Ask Reggi Your Question Now
Can you summarize ALCA 7-4-401?
Relationship Between Payor Bank and Its Customer. > When bank may charge customer's account.
Short Summary
This legal document, found in the Code of Alabama under the Commercial Code, specifically addresses the relationship between a payor bank and its customer. 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 complies with any agreement between the customer and the bank. The document also states that a customer is not liable for an overdraft if they did not sign the item or benefit from its proceeds, but the bank can still charge the overdraft amount, interest, and applicable fees against deposits or credits to the account. Additionally, the bank may charge a check against the customer’s account, even if payment was made before the date of the check, unless the customer has given notice of postdating. If the bank charges a check before the date stated in the notice, it may be liable for damages. The document also covers the bank’s ability to charge the customer’s account based on the original or completed terms of an altered item, unless the bank has notice of improper completion. Overall, this document provides guidelines for when a bank can charge a customer’s account and the liabilities associated with such actions.
Whom does it apply to?
Customers and banks
What does it govern?
Relationship between Payor Bank and Its Customer
What are exemptions?
No exemptions are mentioned.
What are the Penalties?
Damages for dishonor of subsequent items under Section 7-4-402
Jurisdiction
Alabama