Have you ever wondered what happens when you are the victim of check fraud? The Uniform Commercial Code (UCC), specifically Articles 3 and 4, provides important protections for consumers in such situations.
Under the UCC, a bank may only charge your account for items that are “properly payable”—meaning you authorized them. A check bearing a forged signature, an unauthorized alteration (such as a changed amount or payee), or a counterfeit is not properly payable. In these cases, the bank is generally required to credit your account for the unauthorized withdrawal, restoring the funds that were improperly deducted.
This rule places primary responsibility on the bank to detect and prevent fraud during the payment process, encouraging financial institutions to maintain effective safeguards and verification procedures.
At the same time, the UCC requires customers to review their bank statements and canceled checks with reasonable promptness—typically within 30 to 60 days—and to report any discrepancies promptly. Timely notification significantly increases the likelihood of full reimbursement. Delaying beyond the applicable period may limit or eliminate your ability to recover the loss, as the law seeks to promote diligence on both sides.
In essence, these provisions offer meaningful safeguards for account holders. They shift most of the risk of sophisticated fraud to the banking system while rewarding vigilant consumers with strong recourse when problems arise.
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