Question & Asnwer

Question: How do we put a stop payment on a cashier's check drawn on our bank?

Answer: The new UCC (in place in all states except South Carolina and New York) addresses this problem very clearly. A cashier's check, also known as a teller's check, official check, or treasurer's check, is a check drawn against the issuing institution. The person who buys the check is known as the remitter. The remitter has NO right to stop payment on an official check. As for the issuing institution, the potential liability for wrongful refusal to pay is covered under UCC Section 3-411. It could include the face amount, expenses, interest, and consequential damages.

Having so said, the special rule for lost and stolen official checks is that the remitter or the payee is required to give you a "declaration of loss". You'll find that form on www.BankersOnline.com. Then, 90 days after the item was issued, the issuing bank must honor the claim and reissue the check. The issuing bank at that point is not permitted to require a bond or other form of security. If the original item is later presented, even by a holder in due course, the issuing bank does not have to pay it. If it is absolutely necessary to replace the item before the 90 days is up, you will want a bond or some other form of security and indemnification from the remitter and/or the payee to reissue the check.

You may remember when we had the series on the Uniform Commercial Code that we stressed the fact that the new UCC attempts to place the liability on the entity in the best position to prevent the loss. One of the most important facts your tellers need to look at on an official check presented to them for deposit or payment is the date. If it is over 90 days old, treat it very cautiously.

Copyright © 2002 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 12, No. 7, 9/02