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Can you summarize NCGS 25-4-401?
Relationship Between Payor Bank and Its Customer. > When bank may charge customer's account.
Short Summary
This legal document, found in the North Carolina General Statutes under the Uniform Commercial Code, specifically addresses 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, even if it results in an overdraft. An item is considered properly payable if it is authorized by the customer and complies with any agreements between the customer and the bank. However, a customer is not liable for 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 it was paid before the date of the check, unless the customer has given notice of postdating to the bank. If the bank charges the account before the stated date, it may be held liable for damages. Furthermore, the document states that a bank acting in good faith may charge the customer’s account based on the original or completed terms of an altered item, unless it has notice of improper completion. Overall, this document provides guidelines 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 G.S. 25-4-402
Jurisdiction
North Carolina