2023 Illinois Compiled Statutes › Chapter 810 - COMMERCIAL CODE › 810 ILCS 5/ - Uniform Commercial Code. › 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. 
		Transfer warranties.
(a) A customer or collecting bank that transfers an item and receives a
settlement or other consideration warrants to the transferee and to any
subsequent collecting bank that:
(1) the warrantor is a person entitled to enforce the     item;
(2) all signatures on the item are authentic and     authorized;
(3) the item has not been altered;
(4) the item is not subject to a defense or claim in     recoupment (Section 3-305(a)) of any party that can be asserted against the warrantor; and
(5) the warrantor has no knowledge of any insolvency     proceeding commenced with respect to the maker or acceptor or, in the case of an unaccepted draft, the drawer.
(b) If an item is dishonored, a customer or collecting bank transferring
the item and receiving settlement or other consideration is obliged to pay
the amount due on the item (i) according to the terms of the item at the
time it was transferred, or (ii) if the transfer was of an incomplete item,
according to its terms when completed as stated in Sections 3-115 and
3-407.  The obligation of a transferor is owed to the transferee and to any
subsequent collecting bank that takes the item in good faith.  A transferor
may not disclaim its obligation under this subsection by an indorsement
stating that it is made "without recourse" or otherwise disclaiming liability.
(c) A person to whom the warranties under subsection (a) are made and
who took the item in good faith may recover from the warrantor as damages
for breach of warranty an amount equal to the loss suffered as a result of
the breach, but not more than the amount of the item plus expenses and loss
of interest incurred as a result of the breach.
(d) The warranties stated in subsection (a) cannot be disclaimed with
respect to checks.  Unless notice of a claim for breach of warranty is
given to the warrantor within 30 days after the claimant has reason to know
of the breach and the identity of the warrantor, the warrantor is
discharged to the extent of any loss caused by the delay in giving notice
of the claim.
(e) A cause of action for breach of warranty under this Section accrues
when the claimant has reason to know of the breach.
(Source: P.A 87-582.)
(810 ILCS 5/4-208) (from Ch. 26, par. 4-208)
Sec. 4-208. 
		Presentment warranties.
(a) If an unaccepted draft is presented to the drawee for payment or
acceptance and the drawee pays or accepts the draft, (i) the person
obtaining payment or acceptance, at the time of presentment, and (ii) a
previous transferor of the draft, at the time of transfer, warrant to the
drawee that pays  or accepts the draft in good faith that:
(1) the warrantor is or was, at the time the     warrantor transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person entitled to enforce the draft;
(2) the draft has not been altered; and
(3) the warrantor has no knowledge that the signature     of the purported drawer of the draft is unauthorized.
(b) A drawee making payment may recover from any warrantor damages for
breach of warranty equal to the amount paid by the drawee less the amount the
drawee received or is entitled to receive from the drawer because of the
payment. In addition, the drawee is entitled to compensation for expenses and
loss of interest resulting from the breach. The right of the drawee to recover
damages under this subsection is not affected by any failure of the drawee to
exercise ordinary care in making payment. If the drawee accepts the draft (i)
breach of warranty is a defense to the obligation of the acceptor, and (ii) if
the acceptor makes payment with respect to the draft, the acceptor is entitled
to recover from any warrantor for breach of warranty the amounts stated in this
subsection.
(c) If a drawee asserts a claim for breach of warranty under subsection
(a) based on an unauthorized indorsement of the draft or an alteration of
the draft, the warrantor may defend by proving that the indorsement is
effective under Section 3-404 or 3-405 or the drawer is precluded under
Section 3-406 or 4-406 from asserting against the drawee the unauthorized
indorsement or alteration.
