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Can you summarize ARCO 4-4-401?
Relationship Between Payor Bank and Its Customer > When bank may charge customer's account.
Short Summary
This legal document, found in the Arkansas Code under Business and Commercial Law, specifically in the Uniform Commercial Code section, pertains to the relationship between a payor bank and its customer regarding bank deposits and collections. According to this document, a bank has the authority to charge a customer’s account for an item that is properly payable from that 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 customer is not liable for the amount of an overdraft if they did not sign the item or benefit from its proceeds. Additionally, the bank may 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 the check. If the bank charges the account before the stated date, it is liable for damages. Furthermore, the bank can charge the customer’s account according to the original terms of an altered item or the terms of a completed item, as long as the bank is not aware of any improper completion. This document provides the legal framework for when a bank may charge a customer’s account and outlines the rights and liabilities of both parties involved.
Whom does it apply to?
Customers and banks
What does it govern?
Bank Deposits and Collections
What are exemptions?
No exemptions are mentioned.
What are the Penalties?
Damages for dishonor of subsequent items under 4-4-402
Jurisdiction
Arkansas