Expedited Funds

Expedited funds is getting high level attention. The U. S. Supreme Court has heard and ruled on an expedited funds case. At issue was whether banks could sue banks under the EFA or whether standing to sue is limited to suits between depositors and banks.

The ruling: banks can sue banks under the Act. In Bank One Chicago v. Midwest Bank and Trust, Bank One Chicago (formerly First Illinois) accepted for deposit a check drawn on Midwest Bank & Trust. Midwest returned the check because the endorsement stamp was illegible. However, Midwest failed to determine whether there were sufficient funds in the customer's account to cover the check. In fact, the funds were insufficient but by the time this was discovered, the customer had made a significant withdrawal against the bounced check.

Most of the time, compliance with Expedited Funds (Regulation CC) runs fairly smoothly. But when transactions involve something out of the routine, problems tend to occur. This case illustrates how an unusual transaction can lead to a serious problem.

This case is also a good example of why training is important. Sometimes bank staff should take more than one step on an item. The employee at Midwest failed to understand that returning the check for an illegible indorsement did not stop the clock on the time limit within which the bank had to return the check or become liable.

ACTION STEPS

• Review your training calendar. Make sure that training on regulation CC was recent and thorough.
• Check with your people that process checks. Make sure they know everything they need to know.

Copyright © 1996 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 3, 1/96