(d) If (i) a dishonored draft is presented for payment to the drawer or an
indorser or (ii) any other item is presented for payment to a party obliged to
pay the item, and the item is paid, the person obtaining payment and a prior
transferor of the item warrant to the person making payment in good faith that
the warrantor is or was, at the time the warrantor transferred the item, a
person entitled to enforce the item or authorized to obtain payment on behalf
of a person entitled to enforce the item. The person making payment may recover
from any warrantor for breach of warranty an amount equal to the amount paid
plus expenses and loss of interest resulting from the breach.
(e) The warranties stated in subsections (a) and (d) cannot be
disclaimed with respect to checks. Unless notice of a claim for breach of
warranty is given to the warrantor within 30 days after the claimant has
reason to know of the breach and the identity of the warrantor, the
warrantor is discharged to the extent of any loss caused by the delay in
giving notice of the claim.
(f) A cause of action for breach of warranty under this Section accrues
when the claimant has reason to know of the breach.
(Source: P.A. 87-582; 87-1135.)
(810 ILCS 5/4-209) (from Ch. 26, par. 4-209)
Sec. 4-209. 
		Encoding and retention warranties.
(a) A person that encodes information on or with respect to an item
after issue warrants to any subsequent collecting bank and to the payor
bank or other payor that the information is correctly encoded.
If the customer of a depositary bank encodes, that bank also makes the
warranty.
(b) A person who undertakes to retain an item pursuant to an agreement for
electronic presentment warrants to any subsequent collecting bank and to the
payor bank or other payor that retention and presentment of the item comply
with the agreement. If a customer of a depositary bank undertakes to retain
an item, that bank also makes this warranty.
(c) A person to whom warranties are made under this Section and who took
the item in good faith may recover from the warrantor as damages for breach
of warranty an amount equal to the loss suffered as a result of the breach,
plus expenses and loss of interest incurred as a result of the breach.
(Source: P.A. 87-582; 87-1135.)
(810 ILCS 5/4-210) (from Ch. 26, par. 4-210)
Sec. 4-210. Security interest of collecting bank in items, accompanying
documents and proceeds.
(a) A collecting bank has a security interest in an item and any
accompanying documents or the proceeds of either:
(1) in case of an item deposited in an account, to     the extent to which credit given for the item has been withdrawn or applied;
(2) in case of an item for which it has given credit     available for withdrawal as of right, to the extent of the credit given, whether or not the credit is drawn upon or there is a right of charge-back; or
(3) if it makes an advance on or against the item.
(b) If credit given for several items received at one time or pursuant
to a single agreement is withdrawn or applied in part, the security
interest remains upon all the items, any accompanying documents or the
proceeds of either. For the purpose of this Section, credits first given
are first withdrawn.
(c) Receipt by a collecting bank of a final settlement for an item is a
realization on its security interest in the item, accompanying documents,
and proceeds. So long as the bank does not receive final
settlement for the item or give up possession of the item or possession or control of the accompanying
documents for purposes other than collection, the security interest
continues to that extent and is subject to Article 9, but:
(1) no security agreement is necessary to make the     security interest enforceable (Section 9-203(b)(3)(A));
(2) no filing is required to perfect the security     interest; and
(3) the security interest has priority over     conflicting perfected security interests in the item, accompanying documents, or proceeds.
(Source: P.A. 95-895, eff. 1-1-09; 96-328, eff. 8-11-09.)
(810 ILCS 5/4-211) (from Ch. 26, par. 4-211)
Sec. 4-211. 
		When bank gives value for purposes of holder in due course. 
		For purposes of determining its status as a holder in due course, a bank
has given value to the extent it has a security interest in an item,
if the bank otherwise complies with the requirements of Section 3-302
on what constitutes a holder in due course.
(Source: P.A. 87-582; 87-1135.)
(810 ILCS 5/4-212) (from Ch. 26, par. 4-212)
Sec. 4-212. 
		
		Presentment by notice of item not payable by, through, or at
bank; liability of drawer or indorser.
(a) Unless otherwise instructed, a collecting bank may present an item
not payable by, through, or at a bank by sending to the party to accept or
pay a written notice that the bank holds the item for acceptance or payment.
