When cashing checks for non-customers, do you have a policy that dictates a specific dollar limit, or is each item at the discretion of the branch manager or supervisor? I am concerned that a policy that limits cashing checks for non-customers to $1,000 would violate the Dishonor section of UCC 3. Can anyone offer any guidance?

We have a policy for cashing checks for non customers based on ID verification and check verification. We have no limit on the dollar amount. You could run into problems with wrongful dishonor if you won't cash a check drawn on your bank payable to a non customer, if you refuse to cash it only because it is over a certain dollar threshhold.

Since I'm not sure how to attach other threads to this discussion, you might do a search under "Free Accounts" to view several comments on this topic. There is also information under "Court Watch" which is referenced in the aforementioned thread.

Our dollar limits for cashed checks dictate the level of the individual who must approve the transaction. Tellers are authorized to approve checks up to a specified limit and then they must be approved by a head teller or supervisor. We also utilize the fingerprint program and non-customers must come into our lobbies to cash checks (to insure good pictures).

We service a number of attorneys who pay out large sums via check following case settlements. We have a system in place for verification of some of these larger checks (some utilize callbacks, some have payee sign check on front so we can match to signature on back when customer comes in).

Would it be "wrongful dishonor" to establish a payout limit of $1000 on an on-us check for a non-customer? Say a non-customer brings us an on-us check for $3000. The funds are available in the account, and we have verified the maker's signature. If we only allow $1000 to walk out the door in cash and provide the non-customer w/a cashiers check for the rest, is this a problem?

If your have verified the makers signature, the check is payable to an individual (not a business), funds are available, and the payee has provided adequate identification documents you cannot refuse to cash your customers check when presented.

I think that you will find there are a number of banks that have successfully limited the dollar amount they will pay out in cash on a check, with regulatory approval. After all, there are security issues here. I will hasten to add that I have no personal knowledge of such a bank.

To paint a (hopefully) ridiculous example -- Suppose your customer were to write a valid check (balance, signature, etc., all verified) for $1 million to a non-depositor. It would not be dishonor to refuse to pay the check if you don't have the cash in your vaults.

Even though we're providing a cashiers check in the process? I don't disagree that it's a disservice - or maybe even bad form, but some folks are wanting to implement this type of policy to avoid paying out large amounts of cash to non-customers who present large dollar checks - usually from title companies. It almost seems like we're punishing everyone for the sins of the few, and I wasn't sure if the UCC said we couldn't do that. Plus - I would think our customers writing those checks - expecting them to be cashed - would not be happy.

So, just to be clear: if I write a check, regardless of the amount, my bank has to honor it as long as the presenter has good id, my signature is valid and I have available funds in the account.

John, I think you and I were writing at the same time! I agree w/you that security must prevail - not to mention that few branches carry a huge amount of cash. But the issue wasn't so much did the branch have the $ in the vault to pay the customer, but could we - according to statute - restrict the amount of cash paid to a non-customer? From what I read in the UCC, it sounds like if a check is "properly payable" and assuming all other things check out (id and available funds) we would have to honor a check and - within reasonable cash limits - pay the presenter. Otherwise the account holder could say we did not honor his/her check when we had the means to do so. Maybe I'm making this bigger than it needs to be. Why isn't our world black and white?

Actually, the bank did honor the check by issuing their own cashier check in place of the large check. But, now that the non-customer has a cashier check drawn on your bank, what is to prevent that customer from cashing the cashier check?

Where does it say you must cash checks for non-customers? Many banks have a policy that they will not cash checks for unless the presentor has an account with their bank even if the check is drawn on them. I know there has been prior discussion on this issue on BOL.

That's it - it doesn't say that (and Suwanee - I agree we're making a "domino effect" with the cashiers checks if we limit the payout). I guess we're trying not to irritate the customer who issued the check in the first place. And it really should be a sales opportunity to get the non-customer here. When they take the check to their bank, they get charged to cash it. This whole issue is making me crazy

UCC 3 doesn't specifically reference non-customers, nor does it reference customers. 3-501 simply states that as long as "presentment" is made at the place of payment, the instrument is "exhibited", "reasonable" identification is presented, and it's endorsed, that we then have to cash it if there are collected funds in the makers account. To do otherwise would be considered dishonor (as described in 3-502.

This is my interpretation of UCC 3. And, since I know of other banks in our area who, as policy, will not cash a check for a non-customer, drawn on one of their customers, I am wondering who is correct?

You are correct, no where does it say that you have to cash checks for non customer, however it doesn't say that you have the right not to cash them either. It is a customer service....if I write a check drawn on my bank and it can't be cashed what is the sense of having a checking account! Some banks have taken a stand and haven't had problems yet, but it could be a potential lawsuit waiting to happen (wrongful dishonor). Then again what isn't a potential for a lawsuit

Everything you do is about risk management. Each individual institution must assess the risk associated with such a decision...customer reaction, non customer reaction, legal consequences, fee income (Charge non customers for the service...we do!), etc. GOOD LUCK!

Many banks take the position that you can bank here to cash that check, or we'll charge you a fee. Here in Texas that caused some controversy and lawsuits. I don't think the final chapter is written yet, but the banks are in the lead at this point.

The problem I see is that the next time I write that person a check, they'll want the amount increased by the fee amount so they net what was intended. Then I get upset because I am paying a non-customer fee at my bank. But that scenario apparently hasn't dampened the resolve of those banks out there which are doing this.

Does anyone have a definitive answer?

Absolutely, positively and without question that is an absolute "MAYBE", I think!

Riddle me this Bankman: When is a check not a check?

Answer: When it is not payable upon demand!

An order is only a "check" if it fulfills the requirements to be a negotiable instrument and fulfills all of the elements of the definition of a "check" in the UCC. Both require the order to be payable upon demand. (The definition of negotiable instrument also says that it may be "payable at a definite time," but that is not of interest with regard to "checks").

If you charge a fee, the check is not payable upon demand. If I make demand, will the bank pay it? No. The bank will only pay it if I make demand and pay a fee. That is not payable upon demand.

And if it is not payable upon demand it is neither a "negotiable instrument" nor a "check." (See the UCC definition of each.) Further, if it is not a negotiable instrument nor a check, neither the paying bank nor any subsequent holder can become a holder in due course. All subsequent holders would be subject to any personal defenses that the drawer can assert against the payee.

And interesting argument, Riddler, but I would not want to depend on it in a court case. I'm not an attorney, but I bet there are a number out there who could forcefully argue that an on-us check is still a check even if the we impose a fee for cashing it for a non-customer.

I think John would win his bet with the Riddler. Section 3-108 of the UCC says that an order is "payable on demand" if it states that it is payable on demand or does not state any specific time of payment. Issues that may arise later, such as the payment of a fee, are not mentioned.