Illinois Court Confirms: 30 Days to Report Unauthorized Bank Account Activity is Enough

Business and personal lives move fast, and most of us agree there are just not enough hours in the day to attend to every detail. Checking the monthly bank statement for accuracy seems like the last thing on the list. Failing to do it, though, or assigning the task to an employee (especially one who can write checks) can leave you with little recourse if you are the victim of fraud.

The Illinois Appellate Court recently affirmed the dismissal of a customer’s lawsuit against his Bank – not because he wasn’t a victim, he was – he just had not timely reported the fraudulent activity to the Bank, and was left suffering the loss.

In November, 2007, a fraudster took one of the customer’s checks, altered it, and then cashed it for $7,500.00. The customer, however, neglected to review his November statement (on which the fraudulent check appeared) until March 2008. Like most account statements, the customer’s statement said: “Please examine this statement at once. If no error is reported in 30 days, the account will be considered correct.” The Account Agreement, which he received when he opened the account, also contained similar language, including the warning: "If you fail to notify us, you will have no claim against us."

The customer admitted he had failed to report the fraud on time, but argued that (notwithstanding the Account Agreement and Statement) the Illinois version of the Uniform Commercial Code required the Bank to also prove that it suffered a loss as a result of his failure to notify. Because the Bank could not prove any loss, the customer argued that it could not disclaim responsibility for paying the altered check. The trial court disagreed, and dismissed his lawsuit. On appeal, the First District affirmed, agreeing with the trial court that the customer’s own failure to report the fraud in 30 days barred his suit against the Bank. Napleton v. Great Lakes Bank, N.A., 945 NE 2d 111.

The lesson here is plain, and likely applies to all accounts that provide periodic statements, including credit cards, credit unions, and other lenders as well: If you do not report fraudulent activity on time, you may not have any recourse. In addition, with the increasing availability of instant internet access for web-based banking, this 30 day window may well narrow even further, as institutions fight to protect themselves from losses caused by fraud.