The notice must be sent in time to be received on or before the day when
presentment is due and the bank must meet any requirement of the party to
accept or pay under Section 3-501 by the close of the bank's next banking
day after it knows of the requirement.
(b) If presentment is made by notice and payment, acceptance,
or request for compliance with a requirement under Section 3-501 is
not received by the close of business on the day after maturity or,
in the case of demand items, by the close of business on the third banking day
after notice was sent, the presenting bank may treat the item as dishonored and
charge any drawer or indorser by sending it notice of the facts.
(Source: P.A. 87-582; 87-1135.)
(810 ILCS 5/4-213) (from Ch. 26, par. 4-213)
Sec. 4-213. 
		Medium and time of settlement by bank.
(a) With respect to settlement by a bank, the medium and time of
settlement may be prescribed by Federal Reserve regulations or circulars,
clearing-house rules, and the like, or agreement. In the absence of such
prescription:
(1) the medium of settlement is cash or credit to an     account in a Federal Reserve Bank of or specified by the person to receive settlement; and
(2) the time of settlement is:
(i) with respect to tender of settlement by cash,         a cashier's check, or teller's check, when the cash or check is sent or delivered;
(ii) with respect to tender of settlement by         credit in an account in a Federal Reserve Bank, when the credit is made;
(iii) with respect to tender of settlement by a         credit or debit to an account in a bank, when the credit or debit is made or, in the case of tender of settlement by authority to charge an account, when the authority is sent or delivered; or
(iv) with respect to tender of settlement by a         funds transfer, when payment is made pursuant to Section 4A-406(a) to the person receiving settlement.
(b) If the tender of settlement is not by a medium authorized by
subsection (a) or the time of settlement is not fixed by subsection (a), no
settlement occurs until the tender of settlement is accepted by the person
receiving settlement.
(c) If settlement for an item is made by cashier's check or teller's
check and the person receiving settlement, before its midnight deadline:
(1) presents or forwards the check for collection,     settlement is final when the check is finally paid; or
(2) fails to present or forward the check for     collection, settlement is final at the midnight deadline of the person receiving settlement.
(d) If settlement for an item is made by giving authority to charge the
account of the bank giving settlement in the bank receiving settlement,
settlement is final when the charge is made by the bank receiving
settlement if there are funds available in the account for the amount of
the item.
(Source: P.A. 87-582.)
(810 ILCS 5/4-214) (from Ch. 26, par. 4-214)
Sec. 4-214. 
		
		Right of charge-back or refund; liability of collecting
bank; return of item.
(a) If a collecting bank has made provisional settlement with its
customer for an item and fails by reason of dishonor, suspension of
payments by a bank, or otherwise to receive settlement for the item which
is or becomes final, the bank may revoke the settlement given by it, charge
back the amount of any credit given for the item to its customer's account,
or obtain refund from its customer, whether or not it is able to return the
item, if by its midnight deadline or within a longer reasonable time after
it learns the facts it returns the item or sends notification of the facts.
If the return or notice is delayed beyond the bank's midnight deadline or
a longer reasonable time after it learns the facts, the bank may revoke the
settlement, charge back the credit, or obtain refund from its customer, but
is liable for any loss resulting from the delay.  These rights to revoke,
charge back, and obtain refund terminate if and when a settlement for the
item received by the bank is or becomes final.
(b) A collecting bank returns an item when it is sent or delivered to the
bank's customer or transferor or pursuant to its instructions.
(c) A depositary bank that is also the payor may charge back the amount
of an item to its customer's account or obtain refund in accordance with the
Section governing return of an item received by a payor bank for credit on
its books (Section 4-301).
(d) The right to charge back is not affected by:
(1) previous use of a credit given for the item; or
(2) failure by any bank to exercise ordinary care     with respect to the item, but a bank so failing remains liable.
(e) A failure to charge back or claim refund does not affect other
rights of the bank against the customer or any other party.
