Thanks to automated payments and online banking, many of us rarely (if ever) write checks, but millions of Americans still pull out their checkbooks every day to pay their bills. Because they might not always have enough money in their accounts on the day they write those checks, some folks will postdate their checks so that they aren’t deposited or cashed until after that date. Unfortunately, the fact is that there’s generally no actual obligation to honor the date on a check.
Although it might not seem right for a bank or credit union to disregard the date written on a check, they aren’t legally required to honor the request to postpone processing a transaction unless certain conditions are met by the check issuer.
Consumerist reader M. recently learned this the hard way when her bank processed a postdated check several weeks before she’d intended.
M. had sent the check to a car dealership to cover the remaining $1,500 payout resulting from turning in a leased vehicle ahead of schedule.
“Since we were still short a few hundred dollars, why not cover most of the payout, and send a postdated check for the rest later on,” she tells Consumerist. “[The dealer] would deposit the postdated check as stated, right?”
Wrong. And because the bank processed the check before the date she’d written, M.’s account was overdrawn and she was hit with fees by her bank.
While it certainly wasn’t illegal for Marcie to provide a postdated check, it also wasn’t illegal for the dealership to deposit the check or for the bank to take out the funds needed to cover that check, regardless of the date.
That’s because once a check is signed it becomes legal tender, and, according to the Consumer Financial Protection Bureau, banks and credit unions can generally use their own discretion when deciding when to process a check – all without regard to the check’s printed date.
The only way to possibly prevent a postdated check from being processed early is to let everyone involved know in advance — and in a format that goes beyond just postdating the check.
Of course, even this preventative measure isn’t full proof, as rules governing banks vary from state to state depending on the two type of notification given, the CFPB says.
In some states, if a consumer gives the financial institution reasonably timed written notice about a postdated check before the check is received, then the notice is valid for up to six months.
That means the bank must wait to cash the payment until the date stated on the paper or until six months is up, whichever comes first.
But if the consumer gives oral notice to the bank, the institution must only wait 14 days before processing the note – even if that happens to be before the date on the check.
Additionally, the only time a bank can be held liable for processing a postdated check before the indicated date is if that notice is still valid. In which case, the CFPB says the institution may may be on the hook to cover damages such as the cost of overdrafts and other fees.
Consumer advocates who spoke with Consumerist say that while there are several reasons someone might think it’s a good idea to use a postdated check, it’s not generally recommended.
Pamela Banks, senior policy counsel for our colleges at Consumers Union, tells Consumerist that sending a postdated check can be an indicator to the recipient that the check-writer is in dire financial straits. She says that many people who end up falling into predatory lending traps like payday loans have also used postdated checks to try to stave off debt collectors.
Instead, consumers could seek alternative measures such as a small-dollar loans from a credit union or community bank, inquire about a pay advance from their employer or work out a payment plan with the company or individual they are paying.
In addition to understanding the risks and potential issues with providing a postdated check as payment, consumers should be cognizant that it is illegal intentionally write a bad check.
In Marcie’s case, it appears it was indeed “at the bank’s discretion” to process the payment when it was received. Still, she tells Consumerist that the bank in question agreed to remove the overcharge fees incurred as a result of the situation.
