Central Oklahoma Clearing House Association

Critical Protection for Financial Institutions

Check Fraud Warranties

All COCHA clearing participants are bound by this rule designed to reduce loss exposure on forged maker items. The rule provides the payor financial institution 90 days to receive notification from their customer regarding fraudulent items, determine if the bank of first deposit is also a COCHA clearing participant, and return the item. The bank of first deposit performs a sufficiency of funds test prior to accepting the item. This rule more closely aligns liability with the individual/merchant that received the item in exchange for goods or services.


This rule was implemented January 2, 2003, and has served members well since then.

Liability transfer via UCC and Clearing House rules

UCC 4.103:

  • The effect of the provisions of this Article may be varied by agreement, but the parties to the agreement cannot disclaim a bank's responsibility for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack or failure. However, the parties may determine by agreement the standards by which the bank's responsibility is to be measured if those standards are not manifestly unreasonable.
  • Federal Reserve regulations and operating circulars, clearing-house rules, and the like have the effect of agreements under subsection (a), whether or not specifically assented to by all parties interested in items handled.

Under current UCC guidelines, the customer has 30 days from their statement date to report item discrepancies. The Payor Bank has to decide to pay or return items by midnight the day following presentment. In many cases, this time discrepancy places the loss liability on the Payor Bank.

The new Rule states that the Payor Bank:

  • Receive notification from their customer regarding items within 60 days of the account statement having been made available
  • Determine if the Bank of First Deposit (BFD) is also a COCHA clearing member.
  • Return the item to the BFD under the Check Fraud Warranties Rule within 15 days after receiving customer affidavit
  • Within 15 days following the receipt of the warranty claim by the Warrantor, the BFD then conducts a Sufficiency of Funds Test to determine if the depositing account is still in existence and has sufficient funds to cover the item.

If yes, the BFD must accept the item under the Check Fraud Warranties Rule. Whether or not the item is charged back to the BFD depositing customer is between the BFD and their customer.>

Benefits to COCHA Members

Reduces clearing member financial institution loss exposure on forged, altered or counterfeit items, and remotely created and unsigned, unauthorized drafts.

Aligns liability with individual/merchant receiving item in exchange for product and/or service. Encourages COCHA membership and clearing programs participation, thereby reducing check collection costs for all.