Is it legal for a bank not to negotiate a check that is drawn on them? Isn't the bank obligated to negotiate a check that is valid when funds are available?
Banks follow the Uniform Commercial Code (UCC) when it comes to paying checks. There can be slight variances and they may call it something other than the UCC, but generally when a check is properly payable, if they refuse it this could be deemed wrongful dishonor. The check should be paid if the account holder or an authorized signer has signed the check, there is no evidence of any alterations from the original order of payment, and sufficient funds are in the account to pay the amount intended.
If there are questions about the check or it is not actually drawn on that bank, there is no requirement that it be cashed. Sometimes the bank name may be common, such as "First National Bank" and the banks could be different. If this is not the case, ask the bank directly why they won't cash it. If there are any complaints to be made though, the account owner would be the one who would have to do that. The non-customer has no relationship and no right to claim a wrongful dishonor. If you want to reference this further with your banker, ask them to review Section 4-402 of the UCC.
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