  • CFPB Proposal Status Update
  • Your Latest Q&As

By John Burnett

Stopping Payment on Cashier’s Checks

Based on some of the emails and phone calls we’ve received in the last few weeks, there are a lot of Oklahoma bank customers who woke up in August to realize they had been sucked into a huge scam. And many of those customers have contacted their banks for help in desperate attempts to retrieve their money. What is the appropriate response when a bank’s cashier’s or teller’s checks are caught up in such a scam?
In mid-August, the SEC announced that it was bringing charges against, its parent company, Rex Venture Group, and Rex Venture head Paul Burks, for allegedly luring more than a million investors around the world into what the agency described as a "$600 million Internet Ponzi scheme ‘on the verge of collapse.’" In spite of the heavy media coverage of the much larger Madoff scheme less than four years ago, the ZeekRewards "affiliate" lure somehow activated the infamous "It can’t happen to me!" gene in millions of Internet targets, by using the infamous Ponzi tactic of paying unsustainable "profits" to early investors who were all too happy to tout their good fortune to unwittingly add credibility to incredible claims, funding those payouts with the money from more recent "investors."
But what of those bank checks? If your customer asks you to stop payment on a cashier’s or teller’s check, can you accommodate the request? Cashier’s checks and teller’s checks (and the much rarer certified checks) are obligations on which the bank is primarily liable, and they are not customer bank deposits. Since they are not customer deposits, customers don’t have a right to stop payment on them. Prior to Oklahoma’s adoption in 1991 of revised Articles 3 and 4 of the UCC, other UCC provisions addressed ways for a payee to enforce payment of lost, stolen or destroyed instruments (including cashier’s and teller’s checks). Those provisions provided (and still provide today) protection for the issuer by requiring that a court had to determine that the maker or drawer of the instrument was adequately protected from the potential for future demands and damages should the original instrument somehow appear for presentation. Typically, the "adequate protection" came in the form of an indemnity agreement or bond. Banks that were faced with claims of purchaser/remitters of cashier’s and teller’s checks that were lost, stolen or destroyed used similar reasoning to bootstrap methods for reimbursing their customers who were able to provide sufficient indemnity to cover the banks should the original checks ultimately be presented for payment. Oftentimes, indemnity was obtained in the form of a bond issued by an insurance company, at considerable expense, or provided in the form of a pledged deposit account.
Interestingly enough, none of those methods for addressing lost, stolen or destroyed checks addressed the problem of "second thoughts," often called "buyer’s remorse." In spite of customer complaints of being defrauded, for example, there is no fraud involved in the purchase of the bank’s check, so the bank can’t use fraud as a defense against payment. Yet it’s probably the case that many of the reimbursements made to purchasers of official checks were not for checks that the purchaser claimed were lost, stolen or destroyed.
