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Is the bank obligated to pay a check that was internally delayed for collection if there are insufficient funds?
by John Burnett, BOL Guru
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Question: If a financial institution receives a domestic check placed for collection and "misplaces" it or does not forward to appropriate department, is the bank obligated to pay the item? There were sufficient funds at the time of receipt, but not at the present time.
Answer: I suspect that if a court got its hands on this, they'd opine that presentment occurred when there were sufficient funds, and the bank had an obligation to pay absent a stop order from the drawer.
If you dishonor the collection item, your customer could attack for wrongful dishonor.
First published on BankersOnline.com 3/17/03
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