§ 4402 Bank Overdraft Dishonor Liability

Key Takeaways

•If a bank refuses to pay a check or payment that should be paid, it's doing something wrong unless the payment would make the account negative and the bank didn't agree to cover it.
•If the bank wrongly refuses to pay, it has to pay back the customer for any real harm caused, like money lost or even trouble with the law because of the refusal.
•The bank checks the account balance once to decide if there's enough money. If it checks again later, the new balance is what matters.

Example

You write a check to buy groceries, and you have enough money in your account. But the bank says no and doesn't pay the check.

The bank did something wrong by not paying the check when there was enough money. You might get money from the bank for any problems this caused, like extra fees or embarrassment.

(a) Except as otherwise provided in this division, a payor bank wrongfully dishonors an item if it dishonors an item that is properly payable, but a bank may dishonor an item that would create an overdraft unless it has agreed to pay the overdraft. (b) A payor bank is liable to its customer for damages proximately caused by the wrongful dishonor of an item. Liability is limited to actual damages proved and may include damages for an arrest or prosecution of the customer or other consequential damages. Whether any consequential damages are proximately caused by the wrongful dishonor is a question of fact to be determined in each case. (c) A payor bank’s determination of the customer’s account balance on which a decision to dishonor for insufficiency of available funds is based may be made at any time between the time the item is received by the payor bank and the time that the payor bank returns the item or gives notice in lieu of return, and no more than one determination need be made. If, at the election of the payor bank, a subsequent balance determination is made for the purpose of reevaluating the bank’s decision to dishonor the item, the account balance at that time is determinative of whether a dishonor for insufficiency of available funds is wrongful. (Amended by Stats. 1992, Ch. 914, Sec. 41. Effective January 1, 1993.)

Key Takeaways

•If a bank refuses to pay a check or payment that should be paid, it's doing something wrong unless the payment would make the account negative and the bank didn't agree to cover it.
•If the bank wrongly refuses to pay, it has to pay back the customer for any real harm caused, like money lost or even trouble with the law because of the refusal.
•The bank checks the account balance once to decide if there's enough money. If it checks again later, the new balance is what matters.

Example

You write a check to buy groceries, and you have enough money in your account. But the bank says no and doesn't pay the check.

The bank did something wrong by not paying the check when there was enough money. You might get money from the bank for any problems this caused, like extra fees or embarrassment.

Key Takeaways

Example

Key Terms

References

§ 4402 Bank Overdraft Dishonor Liability

Key Takeaways

Example

Key Terms

References

Key Takeaways

Example

Key Terms

Related Statutes

References

Key Takeaways

Example

Key Terms

Related Statutes

References