There are no federal laws that regulate a bank’s handling of stolen checks. The responsibility for legislating banking laws pertaining to check theft is left to each state. However, there are laws related to a bank’s liability when a stolen check is presented within the Uniform Rules for Collection (URC). These rules are administered and published by the International Chamber of Commerce, and issues related to bank liability regarding stolen checks are found in ICC Publication No. 522. Article 22 of this publication states that the presenting bank is responsible for ensuring that the check appears to be correct and complete, but is not responsible for the authenticity of the signature of the person presenting the check or her authority to do so.
The UCC, originally published in 1952, was a collaborative effort by the National Conference of Commissioners on Uniform State Laws to come up with a set of standards to regulate interstate commerce. These standards were never intended to be laws. Rather, they were intended to be informative guidelines to assist the states in establishing their own codes and laws pertaining to banking practices. Article 4 of the UCC addresses all bank transactions involving collections and issuance of funds. A bank’s responsibilities in these situations are clearly defined in Subsection 4-406. The depositor bank (holder of the account) must exercise “ordinary care” to ensure that all identification is valid before cashing the check. It is up to the customer (account holder) to notify the bank that a check is invalid or that it has been stolen before the funds are released. Otherwise, the bank is under no obligation to reimburse the customer the lost funds unless it can be proven that “ordinary care” was not taken.
Account Holder Relief
There are a variety of ways that an account holder may seek relief in the case of a stolen check. According to the Federal Trade Commission, federal laws apply to electronic funds transfers, and state laws apply to paper documents such as checks. The FTC website suggests that anyone who is the victim of a check theft should ask the paying bank or depositor bank to contact the check verification vendor she uses so that retailers will be alerted not to cash any other checks drawn on the account. The account holder is also advised to stop payment and close the account on which the check was drawn. It is important to take these steps in a timely manner (varying from 10 to 30 days, depending on the bank and the account agreement) to avoid being liable for the forgery.
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