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Can you summarize NJST 12A:4-401?
When bank may charge customer's account
Short Summary
This legal document governs the circumstances under which a bank may charge a customer’s account. According to the document, a bank can charge against the customer’s account for an item that is properly payable, 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. However, a customer is not liable for an overdraft if they neither signed the item nor benefited from its proceeds. Additionally, a bank can 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 to the bank. If a bank charges a check before the date stated in the notice, the bank is liable for damages. The document also states that a bank that makes payment to a holder in good faith can charge the customer’s account according to the original or completed terms of the item, unless the bank has notice of improper completion. It is important to note that the penalties for non-compliance include liability for damages resulting from charging a check before the postdating date.
Whom does it apply to?
Customers and banks
What does it govern?
Charging a customer's account by a bank
What are exemptions?
A customer is not liable for the amount of an overdraft if the customer neither signed the item nor benefited from the proceeds of the item.
What are the Penalties?
A bank that charges against the account of a customer a check before the date stated in the notice of postdating is liable for damages for the loss resulting from its act, which may include damages for dishonor of subsequent items.
Jurisdiction
New Jersey