KRS 355.4-214: Right of charge -back or refund -- Liability of collecting bank -- Return

of item.

(1) If a collecting bank has made provisional settlement with its customer for an item

and fails by reason of dishonor, suspension of payments by a bank, or otherwise to

receive settlement for the item which is or becomes final, the bank may revoke the

settlement given by it, charge back the amount of any credit given for the item to its

customer's account, or obtain refund from its customer, whether or not it is able t o

return the item, if by its midnight deadline or within a longer reasonable time after it

learns the facts it returns the item or sends notification of the facts. If the return or

notice is delayed beyond the bank's midnight deadline or a longer reasonabl e time

after it learns the facts, the bank may revoke the settlement, charge back the credit,

or obtain refund from its customer, but it is liable for any loss resulting from the

delay. These rights to revoke, charge back, and obtain refund terminate if an d when

a settlement for the item received by the bank is or becomes final.

(2) A collecting bank returns an item when it is sent or delivered to the bank's customer

or transferor or pursuant to its instructions.

(3) A depositary bank that is also the payor may charge back the amount of an item to

its customer's account or obtain refund in accordance with the section governing

return of an item received by a payor bank for credit on its books (KRS 355.4-301).

(4) The right to charge back is not affected by:

(a) Previous use of the credit given for the item; or

(b) Failure by any bank to exercise ordinary care with respect to the item, but a

bank so failing remains liable.

(5) A failure to charge back or claim refund does not affect other rights of the bank

against the customer or any other party.

(6) If credit is given in dollars as the equivalent of the value of an item payable in

foreign money, the dollar amount of any charge -back or refund must be calculated

on the basis of the bank -offered spot rate for th e foreign money prevailing on the

day when the person entitled to the charge -back or refund learns that it will not

receive payment in ordinary course.