Is the Drawee Bank Liable for a Stale Dated Check?
by Ken Golliher and John Burnett, BOL Gurus
Question: We have an issue where a check that was issued 2 years ago has hit our customer's account. There was no stop payment ever put on this item. The item was brought to our attention when our customer received his bank statement, so the time frame (24hrs) to return the check as stale dated had expired. Is the Drawee bank liable for a stale dated check? What is the law on stale dated checks?
Answer by Ken Golliher: BIO AND CONTACT INFO
Compare section 4-404 of your state's version of the UCC to the language in the model version:
"A bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, which is presented more than six months after its date, but it may charge its customer's account for a payment made thereafter in good faith."
If your state's language is identical, the decision to pay or return a stale dated check is the paying bank's. If you pay it in good faith you are within your rights. If you return a check for "stale date," you must send it back prior to midnight of the banking day following the banking day it was presented for payment.
Answer by John Burnett: BIO AND CONTACT INFO
"Good faith" is the only issue in question here. It's unlikely that bad faith could be proven in this case, since it's very unlikely that anyone at your bank ever saw the date on the check.
This provision of the UCC is one that is commonly misunderstood by customers, who often believe that a bank cannot pay an item that's over 6 months old.
Your state may have other laws that impose a greater duty of care on the bank than the UCC does in 4-404. We've learned that at least one California judge agreed that a bank paying such an item could be held liable to its customer. But the bank in that case evidently got possession of a piece of equipment that had been purchased with the check, under the theory that the drawer of the check should not be unjustly enriched by the bank's "error" in paying the check. Perverse justice, but justice, perhaps.
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