With the adoption of revised Articles 3 and 4 in 1991, Oklahoma added section 3-312, which set up a legal framework for reimbursing both purchasers/remitters and payees of cashier’s, teller’s and certified checks that have been lost, stolen or destroyed. This is the by now familiar process of receiving a claim and declaration from the purchaser/remitter or the payee. After a waiting period of 90 days from the issue or certification date, at which time the claim becomes enforceable, the bank can honor it, and thereby have a legitimate defense to payment if the original check is later presented for payment. That effectively provided an alternative avenue for reimbursement without the need for or cost of indemnity bonds.
Note, however, that even section 3-312 doesn’t address cases of buyer’s remorse or checks purchased (and sent) for what turn out to be scams. There is still no customer right of stop payment, and cashier’s and teller’s checks continue to be primary bank obligations. A purchaser/remitter would perjure himself by making a claim and providing the declaration required to support the claim, and if Section 3-312 can’t be used, the issuing bank can’t refuse payment of the check without risking liability not only for the amount of the check, but also, under §§3-411, possible consequential damages.
Receiver appointed
According to news reports, the U.S. District Court for the Western District of North Carolina has appointed attorney Kenneth Bell the temporary receiver of ZeekRewards for the purpose of preserving assets. Bell has set up a website,, for the purpose of posting updates in the case. A posted August 27 letter explains what Bell’s responsibilities are and what he is doing to track down and gather as many assets as possible for the purpose of funding a victims’ claim pool. Among those assets are undoubtedly large numbers of uprocessed checks and other payments, many of which are probably bank cashier’s and teller’s checks. One of Bell’s likely actions as he marshals these assets will be to negotiate those checks. It’s a lot less likely, since one of Bell’s goals will be to make the distribution of assets back to victims as fair as possible, that he will return any of those checks to investors intact. So banks can expect that, if they refuse payment on their cashier’s or teller’s checks payable to any of the ZeekRewards or related parties, Bell as receiver will press for payment. In such a case, unless the issuing bank refused payment under a bona fide and enforceable claim under UCC §3-312, Bell would have a strong case and could pursue the bank for damages in addition to compelling payment of the check. To have a bona fide claim, the issuing bank would have to have a declaration from the purchaser/remitter under the penalties of perjury that the purchaser/remitter lost possession of the check, but not by transferring the check (sending it to the payee) or by lawful seizure, and that the check is lost, stolen or destroyed (§UCC 3-312(a) and (b)), and more than 90 days have passed since the check was issued.
So is there any way the bank can help the people who have purchased cashier’s or teller’s checks and sent them off to ZeekRewards? Clearly, reimbursing the check purchaser and dishonoring the checks is not a good choice. People use bank checks because they are often considered "as good as cash." In cases like this one, that "cash-like" quality becomes a drawback, because your cashier’s check purchaser is about in the same position he’d be in if he actually paid cash for his "investment." You won’t be in a position to undo the transaction for him. What you can do is point your customer to the Receiver’s website at and suggest they read through the Frequently Asked Questions linked at the top of the page. Or, you can print out copies of the FAQ and give one to affected customers.

