I have had a customer come into the bank with copies of 2 checks that posted to his account with his soon to be ex wife's signature. He had failed to balance his statement in a timely manner so he is not looking to us for relief. His attorney referred him to the sheriff's office to file a complaint. He cannot claim forgery since she signed her own name. The county sheriff told him that she had the right to money in the account since it was marital property. The amount was in excess of $2500.00. She had no right to this money since she wasn't an account owner or authorized signer on the account. This is a small town with all kinds of political whirlpools. How can I help my customer?

Thanks for your help.

It sounds like you are aware that your bank violated the UCC by paying these checks that were bearing an unathorized signature. If the customer has missed his deadline you are not legally obligated to reimburse him but IMO, for customer service reasons you probably should. You (the bank) should then go after the ex-wife for conversion. Many courts will consider an unauthorized signature as a forgery. I don't know about KY.

You might want to call your attorney, or better yet (since the attorney will undoubtedly cost more and recovery may be questionable) just take the loss and then re-train your staff about proper payment of items.

Respectfully

Thanks for your response. I think I'll bump this up the ladder for a decision. I appreciate your input.

I think these are a couple of relevant sections. I think the 4-406 where it talks about lack of ordinary care could be a factor because it was not even his signature. That would be my argument if I was your customer. Best of luck with this issue.

§ 3-403. UNAUTHORIZED SIGNATURE.
(a) Unless otherwise provided in this Article or Article 4, an unauthorized signature is ineffective except as the signature of the unauthorized signer in favor of a person who in good faith pays the instrument or takes it for value. An unauthorized signature may be ratified for all purposes of this Article.
(b) If the signature of more than one person is required to constitute the authorized signature of an organization, the signature of the organization is unauthorized if one of the required signatures is lacking.
(c) The civil or criminal liability of a person who makes an unauthorized signature is not affected by any provision of this Article which makes the unauthorized signature effective for the purposes of this Article.

Section 4--406. Customer`s Duty to Discover and Report Unauthorized
Signature or Alteration.
(1) 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 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, the customer must exercise
reasonable care and promptness to examine the statement and items to
discover his unauthorized signature or any alteration on an item and
must notify the bank promptly after discovery thereof.
(2) If the bank establishes that the customer failed with respect to
an item to comply with the duties imposed on the customer by subsection
(1) the customer is precluded from asserting against the bank
(a) his unauthorized signature or any alteration on the item if
the bank also establishes that it suffered a loss by reason
of such failure; and
(b) an unauthorized signature or alteration by the same wrongdoer
on any other item paid in good faith by the bank after the
first item and statement was available to the customer for a
reasonable period not exceeding fourteen calendar days and
before the bank receives notification from the customer of
any such unauthorized signature or alteration.
(3) The preclusion under subsection (2) does not apply if the customer
establishes lack of ordinary care on the part of the bank in paying the
item(s).
(4) Without regard to care or lack of care of either the customer or
the bank a customer who does not within one year from the time the
statement and items are made available to the customer (subsection (1))
discover and report his unauthorized signature or any alteration on the
face or back of the item or does not within three years from that time
discover and report any unauthorized indorsement is precluded from
asserting against the bank such unauthorized signature or indorsement or
such alteration.
(5) If under this section a payor bank has a valid defense against a
claim of a customer upon or resulting from payment of an item and waives
or fails upon request to assert the defense the bank may not assert
against any collecting bank or other prior party presenting or
transferring the item a claim based upon the unauthorized signature or
alteration giving rise to the customer`s claim

Technically, I believe you are required to reimburse him as the bank paid an item that did not have an authorized signature. It's the bank that has the deadline, not the customer.

If the customer does not report the forgery to the bank within the time designated in the deposit account agreement, the bank would not be obligated to reimburse the customer.

So, even though the UCC allows the customer one year, the bank can shorten that if it is included in the deposit agreement? I'm not arguing, just making sure I understand correctly!

Here is some additional information I found:

A customer must notify its bank of unauthorized payments "promptly" after receipt of its statement and discovery of the facts. UCC § 4-406(c). If it does not do so, it may not recover to the extent of any loss the delay caused the bank. UCC § 4-406(d)(1). Where a series of forgeries is involved, the customer's failure to use due care in examining its statement and notifying the bank of unauthorized items can be a defense if notification would have prevented payment on subsequent forgeries. UCC § 4-406(d)(2). However, in either instance, if the bank pays the item in bad faith or is itself negligent in paying the item, that fact may leave all or some portion of the loss with the bank. UCC § 4-406(e).

If the customer does not report an unauthorized signature within one year after receipt of its monthly statement, it is precluded from raising the claim, whether or not negligence was involved. UCC § 4-406(f). Some courts have permitted the deposit agreement to shorten this outside limit for reporting unauthorized payments to as little as 14 days and to have the reporting period commence to run on the date of mailing, rather than the date of receipt of the statement by the customer. The only requirement for this type of contractual reduction of the one year reporting period is that the shorter period be reasonable and be clearly disclosed to the customer.

In my opinion, the customer's normal period for raising disputes can be extended to one year in instances in which the bank did not exercise ordinary care in handling the account. Whether or not the bank exercised ordinary care is something that can only be determined in court, but failure to police maker signatures at all on accounts will probably be deemed a lack of ordinary care on the bank's part.

Similar situation. Husband has a single account. Wife has signed on the account for two years and the bank accepted the checks. Husband calls today and says NO MORE. He has no problem with the checks in the past, just doesn't want to allow any more. What is the bank's responsibility? I would advise the customer to close and re-open.

I would also recommend closing and reopening a new account. This is someone who was allowed to sign checks and access information in the account. They already know a lot about the relationship. Seems to make sense to change that relationship and take advantage of the privacy everyone is entitled to.