IBA Compliance Connection

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Can our bank put an expiration date on cashier’s checks to prevent them from being held for long periods of time? If so, what is the minimum length of time before a cashier’s check expires?

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We do not recommend placing expiration dates on cashier’s checks. While we are not aware of any law or court decision that would expressly prohibit this practice, Illinois courts treat cashier’s check as “cash equivalents” once they have entered the stream of commerce. Needless to say, cash and cash equivalents have no expiration date. While the Uniform Commercial Code does not prohibit a check issuer from placing an expiration date on a check — and many issuers do print “void after 90 (or 180) days” on various types of checks — Illinois courts would disregard this restriction on a cashier’s check. Your bank would remain obligated to pay the cashier’s check even after the expiration of the period stated in such a legend.

In fact, even on non-cashier checks, this restrictive language would not cause a check to expire and be void. Rather, a check presented after the putative expiration date would be treated as a “stale” check (as opposed to a “void” check). This approach benefits your bank, which most likely reserves the right to cash stale checks (and should, if it doesn’t), because otherwise it would be exposed to ongoing liability when processing and honoring stale checks in the ordinary course of business, which is not an uncommon occurrence.

For resources related to our guidance, please see:

  • MidAmerica Bank, FSB v. Charter One Bank, FSB, 232 Ill.2d 560 (2009) (“‘A cashier’s check circulates in the commercial world as the equivalent of cash. People accept a cashier’s check as a substitute for cash because the bank stands behind it, rather than an individual. . . .’ Thus, prior court precedent supports our interpretation of the UCC’s treatment of cashier’s checks as the equivalent of cash.”)

  • Aliaga Medical Center, S.C. v. Harris Bank N.A., 387 Ill.Dec. 32, 39 (1st Dist. 2014) (“Furthermore, under the parties’ agreement, Harris Bank specifically ‘reserve[d] the right to pay * * * a stale check.’ [The plaintiff’s] contention that this provision is inapplicable because the check ‘was not * * * stale * * * [but instead] it was void’ is without merit. . . . [The plaintiff] has not cited to any case nor identified any other authority supporting its proposition that there is a substantive difference between stale checks and those marked void after a certain time.”)