What to Take Into Account if You Find a Stale Check

My wife Susan believes in the Money Fairy.

That’s the little pixie who leaves change or a few bucks in your coat pocket, under the sofa cushions or in those old bluejeans in the dryer.

“A present from the Money Fairy” is as good an explanation as any for people who don’t normally lose track of money finding a few dollars unexpectedly.

But recently, and for the first time, the Money Fairy left us a check.

OK, so it was really a reimbursement check from Pennsylvania Blue Shield for a medical expense, a $45 payment made in 1993 that somehow got filed away with paperwork and forgotten.

As with any unexpected money, it felt like a nice little gift, with one small exception. Right there on the face of the check were these words: “Must be cashed within six months.”

Ooops.

I am not experienced at losing checks, but I know that plenty of people are.

A reader in Colorado recently sent me a letter describing how his family found dozens of uncashed checks when cleaning up his grandfather’s estate. The checks were more than 20 years old.

And I have talked to plenty of corporate accounting types who have said that many dividend checks go uncashed for long stretches of time, as do a lot of those small-dollar product rebate checks. And Susan has paid baby sitters by check only to have me wait months before they would show up on my bank statement--incidents that lead me to believe those checks get lost until the Money Fairy intervenes.

To me, the Blue Shield check represented found money. To my bank, however, it was a stale check, which means the six-month period during which most checks must be cashed had passed.

Some business and government issuers reduce that time, sometimes to as little as 60 days.

Companies do this for a number of reasons. It helps them keep bank accounts clean by taking unpaid obligations off the books. And it allows them to avoid stop-payment fees when a customer calls up to say a check has been lost.

Cashing a stale check can be tricky. In these days of bank mergers, even the most active of long-time accounts can get new routing numbers that, in effect, void all checks no matter when they were written. In order for a check--any check--to get cashed, all significant conditions--from the account number to the fact that the issuer is still around--must be the same as when the check was written; otherwise, the check will be returned.

Most states have adopted a provision of the Uniform Commercial Code that states that a bank is not obligated to cash a check presented more than six months after the date it was written.

That doesn’t mean the check won’t go through, however.

The old dates can easily be overlooked. And although the check writer’s bank has no obligation to honor the check, bankers tend to assume that the check writer wants it to. Personal checks, which typically don’t carry expiration dates, may be paid for years, provided the account they were written on remains intact. Even the expiration date on a check may not stop its being processed unless the issuer has left special instructions with a bank to make sure the dates are strictly adhered to.

Still, “if you measure the age of the check in years, then you probably shouldn’t try putting it through,” says Paul Connolly, first vice president of the Federal Reserve Bank of Boston. “If the check is younger than that and if it was issued by a going concern, it will probably go through.”

For the payee, an older check means more risk and more work. You could try to cash it--the equivalent of running it up the flagpole to see if it’ll fly--but the likelihood of return makes that a poor option. Banks charge anywhere from $5 to $20 for a returned item. Although stale checks are not necessarily bounced checks, the charges for having them returned can be just as onerous, and the Money Fairy won’t pay those fees.

That means contacting the issuer if possible. In my case, one call to Pennsylvania Blue Shield solved the problem. Had I simply cashed the check, it would not have cleared, because the company is now Capital Blue Cross; fortunately, my records remain on file. The company acknowledged still owing me for the claim, so it issued a new check upon receipt of the old one. (For my own protection, I kept a copy of the check, my correspondence and the name of the supervisor with whom I spoke.)

In the case of the Colorado reader with his grandfather’s decades-old checks, some of the checks were from individuals, others from companies and a few from the government. Contacting the issuers would be nearly impossible. And he does not have any records to indicate why the amounts were owed and whether the accounts were ever settled.

That lack of information does not bode well for collecting. Experts suggest that in a situation involving many stale checks but little information, the checks be broken down into three groups: the definites, the maybes and the unlikelies. Government checks represent the first, corporate checks the middle and personal checks the last.

With official checks, there is a good chance that records--albeit possibly buried in archives somewhere--exist that show the transaction. That will make it easier to get a check reissued. And a government agency--unlike an individual--is unlikely to have moved or closed its bank account.

When it comes to stale corporate checks, it may be a matter of proving that the debt was never paid. A “lost” check may have been reported and reissued. So if the original check is found years later, the debt will already have been paid in full. The other big factor with business checks is what has happened to the company over time. If the business has gone bankrupt or gone through any number of takeovers through the years, there may be no one--or no money in an account--to pursue for payment.

And if people in similar situations simply don’t want to do the research--or can’t because so many years have passed--there are two other choices. One would be to hire a “tracing” firm, which could try to pursue the companies involved to see if the check holder has a claim. Tracing firms would either charge a fee for their service or would take a percentage of the amount recovered.

An alternative is to see if your banker would try processing a few of the checks, with any return charges waived. Several bankers I talked with said they would make such a deal, simply because a good customer bearing a box of years-old checks represents an interesting and unusual challenge.

The moral of the story is to process whatever checks you receive in a reasonable period of time, but to not give up on something you forgot about until the Money Fairy gave you a reminder.