By John Burnett

"Safe Harbor" Provision in Reg E’s Remittance Transfers Rule

The CFPB’s recent publication of the final rule amending its Remittance Transfers regulations (subpart B of CFPB Regulation E, 12 CFR Part 1005) to create a "safe harbor" within the definition of "normal course of business" should promote a welcome sigh of relief from many Oklahoma bankers whose institutions aren’t high-volume providers of the services regulated by the rule. However, as with so many new rules, even those admittedly few designed to make things easier for the industry, there has been a good deal of confusion surrounding the application of the "safe harbor."
There are two parts to the definition – the delineation of the safe harbor and the transition period during which a remittance transfer provider won’t be required to comply with the rules after moving out of the safe harbor.
Size of the safe harbor
Use of the safe harbor piece of the definition of "normal course of business" allows a provider to avoid having to comply with any part of subpart B (except for keeping a count of remittance transfer activity), including all the Gordian disclosure and error resolution requirements. A bank (or other provider) is within the safe harbor exemption if it provided 100 or fewer remittance transfers in the previous calendar year and provides 100 or fewer remittance transfers in the current year.
Some bankers have been confused by that provision and have thought the reference to remittance transfers means they will have to count all of the wire transfers they handle toward that 100 transaction threshold to determine whether they qualified for the safe harbor exemption. And this is where we have to go back to Compliance 101 basics to understand what the safe harbor provision really says.
Definitions, definitions, definitions
Definitions can drive bankers crazy, or they can be a banker’s best ally in the compliance trenches. The safe harbor provision is an example of having definitions that make compliance easier, even if drilling down through those definitions is a challenge.
Start with the phrase "remittance transfer." If you’re going to have to count "remittance transfers" you first need to understand what a "remittance transfer" is. As it happens, it’s defined in §1005.30(e) of the regulation: "the electronic transfer of funds requested by a sender to a designated recipient that is sent by a remittance transfer provider. The term applies regardless of whether the sender holds an account with the remittance transfer provider, and regardless of whether the transaction is also an electronic fund transfer, as defined in § 1005.3(b)."
The emphasized phrases are important in that definition because they are further defined elsewhere in the regulation. You have to understand their definitions in order to fully understand the definition of "remittance transfer."
An "electronic transfer of funds" is explained in the Official Staff Interpretations to §1005.30 to include more than the transactions covered in subsection A of the regulation. For example, wire transfers are excluded from the definition of "electronic fund transfer" in §1005.3, but they are included within the definition of "electronic transfers of funds" (notice the subtle difference in wording between the two phrases) for the purposes of subpart B.
A "sender" is defined in §1005.30(g) as "a consumer in a State who primarily for personal, family, or household purposes requests a remittance transfer provider to send a remittance transfer to a designated recipient." A "consumer" is defined in subpart A §1005.2 as a natural person (a human being, and not an organization or other entity). "State" is defined as including "any state, territory or possession of the United States; the District of Columbia; the Commonwealth of Puerto Rico; or any political subdivision [of the foregoing]."
"Designated recipient" is any person ["person" includes individuals, organizations, and other entities] "specified by the sender as the authorized recipient of a remittance transfer to be received at a location in a foreign country."
What it all means
After drilling down into the definitions far enough, we can now see both which transactions the Remittance Transfers Rule covers, and, more importantly for this discussion, which transactions have to be counted to see if a bank remains within the safe harbor. Hint: they happen to be the same types of transactions.
So, yes, you count toward the 100 the wire transfers and other types of remittance transfers handled by your bank, but only those that (1) are requested by an individual; (2) are primarily for personal, family or household purposes; (3) are originated within the U.S. and territories (or funded from an account housed there); and are sent to an account or paid to a person who is outside the U.S. and its territories.
And what about the transition period?
Suppose that at the end of 2012 your bank has counted all of what would be called remittance transfers, as defined in the regulation, that it handled in the year and that number is 95. Then you start counting again at "1" on January 1, 2013 (the rule isn’t effective until February 7, 2013, but your count covers the full calendar year). Suppose you only get to 90 at the end of 2013, so you are within the safe harbor exception and not subject to the rule for all of 2013. But in 2014, you restart your count and reach the momentous 101st remittance transfer on September 4. As of that date, your bank leaves the safe harbor and becomes subject to the rule. However, the transition period provision that’s the second half of the definition of "remittance transfer provider" will delay the date by which you will have to comply with subpart B for six months from the September 4, 2014, date, or until March 4, 2015.

By Mary Beth Guard 

CFPB Proposal Status Update

Drip. Drip. Drip. FLOOD!!! After nearly a year of few issuances by the Consumer Financial Protection Bureau, the floodgates have opened and we’re being deluged by a steady stream of new proposal rules that will result in massive changes in the lending compliance arena. While it’s tempting to think “Well, these are just proposals. I’m not going to start reading until they finalize them,” I beg you not to follow that faulty path for three reasons.
First, you have a voice and an opportunity to shape the substance of the final rules. Throughout the proposals there are areas where the CFPB has discretion and it is seeking comment on many specific facets of the proposals. Even if you have never written a comment letter before, make your opinion known on these important matters. Help the agency understand the practical impact of what it is considering.

Second, many of the proposals implement provisions in the Dodd-Frank Act, so we know they are a virtual certainty. Might as well become familiar with them and start your planning process early.
Third, there is simply too much to grasp for you to wait until the rules become finalized. With so much changing – from terminology to timing rules, you have to start building your comfort level with the new concepts and approaches so you will be ready to go when the compliance deadline rolls around.
So, where are we now with the CFPB and lending compliance revisions? Here’s a quick summary of two of the most in-depth proosals, along with comment deadlines and areas where comment letters would be warranted.

