expired stop / stale dated check

Posted By: silverliner

expired stop / stale dated check - 10/23/08 01:37 PM

Customer wrote check on 3/21/07, placed a stop on the check on 3/23/07, stop expried 9/23/07, check was cashed and cleared account on 9/16/08, customer reported to us on 10/6/08, we returned as stale on 10/6/08 - fed debited us on 10/21 - BOFD sent adj. for late return. What are our options if any. We credited the customer back when we returned the check for stale date and currently we are out the $$.
Posted By: BrendaC

Re: expired stop / stale dated check - 10/23/08 02:26 PM

You need to review your state statutes regarding staledated items. We can, but do not have to, accept statedated items. If that is the case of you, I would charge back to the customer. The customer should have renewed the stop payment order when it expired if they were concerned the item might still be presented.
Posted By: John Burnett

Re: expired stop / stale dated check - 10/24/08 07:20 PM

You made a late return and the depositary bank caught it and called you on it.

Your bank was not under any obligation to return funds to your customer. New York's version of the UCC, at section 4-404, reads:

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. (Emphasis added)

The "requirement" that a bank refuse to pay a check over 6 months old has been dead for a long time. Some will argue that "good faith" requires you to have positive information that your customer wants the check paid. That might work in theory, but it assumes that you even see the date when the decision is made.
Posted By: reknab

Re: expired stop / stale dated check - 10/30/08 07:39 PM

Hey John,
Is there a MASS version of the UCC realating to stale dated checks?? I can't seem to find it!
Posted By: John Burnett

Re: expired stop / stale dated check - 11/05/08 09:41 PM

We may have been slow in adopting the 1990 UCC wording (in 2001), but we did adopt most of the provisions. You'll find what you're looking for in section 4-404, just like in the "model" version. If you have a copy of the 2001 Massachusetts Uniform Commercial Code book from Mass Bankers, you'll find it at the bottom of page 154, in the right column. This provision, by the way, we adopted way back in 1998.

For an online version of our UCC, go to http://www.mass.gov/legis/laws/mgl/gl-106-toc.htm. Section 4-404 is at http://www.mass.gov/legis/laws/mgl/106-4-404.htm
Posted By: cjdod

Re: expired stop / stale dated check - 11/20/08 10:33 PM

why does the stop expire after 6 months. I know this is standard on every stop payment request form I have ever seen and I was wondering why they expire. Obviously banks input the expiration date on stops, any thing wrong with inputting a very long expiration?

Regards,
cj
Posted By: rlcarey

Re: expired stop / stale dated check - 11/21/08 02:21 PM

You can modify this to a longer period of time, but that just puts the bank at greater risk of improperly paying a check over a stop payment order.
Posted By: Al Miller

Re: expired stop / stale dated check - 11/21/08 03:41 PM

cjdod, this goes back many years. I would bet it was a compromise between consumers who wanted stops to be effective forever and banks who had to manually deal with paper stop forms every day and who had to pay dearly for computer time to identify stop payment suspects.

Computer time and memory are significantly less expensive now and images are the norm instead of paper that had to be reviewed to identify whether this item was the stop or the replacement.

As Randy says, you can modify the 6-month standard in your Deposit Account Agreement. Customers who place stops for checks truely lost won't care. Customers who worry that the check will be presented in 6-months and a day will be very happy. I'm sure the loss of income from stop payment renewal fees won't be noticed as I think that is pretty rare.

Do a risk-benefit cost analysis.

Al