What are the consequences when a recipient cashes a post-dated check early?
Both state and federal law contain provisions that address the cashing or depositing of postdated checks before the date appearing on the check. The laws can vary from one state to the next, but several states have postdated check laws identical to postdated check provisions in federal law.
State Law & the Early Presentation of Postdated Checks
Many states have laws addressing postdated checks and consequences for cashing a postdated check before the check’s date. Some states, such as Georgia, put the onus on the maker of the postdated check to ensure that the check is not cashed or deposited prematurely. Other states, such as West Virginia, place the responsibility of avoiding the premature deposit or cashing of a postdated check on the recipient of the check.
Laws Placing Duties on the Check Maker
In Georgia, a bank may pay a postdated check before the date on the check unless the customer who writes the check notifies the bank of the postdating and sufficiently describes the check. The notification not to pay the postdated check until the check’s date is valid for six months; however, if the customer’s notification was made verbally without also putting it in writing, the customer’s notification remains valid for only 14 days. For example, if the customer verbally informs the bank on May 1 that the customer has written a check with the date June 1, the bank will not be liable if it pays the check on May 15.
If a bank does pay a postdated check before the check’s date even though it has received proper notice from the customer, the bank is liable to the customer for any loss resulting from the bank prematurely paying the check. In other words, a customer who has properly notified the bank of the postdated check can sue the bank for cashing the customer’s postdated check before the postdate if the bank’s action causes the customer loss, such as causing other checks to bounce.
(Ga. Code Ann. §§ 11-4-401, 11-4-403)
Laws Placing Duties on the Check Recipient
West Virginia law contains several prohibitions addressing early payment of postdated checks. The West Virginia Code prohibits a person from requesting or accepting a postdated check while intending to deposit or cash it before the date written on the check. The law also prohibits the recipient of a postdated check from intentionally cashing or depositing the check prior to the check’s date if the recipient represented that postdating the check would prevent the check from being deposited or cashed prior to the check’s date. The same law disallows an organization from making the same representation but then cashing or depositing the check without reasonable procedures in place to prevent the premature cashing of the postdated check.
Where the recipient accepted a check knowing that it was postdated, West Virginia law requires the recipient of a postdated check to, upon the request of the check’s maker, pay the fees and any other costs resulting from the early cashing or depositing of the check.
For violating any of these postdated check provisions, the maker of the postdated check may file a lawsuit against the check recipient seeking to recover the amount of the check and any fees or costs caused by the premature cashing or depositing of the postdated check. The suit may also seek the imposition of a civil penalty against the check recipient in an amount not less than $100 but not greater than $1,000.
(W.Va. Code § 46A-6-110)
Postdated Checks, Debt Collectors, and Federal Law
Federal law addresses the early cashing and depositing of postdated checks in the context of debt collection practices. The federal code broadly prohibits debt collectors from using “unfair or unconscionable means” in collection efforts. In identifying the type of conduct forbidden under this broad prohibition, the statute provides a non-exhaustive list of specific actions that a debt collector may not undertake; three of these specific actions pertain to postdated checks.
Debt collectors are prohibited from depositing or threatening to deposit a postdated check prior to the date on the check. A debt collector may not accept a check postdated by more than five days unless the debt collector notifies in writing the check’s maker of the collector’s intent to deposit the check. The written notice must be provided at least three but no more than ten business days prior to the collector depositing the check. In other words, if on July 1 a debt collector accepts a check postdated for August 1, the collector may not deposit the check before August 1; if the collector intends to deposit the check on August 1, the collector must notify the maker in writing of such intent no later than July 29 but no earlier than July 18.
A debt collector who commits one of the prohibited collection practices faces civil penalties. The penalties can include damages caused by the debt collector’s violation. The court may assess an additional penalty no greater than $1,000, if the lawsuit is brought by an individual. The debt collector may also be responsible for paying the plaintiff’s attorney fees and the costs of bringing the lawsuit.
(15 USC §§ 1692f, 1692k)
Some states have laws that mirror the federal law’s prohibited debt collection practices. For example, Rhode Island law also forbids a debt collector’s use of unfair or unconscionable means to collect a debt. Such means include depositing or threatening to deposit a postdated check before the date on the check. Idaho’s unfair collection practices statute contains a provision identical to the federal notification provision pertaining to checks postdated by more than five days.
(R.I. Gen. Laws § 19-14.9-8; Idaho Code Ann. § 63-4006)
Consult an Attorney
Laws governing the early cashing and depositing of postdated checks can vary among states, although many jurisdictions have similar provisions. If you provided an individual or business with a postdated check that was cashed or deposited before the date on the check, you should speak with an attorney. You may have grounds to file a legal action to recover any harm you suffer as the result of the premature cashing or depositing of the check.