Integrated Mortgage Disclosures. This is a two-part proposal. One part amends Regulation X, which implements RESPA, and the other part implements Regulation Z (the Truth in Lending reg). In Dodd-Frank, Congress directed the bureau to combine some of the disclosures for closed end consumer credit transactions secured by real property.
The proposals do away with the GFE, the early TIL, the HUD-1/1A and the closing TIL for the transactions described above and substitute in their place two new forms called the Loan Estimate and the Closing Disclosure. One thing to note is that the scope of coverage of these disclosures is broader than RESPA. Under RESPA, a loan was not covered if the property consisted of 25 or more acres, and a loan was also not covered if it was secured by vacant land, unless, following the making of the loan using the proceeds of the loan a 1- to 4- family dwelling would be placed or erected on the property. Those two types of loans would be covered by the new in integrated mortgage disclosure requirements, as would any other closed end consumer credit transactions secured by real property.
The integrated disclosures are not merely a mash-up of the old RESPA and TIL disclosures. They represent a substantial departure from those old forms.
These two proposals:
 Change the way the APR is calculated and what is included as a finance charge
 Have sample forms for loan estimates for different types of loan products
 Include in the new forms some new disclosures required by Dodd-Frank.
 Change the definition of “application” for purposes of triggering the new Loan Estimate.
 Allow you to provide written estimates before the “official” Loan Estimate form, as long as you distinguish between the two.
 Modify your timing for making the loan by requiring you to give the Closing Disclosure no less than 3 business days before closing.
 Requires a new Closing Disclosure to be given when changes occur, but provides an exception for what they refer to as “common changes” as well as one for “minor changes.”
 They have limits on closing cost increases
 Require lenders to keep records of the Loan Estimate and Closing Disclosure forms provided to consumers in a standard electronic format to make it easier for regulators to monitor compliance.
One of the most important areas for comment within this set of proposals is on the issue of when this final rule should become effective – and whether small entities should be given more time to comply with the final rule than larger entities. The CFPB states that it seeks to make it effective as soon as possible, because it believes the final rule will provide important benefits to consumers, however, it realizes that changes will need to be made to software, training will need to be performed, so they are asking for industry input. The big question is whether you want to continue living with the existing GFE and other forms for a longer period of time, or whether you want to cut to the chase and get on with the move to the new integrated mortgage disclosures. To a great extent, it’s going to be dependent upon what the software vendors can do, but you know what kind of time you’re going to need for training and changing procedures. Tell them what you think.
Other noteworthy areas for comment:
–Should the requirement to keep records of the Loan Estimates and Closing Disclosures provided to consumers in a standard electronic format be applicable to smaller lenders? If not, what should the cut-off be?
– Should the final rule implementing the integrated disclosures implement the Affected Title XIV Disclosures for open-end credit plans, transactions secured by dwellings that are not real property, and reverse mortgages, as applicable, by requiring creditors to comply with the proposed provisions that implement those disclosure requirements?
– The CFPB is proposing to eliminate the RESPA exemption for loans on property of 25 acres or more in order to make the TILA and RESPA regimes more consistent. CFPB believes that most of the loans that fall into this category are already separately exempt under a provision excluding extensions of credit primarily for business, commercial, or agricultural purposes. They want to know whether this is the case and they’re asking for comment on the number of loans that may be affected by this aspect of the proposal and any reasons for any continued exemption of loans on property of 25 acres or more.
– The proposals modify the definition of the term “application” so that, for purposes of triggering the timing for providing the new Loan Estimate on a closed end consumer credit transaction, you have an application once you receive the consumer’s name, income, and social security number to obtain a credit report, and the property address, an estimate of the value of the property, and the mortgage loan amount sought. They are proposing to remove the seventh catch-all element (information required by the creditor) from the definition and they ask for comment on what, if any, additional specific information beyond the six items included under the proposed definition of application is needed to provide a reasonably accurate Loan Estimate.
