DID YOUR BANK DISHONOR YOUR CHECK? YOU MIGHT HAVE LEGAL RECOURSE

In order for a bank to honor a check, there must be sufficient funds in the account. But if there are, in fact, sufficient funds and the bank “dishonors” the check, then what?

The debtor-creditor relationship

A debtor-creditor relationship exists between the customer and the bank, Investopedia.com reminds us. “When a bank cashes a check, in effect it makes a short-term, interest-free loan. The bank gives out cash immediately, but it may not receive offsetting credit for the cashed check for a day or more. Banks are generally willing to do this for their own customers’ convenience.

The Uniform Commercial Code

The Uniform Commercial Code (UCC) is a comprehensive set of laws governing all commercial transactions in the United States. According to the UCC, if the check was valid and there are enough funds in the customer’s account to cover the amount of that check, a bank’s failure to honor it would constitute wrongful dishonor. The bank could then be held liable to the customer for any damages that resulted from its refusal to pay. It would be up to the courts to decide whether the damages suffered by the customer were, in fact, the result of the wrongful dishonor of the customer’s check.

Damages that might be caused by wrongful dishonor of a customer’s check:

• customer was arrested or prosecuted for failure to pay a debt
• customer was evicted because rent check didn’t clear
• customer’s reputation was damaged causing loss of business
• customer was fired
• healthcare provider or contractor refused any future dealings with the customer
• customer is charged overdraft fees
• customer lost a professional license or certification

What steps can a customer take to recover damages from the bank?

“Wrongful dishonor is not a myth.  It happens in real life situations,” the businessProfessor.com admits. But it is up to the customer to prove that there was significant harm caused by the mistaken dishonoring of his or her check.

As consumers and as businesspeople, we rely on the banking system. When things go wrong, it is advisable to seek experienced legal help. Even if the check dishonored by your bank was for a relatively small amount, the damages to your business and reputation might be substantial. At Ramey & Hailey Law, our mission becomes to defend your interests, helping you avoid further damages and recovering for damages already caused through no fault of your own.