(f) If credit is given in dollars as the equivalent of the value of an
item payable in foreign money, the dollar amount of any charge-back or
refund must be calculated on the basis of the bank-offered spot rate for
the foreign money prevailing on the day when the person entitled to the
charge-back or refund learns that it will not receive payment in ordinary
course.
(Source: P.A. 87-582; 87-1135.)
(810 ILCS 5/4-215) (from Ch. 26, par. 4-215)
Sec. 4-215. 
		
		Final payment of item by payor bank; when provisional
debits and credits become final; when certain credits become available
for withdrawal.
(a) An item is finally paid by a payor bank when the bank has first done
any of the following:
(1) paid the item in cash;
(2) settled for the item without having a right to     revoke the settlement under statute, clearing-house rule, or agreement; or
(3) made a provisional settlement for the item and     failed to revoke the settlement in the time and manner permitted by statute, clearing-house rule, or agreement.
(b) If provisional settlement for an item does not become final, the
item is not finally paid.
(c) If provisional settlement for an item between the presenting and
payor banks is made through a clearing house or by debits or credits in an
account between them, then to the extent that provisional debits or credits
for the item are entered in accounts between the presenting and payor banks
or between the presenting and successive prior collecting banks seriatim,
they become final upon final payment of the items by the payor bank.
(d) If a collecting bank receives a settlement for an item which is or
becomes final, the bank is accountable to its customer for the amount of
the item and any provisional credit given for the item in an account with
its customer becomes final.
(e) Subject to (i) applicable law stating a time for availability of
funds and (ii) right of the bank to apply the credit to an obligation of the
customer, credit given by a bank for an item in a customer's account
becomes available for withdrawal as of right:
(1) if the bank has received a provisional settlement     for the item, when the settlement becomes final and the bank has had a reasonable time to receive return of the item and the item has not been received within that time;
(2) if the bank is both the depositary bank and the     payor bank, and the item is finally paid, at the opening of the bank's second banking day following receipt of the item.
(f) Subject to applicable law stating a time for availability of
funds and any right of a bank to apply a deposit to an obligation of
the depositor, a deposit of money becomes available for withdrawal as of
right at the opening of the bank's next banking day after receipt of the
deposit.
(Source: P.A. 87-582; 87-1135.)
(810 ILCS 5/4-216) (from Ch. 26, par. 4-216)
Sec. 4-216. 
		Insolvency and preference.
(a) If an item is in or comes into the possession of a payor or collecting
bank that suspends payment and the item has not been finally paid, the item
must be returned by the receiver, trustee, or agent in charge of the closed
bank to the presenting bank or the closed bank's customer.
(b) If a payor bank finally pays an item and suspends payments without
making a settlement for the item with its customer or the presenting bank
which settlement is or becomes final, the owner of the item has a preferred
claim against the payor bank.
(c) If a payor bank gives or a collecting bank gives or receives a
provisional settlement for an item and thereafter suspends payments, the
suspension does not prevent or interfere with the settlement's becoming final
if the finality occurs automatically upon the lapse of certain time or the
happening of certain events.
(d) If a collecting bank receives from subsequent parties settlement for
an item, which settlement is or becomes final and the bank suspends
payments without making a settlement for the item with its customer which
settlement is or becomes final, the owner of the item has a preferred claim
against the collecting bank.
(Source: P.A. 87-582; 87-1135.)
(810 ILCS 5/Art. 4 Pt. 3 heading)
PART 3.  
		COLLECTION OF ITEMS: PAYOR BANKS
(810 ILCS 5/4-301) (from Ch. 26, par. 4-301)
Sec. 4-301. 
		
		Deferred posting; Recovery of payment by return of items;
time of dishonor; return of items by payor bank.
(a) If a payor bank settles for a demand item other than a documentary draft
presented otherwise than for immediate payment over the counter before midnight
of the banking day of receipt, the payor bank may revoke the settlement and
recover the settlement if, before it has made final payment and before its
midnight deadline, it:
(1) returns the item; or
(2) sends written notice of dishonor or nonpayment if     the item is unavailable for return.