– You know the term “business day” and how it has two separate definitions in Regulation Z, depending upon which requirement you’re talking about? You have the “general business day requirement” and the alternative business day requirement. It’s absolutely crazy. The CFPB is asking whether the business day usage under current § 1026.19(a) should remain, or if § 1026.19(a) should be modified to use a single definition of business day consistent with proposed § 1026.19(e) and (f). To me, it’s a no brainer. For all purposes within Reg Z, there should be just one definition of the term.
– What do you think of their proposal to monkey with the finance charge? Under proposed § 1026.4, the current exclusions from the finance charge would be largely eliminated, for closed-end transactions secured by real property or a dwelling. Specifically, under the proposed test, a fee or charge is included in the finance charge if it is (1) “payable directly or indirectly by the consumer” to whom credit is extended, and (2) “imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit.” However, the finance charge would continue to exclude fees or charges paid in comparable cash transactions. The proposed rule also retains a few narrow exclusions from the finance charge. Keep in mind that this would cause more closed-end loans to trigger HOEPA protections for high-cost loans, would cause more loans to trigger Dodd-Frank Act requirements to obtain one or more interior appraisals for “higher-risk” mortgage loans, and would reduce the number of loans that would otherwise be “qualified mortgages” under the Dodd-Frank Act Ability to Repay requirements, given that qualified mortgages cannot have points and fees in excess of three percent of the loan amount. Also, more loans could be required to comply with separate underwriting requirements applicable to higher-priced balloon loans, and could be ineligible for certain exceptions authorizing creditors to offer prepayment penalties on fixed-rate, non-higher-priced qualified mortgage loans. It’s a big deal and they’re asking for comment on the proposed changers, as well as the timing for implementation on this part specifically.
– The proposed rule requires creditors to provide all consumers who have the right to rescind with the material disclosures under §§ 1026.18 and 1026.38 and the notice of the right to rescind required by § 1026.23(b), even if such consumer is not an obligor. Any thoughts about that?
This just hits the highlights. The comment deadline is 11/6/12. Already, more than 450 comments have been submitted. Looking through those comments will help give you insight into the practical impact of the proposals. I am pleased to see some from Oklahoma!
Note: Originally, the part of the proposed rule that dealt with changing the definition of “finance charge” had a comment deadline of 9/7/12. The CFPB changed its mind and extended the comment deadline to November 6, 2012.
Reg Z – Mortgage Servicing Proposal. There are two CFPB proposals on mortgage servicing. One proposes amendments to Regulation Z, while the other proposes amendments to Regulation X. If you make mortgage loans and service them yourself – or if you service loans originated by others, these are proposals you need to read and study – and comment upon.
They mandate new monthly mortgage statements, but provide an exemption for small lenders. Their proposed exemption is for small servicers that service 1000 or fewer mortage loans and service only mortgage loans that they originated or own. What level of exemption do you believe is appropriate?
If you make ARM loans, you’ll need to provide early warnings of ARM loan interest rate changes.
Previously, if the borrower’s hazard insurance lapsed, there were no specific laws or regulations that governed the process of how you force-placed insurance. Under this proposal there will be. There will be a standard for reasonable belief the insurance has lapsed, procedures for refunds in the event the consumer obtains coverage, notice requirements (both in terms of content, frequency, timing, and delivery methods), and even limitations on cost.
CFPB is toying with the idea of mandating requirements for accurate information management to ensure servicers can easily identify and retrieve customer files. You’ll need new policies and procedures on the subject, too.
The rules would build in timelines and requirements for responding to information requests and claims of errors – even if the request doesn’t rise to the level of a qualified written request. Plus, there are new disclosures. There are revisions to some of our existing disclosures.
Your comment deadline is October 9, 2012.

