Stop payments don't protect check writer
Feb. 16, 2004 12:00 AM
When it comes to writing checks, don't expect a stop payment to protect you.
A viewer called me after finding herself in a battle with a local check-cashing company.
It seems she'd hired someone to do work around her home. This person had done work for her before so she felt comfortable in writing him a check for the full amount before the job was done.
Unfortunately, her faith was misplaced. Instead of showing up to do the work, he went straight to a check-cashing store. He signed over the check, and the store turned over the cash.
When the workman didn't show up, our viewer immediately called her bank and put a stop payment on the check. It was the only thing she could think of to prevent the missing workman from taking her money.
A short time later, she got a call from the check-cashing store. They made it very clear that she had to pay up, and pay up immediately. When she told them about the stop payment and the missing workman, they told her, "Tough!"
Unfortunately for our viewer, they're right.
It all revolves around these important words: holder in due course.
A holder in due course is someone who gets a negotiable instrument (in this case, a check) in good faith. As long as the check-cashing store asked for the proper identification, it has made a good-faith effort in making sure the check is legitimate. It's not responsible for asking whether the workman actually performed the duties necessary to earn the check.
You simply need to understand that there is no protection for your check. If the person who got the check signs it over to anyone, you're legally obligated to pay up.
You can ask for proof that the new holder acted in good faith. You can ask to see what forms of identification were taken. That could potentially help you find the person who has taken your money.
Ultimately, the best thing you can do is protect yourself before you hand over the check. Don't do it until the work is done, or perhaps pay in several installments. Consider using a credit card if possible. That gives you extra protections.
The next time you're writing a check, you need to understand that once it leaves your hand, you owe the money. Whether you want to or not.