(b) If a demand item is received by a payor bank for credit on its books, it
may return the item or send notice of dishonor and may revoke any credit given
or recover the amount thereof withdrawn by its customer, if it acts within the
time limit and in the manner specified in subsection (a).
(c) Unless previous notice of dishonor has been sent, an item is
dishonored at the time when for purposes of dishonor it is returned or
notice sent in accordance with this Section.
(d) An item is returned:
(1) as to an item presented through a clearing-house,     when it is delivered to the presenting or last collecting bank or to the clearing-house or is sent or delivered in accordance with clearing-house rules; or
(2) in all other cases, when it is sent or delivered     to the bank's customer or transferor or pursuant to instructions.
(Source: P.A. 87-582; 87-1135.)
(810 ILCS 5/4-302) (from Ch. 26, par. 4-302)
Sec. 4-302. 
		Payor bank's responsibility for late return of item.
(a) If an item is presented to and received by a payor
bank, the bank is accountable for the amount of:
(1) a demand item, other than a documentary draft,     whether properly payable or not, if the bank, in any case in which it is not also the depositary bank, retains the item beyond midnight of the banking day of receipt without settling for it or, whether or not it is also the depositary bank, does not pay or return the item or send notice of dishonor until after its midnight deadline; or
(2) any other properly payable item unless, within     the time allowed for acceptance or payment of that item, the bank either accepts or pays the item or returns it and accompanying documents.
(b) The liability of a payor bank to pay an item pursuant to
subsection (a) is
subject to defenses based on breach of a presentment
warranty (Section 4-208) or proof that the person seeking enforcement of
the liability presented or transferred the item for the purpose of
defrauding the payor bank.
(Source: P.A. 87-582; 87-1135; 87-1242; 88-123.)
(810 ILCS 5/4-303) (from Ch. 26, par. 4-303)
Sec. 4-303. 
		
		When items subject to notice, stop-payment order, legal process,
or setoff; order in which items may be charged or certified.
(a) Any knowledge, notice, or stop-payment order received by, legal process
served upon, or setoff exercised by a payor bank comes too late to terminate,
suspend, or modify the bank's right or duty to pay an item or to charge its
customer's account for the item if the knowledge, notice, stop-payment order,
or legal process is received or served and a reasonable time for the bank to
act thereon expires or the setoff is exercised after the earliest of the
following:
(1) the bank accepts or certifies the item;
(2) the bank pays the item in cash;
(3) the bank settles for the item without having a     right to revoke the settlement under statute, clearing-house rule, or agreement;
(4) the bank becomes accountable for the amount of     the item under Section 4-302 dealing with the payor bank's responsibility for late return of items; or
(5) with respect to checks, a cutoff hour no earlier     than one hour after the opening of the next banking day after the banking day on which the bank received the check and no later than the close of that next banking day or, if no cutoff hour is fixed, the close of the next banking day after the banking day on which the bank received the check.
(b) Subject to subsection (a), items may be accepted, paid, certified, or
charged to the indicated account of its customer in any order.
(Source: P.A. 87-582; 87-1135.)
(810 ILCS 5/Art. 4 Pt. 4 heading)
PART 4.  
		RELATIONSHIP BETWEEN PAYOR BANK AND ITS CUSTOMER
(810 ILCS 5/4-401) (from Ch. 26, par. 4-401)
Sec. 4-401. 
		When bank may charge customer's account.
(a) A bank may charge against the account of a customer an item that is
properly payable from that account even though the charge creates an
overdraft. An item is properly payable if it is authorized by the customer
and is in accordance with any agreement between the customer and bank.
(b) A customer is not liable for the amount of an overdraft if the
customer neither signed the item nor benefited from the proceeds of the item.