The next edition of Legal Briefs will be focused entirely on the remaining CFPB proposals that have been issued to date.

QUESTION: We have a rewards checking account through a third party provider. The account is branded with their national logo and name. After about two years of using this account we are moving away from the name branding and the name will be changed to something like “XYZ Rewards Checking.”The name of the account is all that will change. Terms and rates ( variable) will remain the same. Will this change require any type of new disclosure?? If so what would be included?
ANSWER: The name you apply to an account is not a required disclosure and would not require a change notice. You might consider a statement notice so customers will be aware of the product’s name change. It is a PR and marketing issue more than a regulatory disclosure issue.

QUESTION: We have a husband and wife that brought in a Trust Memorandum and wanted to open a NOW checking account. They are both listed as Grantors and Trustees of their Trust. Since they serve the Trust in this capacity and are natural people can the Trust Account be opened as a NOW checking account.I do not have any beneficiary information on this trust through the Trust Memorandum they brought to us. Do I need that information to open the NOW account, because I do not think this couple will bring that information in since their attorney has told them the Memorandum of Trust is sufficient for all their banking needs.
ANSWER: The odds are heavy that the only beneficiaries of the trust are natural persons. But if the bank wants confirmation of that fact before it opens a NOW account, the bank certainly has the right to request that it see who the beneficiaries are. If the grantors are so tight-lipped about the beneficiaries as to deny you a look at the trust document itself, you should ask them to have the Trust Memorandum updated to indicate that all beneficiaries of the trust are individuals or natural persons. With all due respect to their attorney, he or she doesn’t set your bank’s account documentation policy.

QUESTION: I have a question regarding the Fair Credit Reporting Act. Currently our loan department is not a reporter of credit information to any credit reporting agency; however, on occasion, I am told a credit agency will call and request a payment verification on a loan which would only be given with the customer’s approval. The Fair Credit Reporting Act states that we need to provide a notice of negative information to the consumer if we in the ordinary course of business furnish information to a consumer reporting agency. Do we still need to provide the Notice of Negative Information (along with the Notice Regarding Inaccurate Information) since we are not a regular credit reporter? I understand if we have to provide it “just in case” but part of the reason I ask is that it gives the appearance to our customers that we report to a credit agency when in fact we do not.
ANSWER: I do not believe you need to give the notice. I make a distinction between "reporting" and "responding." What you are doing is responding to a request from a CRA at the direction of the customer. That should not trigger the notice requirement.

QUESTION: Flood Insurance: We have a community that just changed from an Emergency Program to the Regular Program. We have 1 flood loan that will be affected. They currently have $35,000 flood coverage. Based on the change in programs are we required to notify the customer of the change and let them know that they will now be required to obtain either the lesser of RVC, loan amount, or max coverage that is available? If we notify them and they don’t get the additional coverage then would we proceed with our force placement procedures?
ANSWER: You need to require coverage in an amount equal to the least of (a) the outstanding principal balance of all loans secured by the property; (b) the overall or “insurable” value of the property minus the land value; or (c) the maximum amount of insurance available under the principal flood insurance program. If the borrower doesn’t provide the coverage, yes, you will need to force place coverage after providing notice to the borrower. Refer to 12 CFR 339.7 for the FDIC version of these rules.

QUESTION: I had a question about an unusual social security number (it started with 730-94) and called Social Security. I told them this didn’t fit in with the Oklahoma number group and wondered if something had changed. I was told that the numbers were now randomly assigned and were not state specific. Just want to check on the information they gave as I have not seen anything on this. I checked online and the number I was given is a valid number but according to the records had not been assigned. I’m just trying to figure out if this is a good number or not. We tried calling SSA but they will not give information out over the phone about individual cases.
ANSWER: You got correct information from the SSA. You’ll find their announcement at As for "not yet assigned" status messages, most providers of SSN verification get monthly updates and very recent numbers won’t show up yet. Even the SSA itself isn’t always current on what it has issued.

QUESTION: We had a noncustomer come in with a Global Cash Card through MasterCard, without a name printed on it. They say it has their payroll deposited on it. We just want to make sure we handle these just like any other cash advance.
ANSWER: First, make sure that the signature panel on the card has be signed. Then, proceed with your normal cash advance procedure (no fee permitted), which should include ID verification. MasterCard honors such transactions as long as you obtain the authorization for the cash advance.

QUESTION: We have received a special listing from the FinCEN Network, requesting that the list be checked against our database for the last 5 years. Our closed accounts are only retained for 12 months after account closing, with an exception being made for interest bearing accounts, which are retained until the last day of the calendar year for 1099 purposes. Are we running any risk of being fined for not being able to check closed account records for the last 5 years?
ANSWER: You appear to be in violation of the Recordkeeping requirements under FinCEN’s regulations at 31 CFR Part 1020, section 1020.410(c) and Part 1010, section 1010.430. The latter citation requires you maintain the records for five years from their creation (even if the account has closed).
I can’t tell you whether there is a risk of being fined, but I can tell you that your bank is at risk of being cited for a recordkeeping violation, based on the information you’ve given us. I suggest you check to see whether the bank is retaining information that you’re not aware of. Purging information from your computer system files does not necessarily mean the information doesn’t exist elsewhere.

