Return Of Draft, Fees, and UCC Deadlines

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Question:

Our credit union was previously significantly hit with fraudulent Visa drafts. It appeared that the Visa drafts were stolen from the postal courier. In an effort to be proactive, we have opted to pull the signature cards and verify against the signature on the drafts presented to us for payment. If the signature is not a quite match (perhaps old signature card on file) we place a call to the cardholder. Of course the dollar amount and the payee are reviewed as well. In one instance, we were not able to confirm with the cardholder after leaving numerous phone messages. We returned the draft marked Refer to Maker on the second day after the draft was presented to us for payment.The merchant who accepted the draft is now attempting to get restitution from us for fees incurred from their bank to the tune of $180 due to their account becoming overdrawn. As far as this scenario is concerned, specifically which regulations should we provide the merchant in order to support our position?

Answer:

You won't find much solace here. When you were unable to verify the item by your return item deadline on the first day after presentment, you became accountable for the item, in my opinion. You don't get extra time.

The payee/merchant had every right, I believe, to direct his bank to refuse the chargeback due to late return.

Your plan to review these items rigorously is a sound one, in light of circumstances. But don't let your desire to dot every i and cross every t delay you in your UCC responsibilities.

I don't believe you owe the merchant anything for his bank's fees. That's their (bank/customer) concern, since the bank shouldn't have charged the check back to its customer in the first place.

First published on BankersOnline.com 06/2/03