(c) A bank may charge against the account of a customer a check that is
otherwise properly payable from the account, even though payment was made
before the date of the check, unless the customer has given notice to the
bank of the postdating describing the check with reasonable certainty.  The
notice is effective for the period stated in Section 4-403(b) for stop-payment
orders, and must be received at such time and in such manner as to afford the
bank a reasonable opportunity to act on it before any action by the bank with
respect to the check described in Section 4-303.  If a bank charges against the
account of a customer a check before the date stated in the notice of
postdating, the bank is liable for damages for the loss resulting from its act.
The loss may include damages for dishonor of subsequent items under Section
4-402.
(d) A bank that in good faith makes payment to a holder may charge the
indicated account of its customer according to:
(1) the original terms of the altered item; or
(2) the terms of the completed item, even though the     bank knows the item has been completed unless the bank has notice that the completion was improper.
(Source: P.A. 87-582; 87-1135.)
(810 ILCS 5/4-402) (from Ch. 26, par. 4-402)
Sec. 4-402. 
		
		Bank's liability to customer for wrongful dishonor; time
of determining insufficiency of account.
(a) Except as otherwise provided in this Article, a payor bank
wrongfully dishonors an item if it dishonors an item that is properly
payable, but a bank may dishonor an item that would create an overdraft
unless it had agreed to pay the overdraft.
(b) A payor bank is liable to its customer for damages proximately caused by
the wrongful dishonor of an item. Liability is limited to actual damages
proved and may include damages for an arrest or prosecution of the customer
or other consequential damages. Whether any consequential damages are
proximately caused by the wrongful dishonor is a question of fact to be
determined in each case.
(c) A payor bank's determination of the customer's account balance on
which a decision to dishonor for insufficiency of available funds is based
may be made at any time between the time the item is received by the payor
bank and the time that the payor bank returns the item or gives notice in
lieu of return, and no more than one determination need be made.  If,
at the election of the payor bank, a subsequent balance determination is
made for the purpose of reevaluating the bank's decision to dishonor the
item, the account balance at that time is determinative of whether a
dishonor for insufficiency of available funds is wrongful.
(Source: P.A. 87-582; 87-1135.)
(810 ILCS 5/4-403) (from Ch. 26, par. 4-403)
Sec. 4-403. 
		Customer's right to stop payment; burden of proof of loss.
(a) A customer or any person authorized to draw on the account if there is
more than one person may stop payment of any item drawn on the customer's
account or close the account by an order to the bank describing the item or
account with reasonable certainty received at a time and in a manner that
affords the bank a reasonable opportunity to act on it before any action by the
bank with respect to the item described in Section 4-303. If the signature of
more than one person is required to draw on an account, any of these persons
may stop payment or close the account.
(b) A stop-payment order is effective for 6 months, but it lapses after 14
calendar days if the original order was oral and was not confirmed in writing
within that period.  A stop-payment order may be renewed for additional
six-month periods by a writing given to the bank within a period during which
the stop-payment order is effective.
(c) The burden of establishing the fact and amount of loss resulting
from the payment of an item contrary to a stop payment order or order to close
an account is on the customer. The loss from payment of an item contrary to a
stop payment order may include damages for dishonor of subsequent items
pursuant to Section 4-402.
(d) When a bank sends to its customer a statement of account
accompanied by items paid in good faith in support of the debit entries or
holds the statement of account and items pursuant to a request or
instructions of its customer or otherwise in a reasonable manner makes the
statement and items available to the customer or, in lieu of returning such
items, sends its customer a statement of account which includes the
identifying number of each item paid in good faith or otherwise
specifically identifying such items or holds such statement pursuant to a
request or instructions of its customer or otherwise in a reasonable manner
makes such statement available to the customer, the customer must exercise
reasonable care and promptness to examine the items and statement to
discover any items improperly paid by the bank over the customer's properly
lodged stop payment order and must notify the bank promptly after discovery
thereof.  Failure of the customer to notify the bank within one year of
either receipt of the item improperly paid by the bank over a properly
lodged stop payment order or, in lieu of  receipt of the improperly paid
item, receipt of a statement containing the debit entry for said item and
specifically identifying said item shall preclude the customer from
asserting against the bank the improper payment.
