Yes, we believe it is permissible to dishonor a check when presented by a non-customer to cash. However, you should review your account agreements to ensure that the bank has not directly or indirectly agreed to cash checks drawn by your customers and presented by non-customers.

When refusing to cash an otherwise bona fide check for a noncustomer, your bank is dishonoring a properly payable check, an act which generally can subject the bank to liability. Nonetheless, Illinois courts have held that if the presenter does not have an account with the bank, that person lacks standing to sue the bank for wrongful dishonor of a properly payable check under the UCC (which provides a cause of action only for accountholders). Accordingly, whether to cash a check payable to a non-customer is a business decision for your bank.

Note that it is possible that if a check was drawn by a customer, the drawer (your customer) could seek to hold your bank liable for wrongful dishonor of the check (for example, if your customer suffered a loss caused by your bank’s refusal to cash the properly payable check for the payee), particularly if your account agreement is silent as to this situation. For this reason, many transaction account agreements expressly reserve the right of the bank to refuse to cash checks drawn on the bank and presented in person by non-customers.

For resources related to our guidance, please see:

• Johnson v. First Banks, Inc., 889 N.E.2d 233, 235 (5th Dist. 2008) (“Pursuant to the plain language of the [Uniform Commercial] Code, the plaintiff, who does not have an account with the defendant, is not a ‘customer’ and therefore lacks standing to pursue a cause of action against the defendant for a wrongful dishonor.”)

• Kronemeyer v. U.S. Bank Nat. Ass’n, 857 N.E.2d 686, 689 (5th Dist. 2006) (“Section 4-402(b) confers no cause of action on the holder of an allegedly dishonored item. Accordingly, the plaintiffs have no standing to pursue a cause of action against U.S. Bank for a wrongful dishonor. the plaintiffs have no standing to pursue a cause of action against U.S. Bank for a wrongful dishonor.”)

• Illinois UCC, 810 ILCS 5/4-402(b) (“A payor bank is liable to its customer for damages proximately caused by the wrongful dishonor of an item.”)