Maryland Check Cashing Money Services Businesses Have Rights When Checks Bounce
Check cashing companies are businesses that offer services to cash checks for individuals who do not have bank accounts or who need access to cash quickly. For many people, they offer a necessary service when other options are not available.
In Maryland, check cashing money services companies may have the ability to pursue their claims as a holder in due course. This legal concept is important because it can protect the rights of the check cashing company in certain situations where a check is dishonored.
What is a Negotiable Instrument?
To understand the concept of a holder in due course, it is important to first understand the basics of a negotiable instrument. A negotiable instrument is a written document that represents a promise to pay a certain amount of money on demand. The concept of negotiability means that these instruments are designed to operate like cash, unconditional, and transferable at will. Checks are one type of negotiable instrument.
When a person writes a check (a “drawer”), they are creating a negotiable instrument. The person who receives the check (a “holder”) can then endorse it and deposit it into their bank account. The bank will process the check and eventually transfer the money from the drawer’s account to the account of the holder.
However, if the drawer does not have enough money in their account to cover the check, the bank may refuse to process it. Or, if the drawer places a stop payment order on the check, the bank will refuse to process it. In either case, the holder may need to pursue other means of collecting the money owed to them.
Holder in Due Course
This is where the concept of a holder in due course comes into play. A holder in due course is never the person to whom the check was initially written. Rather, a holder in due course is someone who has received a negotiable instrument from a previous holder, in good faith and without knowledge that it is not valid or that there are any defects in it, like a stop payment order.
If a check cashing company cashes a check in good faith, without any reason to believe that it is not valid, they may be considered a holder in due course. This means that they have certain legal protections that can help them recover the money owed to them if the check is disputed or dishonored.
For example, if the drawer claims that the check was forged or that they did not authorize the payment, the check cashing company may be able to pursue their claim as a holder in due course. This means that they may be able to recover the money owed to them from the check writer, even if the check writer claims that they do not owe the money. The same is true in the case of a stop payment order—if the check cashing company receives the check without notice of the stop payment, they may be able to pursue their claims as a holder in due course.
It’s important to note that the concept of a holder in due course is not absolute. There are certain situations where a holder in due course may not be protected. For example, if the check was obtained through fraud or if the holder in due course was involved in the creation of the check, they may not be considered a holder in due course.
In conclusion, check cashing companies in Maryland may have the ability to pursue their claims in court as a holder in due course and recover money owed to them because of bounced checks. This legal concept can provide important protections for check cashing companies when a check is disputed or dishonored. However, it is important for check cashing companies to understand the legal requirements and limitations of being a holder in due course and consult with an attorney before taking legal action.
At FURMAN | HONICK LAW, we have extensive experience representing Maryland check cashing and money services businesses as holders in due course in courts across the State of Maryland. Call us today and speak with a partner for a free case evaluation.
