I know there is a banking law that requires banks to only issue cashier's checks on collected funds. However, I am having a hard time finding it. Any suggestions would be appreciated.

Liz,
I am not aware of any "law" that requires collected funds. If there was, it would probably be in the UCC. However, because a cashier's check is defined as a check a bank draws on itself, and because of the limitations on stop payments, etc. I would think it would be a huge risk to issue cashier's checks for non-collected funds. If the funds you based your sale on turn out to be fraudulent or NSF, you are stuck! This may also be a safety and soundness issue with your regulators.
Leslie

LizF: Leslie is right about the risks in issuing a cashier's check against uncollected funds. By law, once a bank issues a cashier's check it must pay it (or run the risk of having to pay damages to someone legitimately asking for payment), w/very few exceptions.

There is no provision in the UCC (Articles 3 and 4) that prohibits a bank from issuing a cashier's check against uncollected funds.

I dont ever recall being asked this in an examination, but, could this be a safety and soundness issue? If so, there may not be a specific regulation that the examiners can point to, but they might still criticize the practice.

There are several former examiners that contribute to these threads; possibly one of them can indicate if safety and soundness might be an issue.

I AM NOT ENGAGED IN PROVIDING LEGAL ADVICE AND THE VIEWS EXPRESSED ARE NOT THOSE OF MY EMPLOYER

Would a bank that has a Next Day Availability policy be in violation of Reg. CC if it refuses to issue a Cashiers' Check on uncollected funds?

Yes, because Reg CC defines "available" as being available JUST AS IF fully and finally collected. So if they are "available" under Reg CC (i.e., no hold has been placed) then they are just the same as collected. Your only option would be to place an "after the fact" hold which you can do up to 24 hours after the deposit.

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Jim Bedsole, CRCM, CBA, CFSA

Opinions expressed are my own, and do not necessarily reflect those of my employer.

Dave: I agree w/jbedsole that you would have to make the funds available for w/drawal, but I disagree that the customer can force the bank to issue a cashier's check for the w/drawal.

The UCC (§3-409) permits a bank to refuse to certify a check. I think that a cashier's check is the equivalent of a certified check, b/c, upon certification, the check becomes an obligation of the bank that certified the check (in the same way that a cashier's check is a check drawn on the bank and not an account of the bank's customer).

From a practical standpoint, once the funds become available, the customer can w/draw cash OTC. If you would allow the customer to w/draw cash, the only reason I can think why you wouldnt give this same customer a cashier's check is if you thought to do so would result in a separate problem for the bank (like getting pulled into a lawsuit over a forged endorsement, etc.).

I AM NOT ENGAGED IN PROVIDING LEGAL ADVICE AND THE VIEWS EXPRESSED ARE NOT THOSE OF MY EMPLOYER