Under the Uniform Commercial Code (UCC), a personal or business check is generally considered to be a stale check if it is presented for payment more than 6 months after it is issued. A check is considered to have been issued on the date entered on the check by the person who writes the check.
A bank is not legally obligated to accept stale checks, but it may do so as long as it acts in good faith and the account owner on which the check is drawn has not made a check-stop payment order with respect to the check. A New York lawyer consultation would help a person understand banking operations and stale checks.
The individual who has issued a check that becomes stale does not satisfy whatever debt they owed if a bank refuses to honor the check. They still owe the recipient of the check the money represented by the check. The recipient can ask for a new payment after a check becomes stale.
However, it is important to remember that a check does not become void 181 days after it is issued. Instead, it becomes stale. Before 6 months have passed, a bank has a clear duty to pay it. Of course, the funds must be available in the account on which it is drawn.
But after 6 months, the bank has discretion and may choose to pay it or not, depending on the circumstances. In the case of frozen bank accounts, a bank would choose not to pay it. Or, if the bank detects a forged signature or other evidence of fraud or criminal activity, it could refuse to pay it.
For example, a contractor may receive a check from a customer in payment of a project dated June 1. If the contractor deposits the check in their bank account by November 30, then the bank must process it. Six months have not passed since the check was issued. However, if the contractor goes to the bank on December 5, which is more than 6 months after the check was written, and presents it for deposit, the bank may choose whether to accept or reject it.
How Do New York Banks Treat Stale Checks?
The rule set forth in federal law is that a check becomes stale when 6 months have passed after it is signed and dated. After 6 months have passed, a bank has the right to accept and cash it, or it may reject it. Checks are considered valid for 1 year after they are signed and dated. However, a person is safest in assuming that they need to cash or deposit a check within 6 months of the date on which it is signed.
In New York, banks may have strict internal policies which provide that they may honor a check for up to 1 year after the check is issued. However, many large banks would automatically flag and reject checks that have been issued more than 180 days, or 6 months, before they are presented for deposit or cashing.
What Do I Do If a New York Bank Honors a Stale Check Without Permission?
It is important to keep in mind that a stale check is not invalid. A check is good for 1 year from the date of its issuance. So, a check may choose to process stale checks for some customers.
If the check is for a relatively small amount, the customer is known to be in good standing with the bank, and there are no other signs that the check should not be paid, a bank may choose to pay a stale check. A New York lawyer would be able to explain bank policies about check processing.
However, the bank must process a stale check in good faith. If they know that the issuer has placed a stop payment order with their bank, they should not proceed with processing. Or, if the bank learns that the issuer is deceased, again, they should not process the stale check. If the bank has any other reason to suspect some kind of check fraud, they should refrain from processing the check.
If a bank pays a check when a valid stop payment order has been issued, the bank could be held liable for the loss suffered by the issuer of the check. However, it is important to know that a check is legally valid and payable for 1 year after the date on which it is issued.
How Is “Good Faith” Evaluated Under New York Banking Law?
A bank is under no obligation to a customer who has a checking account with the bank to pay a check presented more than 6 months after its issue date. The exception is a certified check. The bank would have to pay a certified check.
As noted above, however, a bank may pay a stale check and charge the customer’s account for the payment. The stale check is not void. The bank would want to ensure that it acts in good faith and does not miss signs of fraud or criminality when it pays the check.
How Can I Prevent a Stale Check from Being Honored in New York?
The most effective way to prevent a stale check from being honored by one’s bank in New York is to put a stop payment order on the check with the bank. This would probably entail going to the bank to request the stop payment order.
What Happens When a New York Bank Refuses to Cash a Stale Check?
In New York, a bank is not legally obligated to honor a stale check. A bank may refuse to process it unless the check is certified.
However, the obligation of the issuer of the check to pay the debt they owe to the payee of the stale check continues. The person who received the stale check may ask the payor, the issuer of the check, to provide them with a new check to replace a stale one, if the bank does not honor it.
The payee should present any new, replacement check to their bank for processing promptly. They want to avoid having the same problem again by presenting the check to their bank before 6 months have passed.
If a person believes that they may be unable to present checks to their bank before they become stale, they may wish to ask their creditors to provide them with certified checks. However, the recipient of a check should always keep in mind that best practice is to present a check to their bank for processing within 6 months of the date on which it is issued.
Are There Punitive Damages for Wrongfully Honoring Stale Checks in New York?
Winning an award of punitive damages from a bank because it honored a stale check would be quite challenging. Punitive damages are generally awarded in lawsuits alleging negligence or intentional torts in which the party who is liable for damages acted in an especially reprehensible way.
In New York, winning punitive damages requires a showing of outrageous conduct or gross negligence by the party who is liable, i.e., the bank. So this is what a person who wants to win such an award would have to prove, i.e., that the bank that honored a stale check did something outrageous or grossly negligent. This would be challenging in light of the fact that a stale check is not a check that cannot not be paid per New York law. It is only stale; it is not void.
If a bank were to demonstrate bad faith in paying a stale check, e.g., the bank pays the check after the account holder puts a stop-payment order on the check, then it might be possible to recover punitive damages in addition to compensatory damages.
When Should I Contact a New York Lawyer About a Stale Check Dispute?
If you have an issue with a stale check, you want to talk to a New York finance lawyer. Your bank may have refused to process a stale check and the issuer of the check may have refused to replace it. Or your bank may have paid a stale check after you had placed a stop payment order on the check. Whatever the issue is, a New York finance lawyer will be able to tell you what your options are and help you get the remedy that works best for you.
