Post-dated cheque

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In banking, post-dated cheque is a cheque written by the drawer (payor) for a date in the future.

Whether a post-dated cheque may be cashed or deposited before the date written on it depends on the country. A Canadian bank, for example, is not supposed to process a post-dated cheque and if it does so by mistake, the cheque writer may ask his or her bank to correct the error. In the United States, however, check writers should not expect the post-dating of a check to be honored.[1]

In the United States, postdated items are described in Article 3, Section 113 of the Uniform Commercial Code.[2] Postdated checks are often used in conjunction with payday loans.

Practices in various countries[edit]

Brazil[edit]

In Brazil, the drawer may seek damages in Justice if their cheque is cashed in before its due date, according to the jurisprudential orientation of the Superior Court of Justice, as per Summary No. 370 of such court.[3]

Canada[edit]

Under the clearing rules of the Canadian Payments Association, a post-dated cheque cannot be cashed prior to the date written on it. If a Canadian financial institution inadvertently accepts and processes a cheque before the due date, the cheque writer may ask his or her financial institution to return the amount until the day before the cheque should have been cashed.[4]

India[edit]

Postdated cheques are illegal in India under section 68 of the Indian Stamp Act.

UK[edit]

In the UK the legislation is clear; 'A cheque is a bill of exchange drawn on a banker payable on demand'.[5] Under the Bills of Exchange and Banking Act 1882, part 10, bills of exchange are payable on demand and in part 13, 'A bill is not invalid by reason only that it is ante-dated or post-dated.'[6] In the United Kingdom, postdating a cheque carries no legal weight and so such a cheque can be cashed before the due date. However, a bank may refuse to honour a cheque if the postdate is noticed; othwerwise, the payer has no right to take any form of legal action against the bank for letting the cheque be processed.[7][8]

It is common for the terms and conditions of chequing accounts to state that postdated cheques should not be written and will be dishonoured if detected.[9][10] In some instances a postdated cheque may be retained by the bank and paid on the due date if that date is only a few days away.[11] Some UK organisations do not accept post-dated cheques[12] as well as some Government Departments,[13] while paying income tax or voluntary National Insurance may only be done with post-dated cheques with permission from HM Revenue and Customs Department.[14][15]

United States[edit]

In the United States, national banks are permitted to pay checks even though payment occurs prior to the date of the check. According to the Comptroller of the Currency: "A check is a negotiable instrument—the payee, the person to whom the check is written, may negotiate it through the banking system at any time" and check writers seeking redress must restrict themselves to pursuing the payee.[16]

Nonetheless, if "the customer has given notice to the bank of the postdating describing the check with reasonable certainty" the Uniform Commercial Code requires that the notice to be honored.[17] In practice, whether the check writer has any redress against the financial institution where the payee deposited the check may depend on whether it can be shown that the check was accepted over the counter without examination.[18]

See also[edit]

References[edit]

  1. ^ Banking in Canada and the US RBC Bank Advice Centre
  2. ^ 3 UCC 113 Cornell Law Center's online version of the Uniform Commercial Code
  3. ^ http://www.stj.gov.br/portal_stj/publicacao/engine.wsp?tmp.area=398&tmp.texto=90959
  4. ^ Post-dated cheques Financial Consumer Agency of Canada
  5. ^ http://www.legislation.gov.uk/ukpga/Vict/45-46/61/part/III
  6. ^ http://www.legislation.gov.uk/ukpga/Vict/45-46/61
  7. ^ http://www.chequeandcredit.co.uk/faqs/-/page/can_i_post-date_a_cheque/
  8. ^ http://news.bbc.co.uk/2/hi/programmes/moneybox/3537727.stm
  9. ^ http://payontime.co.uk/cheques-and-cheque-clearing/cheques-and-the-cheque-clearing-system
  10. ^ http://news.bbc.co.uk/2/hi/programmes/moneybox/3537727.stm
  11. ^ http://www.debtscotland.com/bouncedcheques.cfm
  12. ^ https://engineers.gassaferegister.co.uk/Renewals/RenewalFAQ.aspx
  13. ^ http://www.nidirect.gov.uk/the-cost-of-a-driving-licence
  14. ^ https://www.gov.uk/pay-self-assessment-tax-bill
  15. ^ https://www.gov.uk/pay-voluntary-class-3-national-insurance
  16. ^ "Answers About Cashing Checks". Comptroller of the Currency, Administrator of National Banks. Retrieved 2008-11-25. 
  17. ^ http://www.law.cornell.edu/ucc/4/4-401.html
  18. ^ Practical Application of the UCC bankersonline.com