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TJ, Esq.
TJ, Esq., Attorney
Category: Business Law
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Experience:  JD, MBA
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Can a check cashing business who cashes a check in good faith

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Can a check cashing business who cashes a check in good faith but is retunred for stop payment pursue maker (who stopped payment say for good cause) using holder in due course arguement. Maker has money, payee is long gone. Golly, I have heard several versions to this question.
Submitted: 8 years ago.
Category: Business Law
Expert:  TJ, Esq. replied 8 years ago.

Hello and thank you for allowing me the opportunity to assist you.

Question: “Can a check cashing business who cashes a check in good faith but is retunred for stop payment pursue maker (who stopped payment say for good cause) using holder in due course arguement. Maker has money, payee is long gone. Golly, I have heard several versions to this question.”

Answer: Yes, the check cashing business may go after the issuer of the check because of the holder in due course rule (as an FYI, a maker refers to a note…an issuer or drawer refers to a check). The business may alternatively go after the payee who transferred the check. If it goes after the issuer, then it will be up to the issuer to go after the payee.

The exception would be if the issuer has a “real” defense. A “real” defense is something like forgery, fraud, etc. If the check was stopped for a reason specific to the underlying transaction, such as if the payee did not fulfill some obligation, then that is not a “real” defense, and cannot be used to refuse to pay a holder in due course.

Have I satisfactorily addressed your concerns? If not, then please feel free to ask for clarification.

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DISCLAIMER: Please understand that the complexities of most legal problems cannot be adequately addressed in this setting, and that I am only licensed to practice law in the state of Maryland. Accordingly, you acknowledge (1) that we have not formed an attorney-client relationship, and (2) that my post is general information only and not specific legal advice.

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Customer: replied 8 years ago.
Just to clarify is the Holder in Due Course a federal law, or does it vary from state to state. I am in Texas. Thanks

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