In addition to declaring the loss of a cashier’s check, your financial institution will also require you to sign an indemnity agreement, which releases the bank or credit union from all responsibility if a situation arose where the check turned up and was somehow cashed or deposited. The Indemnity Agreement essentially makes you fully responsible for the outstanding amount of the lost cashier’s check. Once you’ve signed a formal Indemnity Agreement, the bank can re-issue your cashier’s check or return the funds to your own bank account.
Before they will issue a replacement cashier’s check, many banks will require someone who has lost a cashier’s check to purchase an Indemnity Bond, which protects the bank from having to pay out on a cashier’s check twice. An indemnity bond makes you, the one who lost the cashier’s check, liable in case the original check shows up again and is cashed or deposited.
Indemnity Bonds can be purchased through insurance agencies who deal with that type of financial instrument. Purchasing an indemnity bond will cost you around 2% of the amount listed on the lost cashier’s check.
In their Declaration of Loss statement templates and indemnity agreements, financial institutions who issue cashier’s checks tend to treat missing checks the same way, which means that it doesn’t typically matter what happened to the check, whether it was lost, stolen, or destroyed. The terminology they typically use covers all three of those instances.
However, if you can reasonably prove to your bank that your cashier’s check was destroyed rather than lost or stolen, it is likely that their terms for correcting the loss may be more favorable. Also, your worry about the check showing up later and being cashed by someone other than the intended recipient will be much less than if the check was lost or stolen. If you’re required by your check issuing bank to purchase an indemnity bond, it may be easier and/or cheaper to obtain the bond if you can convince the bond issuer that the check was destroyed.
Should You Mail a Cashier’s Check?
If you’re considering whether to mail a cashier’s check to someone, here is a word of caution: the United States postal service is notorious for losing mail and packages. As a quasi-governmental agency, it’s only natural that the post office is less accountable than private couriers like DHL, FedEx, and UPS.
To avoid the stress of wondering whether your check is going to be delivered, I’d recommend using UPS, FedEx, or DHL and overnighting the check in cases where you absolutely must send someone a cashier’s check. If you can avoid having to mail something that acts almost like cash as a cashier’s check does, I’d choose a different payment method that doesn’t depend on sometimes moody delivery drivers and other hands that will handle your express letter along the way.
Alternatives to Cashier’s Checks
As mentioned above, there are several alternatives to using a cashier’s check. Wiring money is my top recommendation as an alternative. You can also send money guaranteed via money orders, Western Union, money transfer services like Xoom (a PayPal company), and several other similar methods that limit your liability compared to a cashier’s check.
What If A Lost Cashier’s Check is Cashed by the Wrong Person?
Cashier’s check fraud is a growing problem in the United States, but in most cases, fraud schemes involve people creating fake cashier’s checks during business and personal interactions such as the sale of a product remotely.
In order for someone to deposit your lost cashier’s check, he or she would need to sign it over to himself by forging your signature. Signing a cashier’s check to someone else involves writing “Pay to the order of [new check owner’s name]” in the endorsement section on the back of the check. The original owner’s signature must appear below the verbiage signing the check over to a new owner.
Banks normally have strict rules about accepting cashier’s checks that have been signed over from the original recipient to someone else. In order for the bank to accept a signed over check, the bank typically must know the new check owner and have some background on why he would be having a cashier’s check signed over to him. For instance, a common situation where a cashier’s check is signed over to someone other than the original payee is at a foreclosure auction for real estate. In these scenario, the common protocol is for auction bidders to have cashier’s checks made out to them for the amount they intend to bid. Once the auction has closed, the winner signs over his cashier’s check to the auctioneer to deposit into an account designated for the auctioneer’s organization. Their bank understands their field of business, and therefore would be willing to accept for deposit on a regular basis signed over cashier’s checks.
On the other hand, if someone found a lost cashier’s check, fraudulently signed it over to himself, and attempted to deposit the check, the bank would typically need to be familiar with the depositor, and would go through some security checks to ensure that there wasn’t fraud being committed. This is especially true if the cashier’s check involves large sums of money, in the range of $10,000 and above.
It’s useful to know that there are checks in place to prevent the depositing or cashing of a lost or stolen cashier’s check. However, in the rare case that someone finds a lost cashier’s check or steals it intentionally, if that person is able to convince the bank that the check is legitimately his, there is very little remedy that can be used to recover those funds. People who commit this kind of check fraud are typically experts at covering their tracks.
If you find yourself in the very unlucky position of having lost a cashier’s check, and having that check found and deposited by an unscrupulous person, you need to quickly consult an attorney that is familiar with check fraud laws and procedures for recovery.
Legal Information Regarding Cashier’s Checks
If you’d like to read the official legal description of the laws involved with a lost or stolen cashier’s check, you can visit Cornell University online publication of UCC § 3-312, which governs lost, stolen, or destroyed cashier’s checks, teller’s checks, and certified checks.
General Advice and Caution Regarding Cashier’s Checks
Hopefully the information in this article has helped you to better understand what’s at stake when a cashier’s check is lost or stolen (or destroyed). Considering the fact that there are several backups and remedies, you’re not entirely exposed to risk should you lose one, but the best approach would be to exercise adequate caution and preempt a situation where you have to fix a potential money problem after the fact. Especially if you’re dealing with large amounts of money wrapped into a cashier’s check, it’s best to either limit the amount of time the cashier’s check is outstanding or even to find an alternate method of payment.