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Who Gets Nailed When a Foreign Check Is Bad?
If a check is from out of the USA and the bank was notified of this at the time of deposit and elected to not put a hold on the check for collection of funds, what is the responsibility of the bank if said check is returned over forty-five days later? Additionally, if the bank allowed the funds to be withdrawn, telling the customer that the check was good, what is the bank's responsibility?
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 It sounds like you or someone you know got burned by a bogus foreign check.
It takes a long time for checks drawn outside the U.S. to clear. There are stories of delays of several weeks for checks on Canadian banks, and our neighbor to the north isn't inefficient in its check clearing procedures. It's the fact that a check has to move across a national boundary that seems to slow things up so much!
Most U.S. banks don't accept foreign checks for deposit specifically because of the uncertainties involved. However, there are a number of banks that do accept Canadian checks specifically, and it's possible there are other, different policies at banks around the country. Banks that don't accept foreign checks for deposit may take them for collection, crediting their customers when the bank receives payment.
However, when a bank does take a check -- any check -- for deposit, its customer, by endorsing the check, assumes liability if the check is ultimately bounced. That liability is not affected by the fact that the depository bank permits some or all of the funds represented by that check to be withdrawn before payment is final. If the check is bounced, your bank will be liable to pay for it, but you remain liable to your bank to cover the check, too.
Published on BankingQuestions.com 8/31/06
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