Answer by John Burnett:
"Refer to maker" is tantamount to saying "We want to return this item but we can't tell you why." If the check is actually NSF or forged or stopped, putting "refer to maker" on the check as the reason for return could get the paying bank in hot water. The payee deserves to know why a check is not paid, and could argue that the lack of the correct reason caused the payee a loss.
"Refer to maker" does not endow a check with any sort of protection from an allegation of late return, either. In the cases you mention, you think the other bank is returning items late based on an allegation of kiting. Your bank should refuse these as late returns since the drawee bank doesn't get a "pass" on the midnight deadline just because they think a kite is flying. In these cases "refer to maker" seems to be an obvious ruse to hide the true reason for bouncing the checks -- when the true reason would not be permitted a late return.
In general, delayed returns are permitted only for things like forged endorsements and alterations, since these are not things that the drawee is presumed to know at the time of payment.
Answer by Ken Golliher:
John is so much more polite than I am. I would have said the message is "We want to return this item and we know why, but we're not going to tell you. Otherwise, John has nailed the response and I am only adding moral support.
Refer to maker is the most consistently abused reason for return; banks often use it under circumstances that can only be described as "dishonest." Yours is an example.
If it was apparent to me that a check marked refer to maker was returned after the midnight deadline, I would automatically protest it as a late return. If they respond by alleging their return was timely, their response is a gift to my bank of a clear paper trail showing that they knowingly abused the process. If we end up in court on this one, the other bank supplied my best evidence.
First published on BankersOnline.com 08/11/03