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Statutes > Illinois Laws > CHAPTER 810 COMMERCIAL CODE > 810 ILCS 5/ Uniform Commercial Code. > Article 4 - Bank Deposits And Collections

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Article 4 - Bank Deposits And Collections


      (810 ILCS 5/Art. 4 heading)
ARTICLE 4
BANK DEPOSITS AND COLLECTIONS


      (810 ILCS 5/Art. 4 Pt. 1 heading)
PART 1. GENERAL PROVISIONS AND DEFINITIONS

    (810 ILCS 5/4‑101) (from Ch. 26, par. 4‑101)
    Sec. 4‑101. Short title. This Article may be cited as Uniform Commercial Code‑‑Bank Deposits and Collections.
(Source: P.A. 87‑1135.)

    (810 ILCS 5/4‑102) (from Ch. 26, par. 4‑102)
    Sec. 4‑102. Applicability.
    (a) To the extent that items within this Article are also within Articles 3 and 8, they are subject to those Articles. If there is conflict, this Article governs Article 3, but Article 8 governs this Article.
    (b) The liability of a bank for action or non‑action with respect to an item handled by it for purpose of presentment, payment, or collection is governed by the law of the place where the bank is located. In the case of action or non‑action by or at a branch or separate office of a bank, its liability is governed by the law of the place where the branch or separate office is located.
(Source: P.A. 87‑582; 87‑1135.)

    (810 ILCS 5/4‑103) (from Ch. 26, par. 4‑103)
    Sec. 4‑103. Variation by agreement; measure of damages; action constituting ordinary care.
    (a) The effect of the provisions of this Article may be varied by agreement, but the parties to the agreement cannot disclaim a bank's responsibility for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack or failure. However, the parties may determine by agreement the standards by which the bank's responsibility is to be measured if those standards are not manifestly unreasonable.
    (b) Federal Reserve regulations and operating circulars, clearing‑house rules, and the like have the effect of agreements under subsection (a), whether or not specifically assented to by all parties interested in items handled.
    (c) Action or non‑action approved by this Article or pursuant to Federal Reserve regulations or operating circulars is the exercise of ordinary care and, in the absence of special instructions, action or non‑action consistent with clearing‑house rules and the like or with a general banking usage not disapproved by this Article, is prima facie the exercise of ordinary care.
    (d) The specification or approval of certain procedures by this Article is not disapproval of other procedures that may be reasonable under the circumstances.
    (e) The measure of damages for failure to exercise ordinary care in handling an item is the amount of the item reduced by an amount that could not have been realized by the exercise of ordinary care. If there is also bad faith it includes any other damages the party suffered as a proximate consequence.
(Source: P.A. 87‑582; 87‑1135.)

