Legal Steps for Bank Check Mishandling

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 What Happens if a Check Gets Lost In the Collection Process Between Different Banks?

Generally, banks bear the risk of loss if a check gets lost in the collection process between different banks. This applies if the check has become property of the bank, which occurs when a check is:

  • Handed over to a bank teller;
  • Inserted into an ATM machine;
  • Received by a bank in the mail.

In modern times, the loss of a check in transit typically presents few to no practical problems. In most cases, the check will have been endorsed restrictively by the bank that was forwarding it, and the depositor will not have difficulty obtaining a duplicate from the drawer.

Additionally, it is common for a bank to reproduce a check that is handled for collection. These check copies, if they exist, are commonly available for collection purposes.

Can My Bank Supply a Missing Endorsement on a Check if I Forget to Do It?

In some instances, banks may be asked to collect checks which have not been endorsed by a payee. This may occur when the endorsement of the payee cannot be obtained due to their absence or for another reason.

If a payee is, in fact, a depositor of the bank, the check can be collected even with a lack of endorsement guaranteed. In many cases, the depositary bank may endorse the check with a statement that reads, “credited to the account of the named payee absence of endorsement guaranteed.”

Banks may safely pay checks which bear these statements or legends. In these cases, neither the collecting bank nor the payor bank will be held liable for the unendorsed check if the intended payee receives the proceeds of the check.

Are There Any Warranties That a Bank or Person Writing a Check Give?

There are warranties which are given by all parties that are involved in the collection process. This includes the depositor and the collecting banks.

These warranties run in favor of the transferees collecting bank as well as the payor or the individual who wrote the check. The warranties to the payor or the acceptor include:

  • That the depositor or collecting bank has good title or is authorized to obtain payment on behalf of an individual or entity who has good title;
  • That the depositor or bank has no knowledge that the signature of the maker or drawer is unauthorized; and
  • That the instrument was not materially altered.

ow Do I Correct a Mistake or Unauthorized Withdrawal on My Bank Account?

If there is an unauthorized withdrawal or a mistake on an individual’s bank account, there are steps they can take to correct the issue. The Electronic Fund Transfer Act establishes procedures and protections for individuals who have experienced unauthorized withdrawals or mistakes in their bank account.

If I Feel My Bank Account Has a Mistake on It, What Steps Must I Follow to Be Legally Protected Under the Act?

There are certain steps an individual is required to take in order to be legally protected under the Electronic Fund Transfer Act if they feel their bank account has a mistake on it, including:

  • Writing or calling their financial institution within 60 days of the discovery of the mistake and providing a description of the error;
  • The financial institution must investigate the reported error and resolve it within 45 days;
    • It is important to note that if the bank takes longer than 10 days to resolve the issues. Generally, it is required to put the amount in question back into the individual’s account;
    • For certain issues, such as errors in opening new accounts or with international transactions, a bank may have 90 days to investigate the issue; and
  • After the investigation is complete, the financial institution is required to explain the results to the individual, regardless of whether or not an error was found. If the bank did discover an error, it is required to immediately work to resolve it.

If an individual has any questions or concerns regarding what steps to take, they should consult with a lawyer for bank issues.

If My ATM or Debit Card Has Been Stolen or Has Been Used for Identity Fraud, What Steps Must I Take to Stop and Limit My Resulting Financial Loss?

If an individual’s ATM or debit card has been stolen or has been used for identity fraud, there are certain steps they must take to stop and limit their resulting financial loss, including:

  • Notifying their financial institution within 2 business days;
  • If this is done within 2 business days, the individual’s loss will be limited to $50;
  • If an individual does not notify their financial institution within the 2 business days, they should still notify them because their loss will be limited to $500.

It is important to be aware that if an individual does not notify their financial institution within 60 days of receiving their bank statement containing the illegal withdrawal, their potential loss will not be limited.

When Can You Sue a Bank?

An individual may be able to sue a bank if specific laws apply to their issue. These laws include:

Pursuant to TILA, a bank is required to provide consumers with accurate information regarding credit transactions. In other words, a bank must provide accurate disclosures regarding:

  • The rate of interest;
  • Monthly payments;
  • Other pertinent information regarding mortgage and credit loans.

Pursuant to the FDCPA, a bank cannot employ, among other conduct, harassing techniques or inaccurate information in an attempt to collect on a valid debt. Under the FDCPA, an individual may be able to sue a bank if the bank refuses to remove false information that it has placed on the individual’s credit report.

How Do You File a Lawsuit Against a Bank?

Except for under the circumstances discussed above, an individual is not permitted to sue a bank in civil court unless there is a specific law that permits it. In some instances, however, an individual may be able to sue the bank in small claims court.

A small claims court is a court that hears claims that involve limited amounts of monetary damages or up to a certain amount of damages. The small claims court systems in each state have their own damages amounts and filing procedures.
In general, for an individual to file a claim in small claims court, they are required to file a document called a complaint. The bank must receive a copy of this complaint.

After the bank receives the complaint, it has a specific time frame in which to file an answer. Once the court receives copies of the complaint and the answer, it will set a trial date.

At the trial, each party will present their evidence. Once this process is complete, the court will make a determination.

The types of claims that can be filed against banks include claims in which a bank owes an individual money and will not pay it. For example, a bank may issue a non-sufficient funds penalty, which is imposed when an individual writes a check but does not have enough money in their account at three times the amount it should. If that is the case, the individual may sue to recover the money the bank improperly took out.

Should I Contact a Lawyer Regarding the Mishandling of My Check?

It is essential to have the assistance of a financial lawyer for any issues, questions, or concerns you may have related to the mishandling of your check. If you believe that a bank, an individual receiving the check, or the individual who wrote the check has acted improperly with regard to the handling of your check, you should contact a lawyer immediately.

Your attorney can advise you of the laws in your state, investigate whether the check was mishandled, and assist you in filing a lawsuit if they have. They will also represent you any time you are required to appear in court related to your case.

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