Ask Reggi Your Question Now
Can you summarize 810 ILCS 5/4-401?
RELATIONSHIP BETWEEN PAYOR BANK AND ITS CUSTOMER >
Short Summary
This section of the Illinois Compiled Statutes, specifically Section 4-401, governs the relationship between a payor bank and its customer in the context of bank deposits and collections. It outlines the circumstances under which a bank may charge a customer’s account, even if it creates an overdraft. An item is considered properly payable if it is authorized by the customer and in accordance with any agreement between the customer and the bank. The customer is not liable for an overdraft if they neither signed the item nor benefited from its proceeds. The section also addresses the bank’s ability to charge a customer’s account for a check that is otherwise properly payable, even if payment was made before the date of the check, unless the customer has given notice of postdating. If the bank charges against the account before the postdating date, it may be liable for damages. It is important for banks and their customers to understand these provisions to ensure compliance and avoid potential penalties.
Whom does it apply to?
Banks and their customers
What does it govern?
Relationship between payor bank and its customer
What are exemptions?
No exemptions are mentioned.
What are the Penalties?
The bank may be liable for damages for dishonor of subsequent items under Section 4-402 if it charges against the account of a customer a check before the date stated in the notice of postdating.
Jurisdiction
Illinois