    (810 ILCS 5/4‑104)(from Ch. 26, par. 4‑104)
    Sec. 4‑104. Definitions and index of definitions.
    (a) In this Article, unless the context otherwise requires:
        (1) "Account" means any deposit or credit account
     with a bank, including a demand, time, savings, passbook, share draft, or like account, other than an account evidenced by a certificate of deposit;
        (2) "Afternoon" means the period of a day between
     noon and midnight;
        (3) "Banking day" means the part of a day on which a
     bank is open to the public for carrying on substantially all of its banking functions, except that any day that is not a banking day for purposes of Federal Reserve Regulation CC (as may be amended from time to time) shall not be a banking day for purposes of this Article or Article 3;
        (4) "Clearing house" means an association of banks
     or other payors regularly clearing items;
        (5) "Customer" means a person having an account with
     a bank or for whom a bank has agreed to collect items, including a bank that maintains an account at another bank;
        (6) "Documentary draft" means a draft to be
     presented for acceptance or payment if specified documents, certificated securities (Section 8‑102) or instructions for uncertificated securities (Section 8‑102), or other certificates, statements, or the like are to be received by the drawee or other payor before acceptance or payment of the draft;
        (7) "Draft" means a draft as defined in Section
     3‑104 or an item, other than an instrument, that is an order;
        (8) "Drawee" means a person ordered in a draft to
     make payment;
        (9) "Item" means an instrument or a promise or order
     to pay money handled by a bank for collection or payment. The term does not include a payment order governed by Article 4A or a credit or debit card slip;
        (10) "Midnight deadline" with respect to a bank is
     midnight on its next banking day following the banking day on which it receives the relevant item or notice or from which the time for taking action commences to run, whichever is later;
        (11) "Settle" means to pay in cash, by
     clearing‑house settlement, in a charge or credit or by remittance, or otherwise as agreed. A settlement may be either provisional or final;
        (12) "Suspends payments" with respect to a bank
     means that it has been closed by order of the supervisory authorities, that a public officer has been appointed to take it over, or that it ceases or refuses to make payments in the ordinary course of business.
    (b) Other definitions applying to this Article and the Sections in which they appear are:
        "Agreement for electronic
            presentment"Section 4‑110.
        "Bank"Section 4‑105.
        "Collecting bank"Section 4‑105.
        "Depositary bank"Section 4‑105.
        "Intermediary bank"Section 4‑105.
        "Payor bank"Section 4‑105.
        "Presenting bank"Section 4‑105.
        "Presentment notice"Section 4‑110.
    (c) "Control" as provided in Section 7‑106 and the following definitions in other Articles apply to this Article:
        "Acceptance"Section 3‑409.
        "Alteration"Section 3‑407.
        "Cashier's check"Section 3‑104.
        "Certificate of deposit"Section 3‑104.
        "Certified check"Section 3‑409.
        "Check"Section 3‑104.
        "Good faith"Section 3‑103.
        "Holder in due course"Section 3‑302.
        "Instrument"Section 3‑104.
        "Notice of dishonor"Section 3‑503.
        "Order"Section 3‑103.
        "Ordinary care"Section 3‑103.
        "Person entitled to enforce"Section 3‑301.
        "Presentment"Section 3‑501.
        "Promise"Section 3‑103.
        "Prove"Section 3‑103.
        "Teller's check"Section 3‑104.
        "Unauthorized signature"Section 3‑403.
    (d) In addition Article 1 contains general definitions and principles of construction and interpretation applicable throughout this Article.
(Source: P.A. 95‑895, eff. 1‑1‑09.)

    (810 ILCS 5/4‑105) (from Ch. 26, par. 4‑105)
    Sec. 4‑105. "Bank"; "Depositary Bank"; "Payor Bank"; "Intermediary Bank"; "Collecting Bank"; "Presenting Bank".
    In this Article:
    (1) "Bank" means any person engaged in the business of banking, including a savings bank, savings and loan association, credit union, or trust company;
    (2) "Depositary bank" means the first bank to take an item even though it is also the payor bank, unless the item is presented for immediate payment over the counter;
    (3) "Payor bank" means a bank that is the drawee of a draft;
    (4) "Intermediary bank" means a bank to which an item is transferred in course of collection except the depositary or payor bank;
    (5) "Collecting bank" means a bank handling an item for collection except the payor bank;
    (6) "Presenting bank" means a bank presenting an item except a payor bank.
(Source: P.A. 87‑582; 87‑1135.)

    (810 ILCS 5/4‑106) (from Ch. 26, par. 4‑106)
    Sec. 4‑106. Payable through or payable at bank; collecting bank.
    (a) If an item states that it is "payable through" a bank identified in the item, (i) the item designates the bank as a collecting bank and does not by itself authorize the bank to pay the item, and (ii) the item may be presented for payment only by or through the bank.
    (b) If an item states that it is "payable at" a bank identified in the item, (i) the item designates the bank as a collecting bank and does not by itself authorize the bank to pay the item, and (ii) the item may be presented for payment only by or through the bank.
    (c) If a draft names a nonbank drawee and it is unclear whether a bank named in the draft is a co‑drawee or a collecting bank, the bank is a collecting bank.
(Source: P.A. 87‑582; 87‑1135.)

