Stale Dated Checks

Question: At one of your Security Workshops you presented some information on UCC 3 and 4 amendments including a statement you made about "stale dated checks". You said that "...as long as a check is paid in good faith there is no stale date and the bank may choose to have a policy of six months, but liability may come into play if you violate your own policy." I know that's what you said, because I wrote it down that day.

We use the training material of a large bank training company, and here is what their manual says about the same subject.

"Stale Checks - The flip side of the post-dated check is the "stale" side, and the rules on it have been changed in the UCC as well. Previously a check was deemed stale, and the bank it was drawn on was not required to pay it, if it was presented more than six months after the date written on it. The amendment to the UCC reduces that six months to 90 days. This change will have to be highlighted to a bank's tellers, operations people, and others who handle checks and check questions."

I'm about to conduct training. Which one of you is correct? Document, please.

Answer: Well, I'll stand by my statement - and here's the documentation to back it up. I don't know where your supplier got their 90 days from, but I'd be willing to bet they've already published a correction.

UCC Section 4-404. BANK NOT OBLIGED TO PAY CHECK MORE THAN SIX MONTHS OLD 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.

Here's what advisor Mary Beth Guard, Esq. has to say about it:
"The payor bank holds all the cards here. Section 4-404 of the UCC places the ball firmly in the banks' court by stating that a bank is under no obligation to a customer having a checking account to pay a check which is presented more than six months after its date, but it may charge the customers account for a payment made thereafter in good faith.

"This provision is intended to protect the payor bank as, once again, the date is not in the MICR line and often is not noticed prior to payment of the check.

"The bank may thus 1. Pay the check and be protected or 2. Refuse to pay the check and be protected.

"The one thorn in this otherwise pretty provision is the requirement that the payment be in good faith. Generally that is interpreted as meaning the bank can't have reason to know the customer does not want the check paid. There have been numerous cases dealing with the question of whether an expired stop payment order puts the bank on such notice. Generally, the answer in most cases has been that it does not."

Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 5, 6/05