Bank Deposits and Collections

ORS 74.4020
Bank’s liability to customer for wrongful dishonor

  • time of determining insufficiency of account


Except as otherwise provided in this chapter, a payor bank wrongfully dishonors an item if it dishonors an item that is properly payable. However, a bank may dishonor an item that would create an overdraft unless it has agreed to pay the overdraft.


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.


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 a 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 availability funds is wrongful. [1961 c.726 §74.4020 (Bank’s liability to customer for wrongful dishonor); 1993 c.545 §105]

Notes of Decisions

Since plaintiff was without (overdrawn) rather than within its approved line of credit, defendant bank was entitled, as to plaintiff, to dishonor drafts in excess thereof. Modoc Meat & Cattle Co. v. First State Bank of Oregon, 271 Or 276, 532 P2d 21 (1975)


Last accessed
Jun. 26, 2021