    (810 ILCS 5/4‑107) (from Ch. 26, par. 4‑107)
    Sec. 4‑107. Separate office of bank. A branch or separate office of a bank is a separate bank for the purpose of computing the time within which and determining the place at or to which action may be taken or notice or orders must be given under this Article and under Article 3.
(Source: P.A. 87‑582.)

    (810 ILCS 5/4‑108) (from Ch. 26, par. 4‑108)
    Sec. 4‑108. Time of receipt of items.
    (a) For the purpose of allowing time to process items, prove balances, and make the necessary entries on its books to determine its position for the day, a bank may fix an afternoon hour of 2:00 P.M. or later as a cutoff hour for the handling of money and items and the making of entries on its books.
    (b) An item or deposit of money received on any day after a cutoff hour so fixed or after the close of the banking day may be treated as being received at the opening of the next banking day.
(Source: P.A. 87‑582; 87‑1135.)

    (810 ILCS 5/4‑109) (from Ch. 26, par. 4‑109)
    Sec. 4‑109. Delays.
    (a) Unless otherwise instructed, a collecting bank in a good faith effort to secure payment of a specific item drawn on a payor other than a bank, and with or without the approval of any person involved, may waive, modify, or extend time limits imposed or permitted by this Act for a period not exceeding 2 additional banking days without discharge of drawers or indorsers or liability to its transferor or a prior party.
    (b) Delay by a collecting bank or payor bank beyond time limits prescribed or permitted by this Act or by instructions is excused if (i) the delay is caused by interruption of communication or computer facilities, suspension of payments by another bank, war, emergency conditions, failure of equipment, or other circumstances beyond the control of the bank, and (ii) the bank exercises such diligence as the circumstances require.
(Source: P.A. 87‑582.)

    (810 ILCS 5/4‑110) (from Ch. 26, par. 4‑110)
    Sec. 4‑110. Electronic presentment.
    (a) "Agreement for electronic presentment" means an agreement, clearing‑house rule, or Federal Reserve regulation or operating circular, providing that presentment of an item may be made by transmission of an image of an item or information describing the item ("presentment notice") rather than delivery of the item itself. The agreement may provide for procedures governing retention, presentment, payment, dishonor, and other matters concerning items subject to the agreement.
    (b) Presentment of an item pursuant to an electronic presentment agreement is made when the presentment notice is received.
    (c) If presentment is made by presentment notice, a reference to "item" or "check" in this Article means the presentment notice unless the context otherwise indicates.
(Source: P.A. 87‑582; 87‑1135.)

    (810 ILCS 5/4‑111) (from Ch. 26, par. 4‑111)
    Sec. 4‑111. Statute of limitations. An action to enforce an obligation, duty or right arising under this Article must be commenced within 3 years after the cause of action accrues.
(Source: P.A. 87‑582.)


      (810 ILCS 5/Art. 4 Pt. 2 heading)
PART 2. COLLECTION OF ITEMS: DEPOSITARY AND COLLECTING BANKS

    (810 ILCS 5/4‑201) (from Ch. 26, par. 4‑201)
    Sec. 4‑201. Status of collecting bank as agent and provisional status of credits; applicability of Article; item indorsed "pay any bank".
    (a) Unless a contrary intent clearly appears and before the time that a settlement given by a collecting bank for an item is or becomes final, the bank, with respect to the item, is an agent or sub‑agent of the owner of the item and any settlement given for the item is provisional. This provision applies regardless of the form of indorsement or lack of indorsement and even though credit given for the item is subject to immediate withdrawal as of right or is in fact withdrawn; but the continuance of ownership of an item by its owner and any rights of the owner to proceeds of the item are subject to rights of a collecting bank, such as those resulting from outstanding advances on the item and rights of recoupment or setoff. If an item is handled by banks for purpose of presentment, payment, collection, or return, the relevant provisions of this Article apply even though action of the parties clearly establishes that a particular bank has purchased the item and is the owner of it.
    (b) After an item has been indorsed with the words "pay any bank" or the like, only a bank may acquire the rights of a holder until the item has been:
        (1) returned to the customer initiating collection;
     or
        (2) specially indorsed by a bank to a person who is
     not a bank.
(Source: P.A. 87‑582; 87‑1135.)

