One of the myths that somehow refuses to go away is the myth that post-dated checks are "illegal." They are not.There is nothing illegal, inappropriate, unlawful, unethical, unprofessional, or unconscionable about a creditor asking a customer to issue a post dated check, nor is there any reason a customer cannot issue one or a series of post dated checks to clear a past due balance.There are several advantages to taking postdated checks in settlement of an account balance including these: 1.
According to the Uniform Commercial Code (UCC) Subsection 3-104, a check is defined as a "draft payable on demand and drawn on a bank." A postdated check, since it's not necessarily payable on demand, does not meet this requirement.
Consequently, most states generally hold that a postdated check does not constitute a present fraud nor does it fall within the scope of the 'bad-check laws.' Concerning your bank paying a postdated check before its time, UCC Subsection 4-401 states that "a bank may honor an otherwise properly payable postdated check before its date unless the customer has given the bank reasonable notice of the postdating." The notice of postdating is simply a means by which you can place the bank on formal notice that you've written a postdated check, and it orders the bank not to pay the check before the date written thereon.
If, after reasonable notification, the bank makes payment before the pay date on the check, it could be held liable for losses occurring due to its actions.
If you've ever been the target of a debt collection agency, you've probably been offered the option of using postdated checks to pay what you owe.
Most people do not fully understand their rights or liabilities when using this form of debt settlement, nor the laws governing their use and acceptance.
While these regulations do not necessarily impose penalties, you should nevertheless be aware that there are instances in which postdated checks presented by creditors but returned by the bank for 'non-sufficient funds' may be deemed fraudulent, and could thereby result in civil and criminal penalties.
With that in mind, let's take a look at the current regulations governing post-dated checks given to creditors, collection agencies and banks.
There is a down side to accepting post dated checks...
If a creditor accepts a post-dated check in exchange for merchandise or services, in many jurisdictions the seller is considered to have extended credit to the issuer of that check.