QUESTION: Can a shareholder of a Bank pledge his/her Bank Stock they have with a certain Bank, against a loan they have with that SAME bank?
ANSWER: No, they can’t. It’s prohibited under Sec. 706 of the Banking Code:
“Lending on stock prohibited. It shall be unlawful for any bank or trust company to loan its funds to any stockholder, on its stock or its holding company stock as collateral security; provided, that any bank or trust company may hold its stock to secure the indebtedness previously in good faith contracted.”
FOLLOW-UP: I misunderstood the question that was being asked. The question was: Our Bank could not make a loan for the purchase of the stock using the stock as collateral. However, after the stock was free and clear or was purchased with cash it could be used as collateral for a different purpose loan. Such as additional collateral to provide equity in a land purchase.
ANSWER: Sec. 706 does not permit your bank to accept its own stock as collateral for any loan, regardless of purpose, unless you’re taking the stock after the fact to protect the bank from loss if the loan is at risk of going into default.

QUESTION: What is the time limitation on improper endorsements on checks that a customer deposits in their account?
ANSWER: Under UCC 4-111, there is a three-year statute of limitations from when the claim accrues. The claim accrues, according to UCC 4-401(e), on the date the item is finally paid by the bank.

QUESTION: During a recent audit, it was found that we neglected to give out a ‘confirmation of consent’ form to 4 customers that included the ‘right to revoke’ language. All four of these customers signed the Opt In form to authorize us to charge NSF fees for the one time ATM and Debit card transactions. We have provided the correct form to all of our customers as required, but these four ‘slipped through the crack’ when our bookkeeper quit unexpectedly and the new employee was unaware of the form. The audit finding recommended that we immediately cease charging these 4 customers (which we’ve done) and send them the req’d confirmation form (which we’ve also done).
The second recommendation was that we refund all charges since they ‘opted in’. The dollar amount for these customers is not significant and is not an issue (total is around $800). What we are concerned with is the ‘reputation risk’ associated with refunding almost $700 to one particular customer. The other three customers don’t pose any risk as their amounts are less than $100 in total.
My question is this: Rather than refund to this customer (or all of them if discrimination might be an issue), would it be permissible to keep them on ‘no charge’ until they have accumulated the equivalent of what we charged since the opt in? We would obviously keep records of the charges waived until that time to show that they basically received the money.
ANSWER: I am not sure what you mean by "reputational risk" in this context, but since you have no idea whether any or these parties will have an overdraft in the future or will opt out before having overdrafts particularly when viewed in light of the clear language of the Official Interpretation to Sec. 1005.17 quoted below, I don’t see an alternative to refunding the fees.
“7. Confirmation. A financial institution may comply with the requirement in § 1005.17(b)(1)(iv) to provide confirmation of the consumer’s affirmative consent by mailing or delivering to the consumer a copy of the consumer’s completed opt-in notice, or by mailing or delivering a letter or notice to the consumer acknowledging that the consumer has elected to opt into the institution’s service. The confirmation, which must be provided in writing, or electronically if the consumer agrees, must include a statement informing the consumer of the right to revoke the opt-in at any time. See § 1005.17(d)(6), which permits institutions to include the revocation statement on the initial opt-in notice. An institution complies with the confirmation requirement if it has adopted reasonable procedures designed to ensure that overdraft fees are assessed only in connection with transactions paid after the confirmation has been mailed or delivered to the consumer.”

QUESTION: We have a savings account in daughter (age 19) and father (deceased) as joint ownership. It was the daughter’s money, but the father wanted to monitor her spending with 2 signatures required for withdrawal. Since the father is deceased, does the money belong to her individually?
ANSWER: The key question is the form of ownership. If the account was established under joint ownership with rights of survivorship, the ownership has now vested in the surviving owner, the daughter, notwithstanding the dual signature agreement. Of course the dual signature agreement is now moot.