    (810 ILCS 5/4‑202) (from Ch. 26, par. 4‑202)
    Sec. 4‑202. Responsibility for collection or return; when action timely.
    (a) A collecting bank must exercise ordinary care in:
        (1) presenting an item or sending it for presentment;
        (2) sending notice of dishonor or nonpayment or
     returning an item other than a documentary draft to the bank's transferor after learning that the item has not been paid or accepted, as the case may be;
        (3) settling for an item when the bank receives
     final settlement; and
        (4) notifying its transferor of any loss or delay in
     transit within a reasonable time after discovery thereof.
    (b) A collecting bank exercises ordinary care under subsection (a) by taking proper action before its midnight deadline following receipt of an item, notice, or settlement. Taking proper action within a reasonably longer time may constitute the exercise of ordinary care, but the bank has the burden of establishing timeliness.
    (c) Subject to subsection (a) (1), a bank is not liable for the insolvency, neglect, misconduct, mistake, or default of another bank or person or for loss or destruction of an item in the possession of others or in transit.
(Source: P.A. 87‑582; 87‑1135.)

    (810 ILCS 5/4‑203) (from Ch. 26, par. 4‑203)
    Sec. 4‑203. Effect of instructions. Subject to Article 3 concerning conversion of instruments (Section 3‑420) and restrictive indorsements (Section 3‑206), only a collecting bank's transferor can give instructions which affect the bank or constitute notice to it, and a collecting bank is not liable to prior parties for any action taken pursuant to the instructions or in accordance with any agreement with its transferor.
(Source: P.A. 87‑582; 87‑1135.)

    (810 ILCS 5/4‑204) (from Ch. 26, par. 4‑204)
    Sec. 4‑204. Methods of sending and presenting; sending directly to payor bank.
    (a) A collecting bank shall send items by a reasonably prompt method, taking into consideration relevant instructions, the nature of the item, the number of those items on hand, the cost of collection involved, and the method generally used by it or others to present those items.
    (b) A collecting bank may send:
        (1) an item directly to the payor bank;
        (2) an item to a nonbank payor if authorized by its
     transferor; and
        (3) an item other than documentary drafts to a
     nonbank payor, if authorized by Federal Reserve regulation or operating circular, clearing‑house rule, or the like.
    (c) Presentment may be made by a presenting bank at a place where the payor bank or other payor has requested that presentment be made.
(Source: P.A. 87‑582; 87‑1135.)

    (810 ILCS 5/4‑205) (from Ch. 26, par. 4‑205)
    Sec. 4‑205. Depositary bank holder of unindorsed item. If a customer delivers an item to a depositary bank for collection:
    (1) the depositary bank becomes a holder of the item at the time it receives the item for collection if the customer at the time of delivery was a holder of the item, whether or not the customer indorses the item, and, if the bank satisfies the other requirements of Section 3‑302, it may be a holder in due course; and
    (2) the depositary bank warrants to collecting banks, the payor bank or other payor, and the drawer that the amount of the item was paid to the customer or deposited to the customer's account.
(Source: P.A. 87‑582; 87‑1135.)

    (810 ILCS 5/4‑206) (from Ch. 26, par. 4‑206)
    Sec. 4‑206. Transfer between banks. Any agreed method that identifies the transferor bank is sufficient for the item's further transfer to another bank.
(Source: P.A. 87‑582.)

    (810 ILCS 5/4‑207) (from Ch. 26, par. 4‑207)
    Sec. 4‑207.

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