We have a customer who closed her account and requested that a cashier’s check with the remaining funds be mailed to her. The customer has not received the check and believes it was lost in the mail. She has signed an indemnity agreement and would like a new cashier’s check to be issued. Do we have to wait ninety days to reissue the cashier’s check if we have a signed indemnity agreement? Can we put a stop payment on the lost cashier’s check?

Whether to issue a replacement cashier’s check prior to the ninety-day waiting period is a business decision for your bank.

As both the remitter and payee of the cashier’s check, the customer may assert a claim for the lost check by signing a “declaration of loss” that meets the Uniform Commercial Code’s (UCC) requirements. However, the customer’s claim does not become enforceable until ninety days after the date of the lost cashier’s check, after which time your bank may pay the customer the amount of the original check and refuse to pay the original check, if presented.

If you choose to reissue a cashier’s check before the ninety-day period has expired, you run the risk of paying the amount of the check twice. However, if the customer has provided the bank with a legally enforceable indemnity agreement that would cover this loss, this may not be a significant risk to the bank.

As to a stop payment order, the general rule in Illinois is that a bank cannot honor a customer’s request to stop payment on a cashier’s check, since the check is drawn on the bank’s funds and not the customer’s funds. Under the UCC, the issuer of a cashier’s check is obligated to pay the check to a legitimate holder of the instrument when presented for payment. In other words, a cashier’s check is the equivalent of cash, because it is drawn on the account of the bank, and it is not subject to a stop payment order.

For resources related to our guidance, please see:

Uniform Commercial Code, 810 ILCS 5/3-312(b) (“A claimant may assert a claim to the amount of a check by a communication to the obligated bank describing the check with reasonable certainty and requesting payment of the amount of the check, if (i) the claimant is the drawer or payee of a certified check or the remitter or payee of a cashier’s check or teller’s check, (ii) the communication contains or is accompanied by a declaration of loss of the claimant with respect to the check, (iii) the communication is received at a time and in a manner affording the bank a reasonable time to act on it before the check is paid, and (iv) the claimant provides reasonable identification if requested by the obligated bank. Delivery of a declaration of loss is a warranty of the truth of the statements made in the declaration. . . .”)

Uniform Commercial Code, 810 ILCS 5/3-312(b) (“If a claim is asserted in compliance with this subsection, the following rules apply: (1) The claim becomes enforceable at the later of (i) the time the claim is asserted, or (ii) the 90th day following the date of the check, in the case of a cashier’s check or teller’s check, or the 90th day following the date of the acceptance, in the case of a certified check. (2) Until the claim becomes enforceable, it has no legal effect and the obligated bank may pay the check or, in the case of a teller’s check, may permit the drawee to pay the check. Payment to a person entitled to enforce the check discharges all liability of the obligated bank with respect to the check. (3) If the claim becomes enforceable before the check is presented for payment, the obligated bank is not obliged to pay the check. (4) When the claim becomes enforceable, the obligated bank becomes obliged to pay the amount of the check to the claimant if payment of the check has not been made to a person entitled to enforce the check. Subject to Section 4-302(a)(1), payment to the claimant discharges all liability of the obligated bank with respect to the check.”)

Uniform Commercial Code, 810 ILCS 5/4-403 (“A customer . . . may stop payment of any item drawn on the customer’s account . . . .”)

Uniform Commercial Code, Official Comment 4 to Section 4-403 (“A cashier’s check or teller's check purchased by a customer whose account is debited in payment for the check is not a check drawn on the customer’s account within the meaning of subsection (a) [the section on a customer’s right to stop payment]; hence, a customer purchasing a cashier’s check or teller's check has no right to stop payment of such a check under subsection (a).”)

Illinois UCC, 810 ILCS 5/3-412 (“The issuer of a note or cashier's check . . . is obliged to pay the instrument (i) according to its terms at the time it was issued or, if not issued, at the time it first came into possession of a holder . . . The obligation is owed to a person entitled to enforce the instrument or to an indorser who paid the instrument under Section 3-415.”)

Midamerica Bank, FSB. v. Charter One Bank, FSB, 905 N.E.2d 839, 844 (2009) (“. . . a bank has no right to stop payment on cashier’s checks because they are the equivalent of cash.”)

Midamerica Bank, FSB. v. Charter One Bank, FSB, 905 N.E.2d 839, 844 (2009) (“‘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.”)