Check presentment, UCC, Mobile Banking, Check 21

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Question:

We have a business customer who had an employee negotiate their payroll checks a second time. This employee deposited their payroll checks through a mobile channel with their bank over a year ago and then deposited them again. They cleared our customers account because our duplicate detection only goes back a year. Our customer did not reconcile or review his accounts to notice the duplicate payments and wants to hold the bank responsible. They total about $11k. We already tried returning the checks for duplicate and as expected, they were returned for "Late Return". I am looking for any input as to how we can recoup the funds? The bank of first deposit (PNC) did take in stale dated checks as well as having their customer not adhere to mobile banking terms. Any input would be appreciated.

Answer:

by Brian Crow:

This is governed by your state's Uniform Commercial Code and your deposit agreement which should specify timeframes for your customer to identify and report an error and the bank's liability for honoring an item that was not properly payable. If you are not sure how to interpret the law or your contract, you should ask your legal counsel to review.

Answer:

by John Burnett:

If your bank honors its customer's claim for reimbursement when the UCC and/or your deposit agreement provide that the customer's claim was late, you will likely have no ability to collect from any other bank involved.

While I totally agree with Brian -- you should consult legal counsel -- if your customer failed to notify you until more than a year passed after the statement was sent showing the second payment of the check, you should be able to tell your customer he was too late to the party, and suggest that customers have a responsibility to check their statements promptly for unauthorized items and alterations.