Answer by Ken Golliher:Any fee in connection with cashiers checks is not "in connection with an account" and, thus, subject to required disclosure under Reg DD. Nevertheless, while a rose by any other name would smell as sweet, a stop payment on a cashiers check would smell just as bad no matter what you called it. I would suggest that the fee you are contemplating be described as a "replacement" fee; i.e. the service is focused on providing a new check, not on refusing to pay the first one. (The first check may never show up anyway.)
Nevertheless, states that adopted 3-312 to their version of the UCC did so as a consumer protection measure. Obviously, the issuing bank could set the fee high enough to eliminate the process entirely, thus defeating the consumer protection entirely. If the remitter or payee complies with the statute and provides the appropriate documentation, I believe you must comply with the statute and reissue the check. I don't think you can condition compliance with a statute aimed at consumer protection on receipt of a fee.
Answer by John Burnett:With Ken's kind permission, I'll provide a slightly different perspective. I don't view the adoption of section 3-312 (or parallel language in 4-403 in New York) as a consumer protection move. Rather, I look at 3-312 as an effort to facilitate the completion of a transaction when an official check is, in fact, lost, stolen, or destroyed. It maintains the "near cash" primary bank obligation status of these checks for 90 days, but allows the issuing or certifying bank to replace the check or reimburse a claimant after that period without the risk of having to pay the original item. A side benefit is that it should discourage the practice of "hoarding" official checks and cluttering up banks' lists of unpaid official items that eventually get surrendered to the state as abandoned.
There is precious little in the UCC that is designed deliberately as "consumer protection." Like their much older stop payment distant cousin, the "Claims for Lost, Stolen or Destroyed Official Checks" provisions of section 3-312 are, in my opinion, an attempt to facilitate the use of a negotiable instrument. Any consumer advantage gained thereby is coincidental.
Like Ken, I'd be happier seeing any fee involved characterized as a "replacement fee." It better describes what the bank is doing. As for the size of the fee, it probably should be in the same ballpark as the bank's normal fee for certification or cashier's/teller's check issuance.
Answer by Ken Golliher:John and I have agreed to disagree on this one, but he's correct in noting the UCC is a commercial, not a consumer protection law. My characterization of any aspect of the UCC as being oriented to "consumer protection" reflects personal opinion.
However, prior to 3-312's promulgation banks were not required to do anything to assist those who had lost a cashier's check. Banks that were sympathetic allowed purchasers to buy a bond that protected the bank if the "lost" item resurfaced. (Those bonds were neither cheap nor easy to obtain.) Other banks simply told the parties, "You lost it; it's not our problem."
A couple quotes from the commentary might add perspective:
The purpose of 3-312 is to offer a person who loses such a check a means of getting a refund of the amount of the check within a reasonable period of time without the expense of posting a bond and with full protection of the obligated bank.
There is also language in the commentary that indicates the bank may not supplement the requirements of the statute:
The obligated bank may not impose additional requirements on the claimant to assert a claim under subsection (b). For example, the obligated bank may not require the posting of a bond or other form of security.
I would not say requiring payment of a fee is the equivalent of requiring the posting of a bond until I knew the size of the fee vs. the size of the check. However, there are some who would equate the two in any context.
Given the potential complexity of cashier's checks, banks are wise when they offer an alternative payment product for smaller dollar amounts and impose much higher fees in connection with teller's checks, cashier's checks and certified checks.
First published on BankersOnline.com 8/21/06