A bank gets an overnight courier package with a bill of lading for goods shipped from India along with a draft asking the bank to pay $900,000 to the company in Mumbai that drew the draft. You are the officer who opens the package. You had previously denied the purchaser’s application for a letter of credit to finance the purchase of the goods. You’re busy and you already turned down the application, so you throw the package in a drawer until a month later when the bank that sent you the package asks about it. Oops! The midnight deadline does not apply, BUT instead, the law requires that you either pay or return the draft within a reasonable time. A month is not reasonable. Your bank is liable on the draft, very much the same as if you failed to bounce an NSF check.

Today’s Takeaway? This is a true story and the facts almost killed a merger between two banks that I handled a few years ago. Make sure that if your bank receives a draft, no matter how it is titled, or receives documents for collection, your staff deals with it immediately. If you are not paying the presentment, return it to the sender ASAP. If you’re not sure what to do, call us before you accidentally end up with an unexpected liability.