Cashing Corporate Checks
Answers by Andy Zavoina and Mary Beth Guard, BOL Guru Guru Bios
QUESTION: We recently had an irate business professional that wanted to "cash" a check that was payable to the business where he was employed and had been returned NSF. When we informed him that our bank policy was to issue a cashier's check payable to the business to replace the original check, he stated that it was against the law to NOT cash his check. Where can we find laws and/or regulations relating to checks and businesses/corporations?
ANSWER by Andy Zavoina:
It may take one of the legal eagles to provide some cite or case, but I am aware of no law requiring you to provide cash. This is especially so when the check is payable to a business, not a person.
Strict accounting rules for the business would also frown on such a practice. In that light the customer should be somewhat pleased since the practice protects him.
ANSWER by Mary Beth Guard:
Generally accepted banking practices require checks made payable to business entities to be deposited into an account held by the business entity. There is no law that requires the cashing of a check. However, if customer A writes a check on his account at Bank X to customer B and customer B subsequently presents it to Bank X to be cashed, Bank X could risk a claim of wrongful dishonor from customer A if it does not cash the check. Bank X may refuse to make payment, however, without being deemed to have "dishonored" the check if the person making presentment cannot provide reasonable identification. In our example scenario, even if the employee of the business were able to establish his own identity and the identity of the business to the satisfaction of Bank X, he would probably fail to establish that he has the authority to cash checks made payable to the corporation.
I would not advocate exchanging the check for a cashier's check either. That course of action is fraught with potential pitfalls.
The law which governs most of these types of questions is the Uniform Commercial Code, Articles 3 and 4. You can link to the UCC sections from the BOL Launch Pad
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