(Source: P.A. 86-583; 87-582; 87-1135.)
(810 ILCS 5/4-404) (from Ch. 26, par. 4-404)
Sec. 4-404. 
		
		Bank
not obligated to pay check more than six months old.
A bank is under no obligation to a customer having a checking account to
pay a check, other than a certified check, which is presented more than 6
months after its date, but it may charge its customer's account for a
payment made thereafter in good faith.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/4-405) (from Ch. 26, par. 4-405)
Sec. 4-405. 
		Death or incompetence of customer.
(a) A payor or collecting bank's authority to accept, pay, or collect an
item or to account for proceeds of its collection, if otherwise effective, is
not rendered ineffective by incompetence of a customer of either bank existing
at the time the item is issued or its collection is undertaken if the bank does
not know of an adjudication of incompetence. Neither death nor incompetence of
a customer revokes the authority to accept, pay, collect, or account until the
bank knows of the fact of death or of an adjudication of incompetence and has
reasonable opportunity to act on it.
(b) Even with knowledge, a bank may for 10 days after the date of death
pay or certify checks drawn on or before that date unless ordered to stop
payment by a person claiming an interest in the account.
(Source: P.A. 87-582; 87-1135.)
(810 ILCS 5/4-406) (from Ch. 26, par. 4-406)
Sec. 4-406. 
		
		Customer's duty to discover and report unauthorized signature
or alteration.
(a) A bank that sends or makes available to a customer a statement of
account showing payment of items for the account shall either return or
make available to the customer the items paid or provide information in the
statement of account sufficient to allow the customer to identify the items
paid.  The statement of account provides sufficient information if the item
is described by item number, amount, and date of payment.
(b) If the items are not returned to the customer, the person retaining
the items shall either retain the items or, if the items are destroyed,
maintain the capacity to furnish legible copies of the items until the
expiration of 7 years after receipt of the items.  A customer may
request an item from the bank that paid the item, and that bank must
provide in a reasonable time either the item or, if the item has been
destroyed or is not otherwise obtainable, a legible copy of the item.
(c) If a bank sends or makes available a statement of account or items
pursuant to subsection (a), the customer must exercise reasonable
promptness in examining the statement or the items to determine whether
any payment was not authorized because of an alteration of an item or
because a purported signature by or on behalf of the customer was not
authorized.  If, based on the statement or items provided, the customer
should reasonably have discovered the unauthorized payment, the customer
must promptly notify the bank of the relevant facts.
(d) If the bank proves that the customer failed, with respect to an
item, to comply with the duties imposed on the customer by subsection (c),
the customer is precluded from asserting against the bank:
(1) the customer's unauthorized signature or any     alteration on the item, if the bank also proves that it suffered a loss by reason of the failure; and
(2) the customer's unauthorized signature or     alteration by the same wrongdoer on any other item paid in good faith by the bank if the payment was made before the bank received notice from the customer of the unauthorized signature or alteration and after the customer had been afforded a reasonable period of time, not exceeding 30 days, in which to examine the item or statement of account and notify the bank.
(e) If subsection (d) applies and the customer proves that the bank
failed to exercise ordinary care in paying the item and that the failure
substantially contributed to loss, the loss is allocated between the
customer precluded and the bank asserting the preclusion according to the
extent to which the failure of the customer to comply with subsection (c)
and the failure of the bank to exercise ordinary care contributed
to the loss.  If the customer proves that the bank did not pay the item in
good faith, the preclusion under subsection (d) does not apply.
(f) Without regard to care or lack of care of either the customer or the
bank, a customer who does not within one year after the statement
or items are made available to the customer (subsection (a)) discover and
report the customer's unauthorized signature on or any alteration on
the item is precluded
from asserting against the bank the unauthorized signature or alteration.
If there is a preclusion under this subsection, the payor bank may not
recover for breach of warranty under Section 4-208 with respect to the
unauthorized signature or alteration to which the preclusion applies.
(Source: P.A. 87-582; 87-1135.)
(810 ILCS 5/4-407) (from Ch. 26, par. 4-407)
Sec. 4-407. 
		Payor bank's right to subrogation on improper payment. 
		If a payor bank has paid an item over the order of the drawer or maker to stop
payment, or after an account has been closed, or otherwise under circumstances
giving a basis for objection by the drawer or maker, to prevent unjust
enrichment and only to the extent necessary to prevent loss to the bank by
reason of its payment of the item, the payor bank is subrogated to the rights:
(1) of any holder in due course on the item against the drawer or
maker;
(2) of the payee or any other holder of the item against the drawer
or maker either on the item or under the transaction out of which the
item arose; and
(3) of the drawer or maker against the payee or any other holder of
the item with respect to the transaction out of which the item arose.
(Source: P.A. 87-582; 87-1135.)
(810 ILCS 5/Art. 4 Pt. 5 heading)
PART 5.  
		COLLECTION OF DOCUMENTARY DRAFTS
(810 ILCS 5/4-501) (from Ch. 26, par. 4-501)
Sec. 4-501. 
		
		Handling of documentary drafts; duty to send for presentment and
to notify customer of dishonor.
A bank that takes a documentary draft for collection shall present or send
the draft and accompanying documents for presentment and, upon learning that
the draft has not been paid or accepted in due course, shall seasonably notify
its customer of the fact even though it may have discounted or bought the draft
or extended credit available for withdrawal as of right.
(Source: P.A. 87-1135.)
(810 ILCS 5/4-502) (from Ch. 26, par. 4-502)
Sec. 4-502. 
		Presentment of "on arrival" drafts.
If a draft or the relevant instructions require presentment "on
arrival", "when goods arrive" or the like, the collecting bank need not
present until in its judgment a reasonable time for arrival of the goods
has expired. Refusal to pay or accept because the goods have not arrived is
not dishonor; the bank must notify its transferor of the refusal but need
not present the draft again until it is instructed to do so or learns of
the arrival of the goods.
(Source: P.A. 87-1135.)
(810 ILCS 5/4-503) (from Ch. 26, par. 4-503)
Sec. 4-503. 
		
		Responsibility of presenting bank for documents and goods;
report of reasons for dishonor; referee in case of need. Unless otherwise
instructed and except as provided in Article 5, a bank presenting a
documentary draft:
(1) must deliver the documents to the drawee on acceptance of the
draft if it is payable more than 3 days after presentment; otherwise, only
on payment; and
(2) upon dishonor, either in the case of presentment for acceptance
or presentment for payment, may seek and follow instructions from any
referee in case of need designated in the draft or, if the presenting bank
does not choose to utilize the referee's services, it must use diligence
and
good faith to ascertain the reason for dishonor, must notify its transferor of
the dishonor and of the results of its effort to ascertain the reasons
therefor, and must request instructions.
However, the presenting bank is under no obligation with respect to goods
represented by the documents except to follow any reasonable instructions
seasonably received; it has a right to reimbursement for any expense incurred
in following instructions and to prepayment of or indemnity for those expenses.
(Source: P.A. 87-582; 87-1135.)
(810 ILCS 5/4-504) (from Ch. 26, par. 4-504)
Sec. 4-504. 
		
		Privilege of Presenting Bank to Deal With Goods; Security
Interest for Expenses.
(a) A presenting bank that, following the dishonor of a documentary
draft, has seasonably requested instructions but does not receive them
within a reasonable time may store, sell, or otherwise deal with the goods
in any reasonable manner.
(b) For its reasonable expenses incurred by action under subsection (a)
the presenting bank has a lien upon the goods or their proceeds, which may
be foreclosed in the same manner as an unpaid seller's lien.
(Source: P.A. 87-582; 87-1135.)