Dishonoured Cheques
A dishonoured cheque cannot be redeemed for its value and is worthless; they are also known as an RDI (returned deposit item), or NSF (non-sufficient funds) cheque. Cheques are usually dishonoured because the drawer's account has been frozen or limited, or because there are insufficient funds in the drawer's account when the cheque was redeemed. A cheque drawn on an account with insufficient funds is said to have bounced and may be called a rubber cheque. Banks will typically charge customers for issuing a dishonoured cheque, and in some jurisdictions such an act is a criminal action. A drawer may also issue a stop on a cheque, instructing the financial institution not to honour a particular cheque.
In England and Wales, they are typically returned marked "Refer to Drawer"—an instruction to contact the person issuing the cheque for an explanation as to why the cheque was not honoured. This wording was brought in after a bank was successfully sued for libel after returning a cheque with the phrase "Insufficient Funds" after making an error—the court ruled that as there were sufficient funds the statement was demonstrably false and damaging to the reputation of the person issuing the cheque. Despite the use of this revised phrase, successful libel lawsuits brought against banks by individuals remained for similar errors.
In Scotland, a cheque acts as an assignment of the amount of money to the payee. As such, if a cheque is dishonoured in Scotland, what funds are present in the bank account are "attached" and frozen, until either sufficient funds are credited to the account to pay the cheque, the drawer recovers the cheque and hands it into the bank, or the drawer obtains a letter from the payee stating that they have no further interest in the cheque.
A cheque may also be dishonored because it is stale or not cashed within a "void after date". Many cheques have an explicit notice printed on the cheque that it is void after some period of days. In the US, banks are not required by the Uniform Commercial Code to honour a stale-dated cheque, which is a cheque presented six months after it is dated.
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Famous quotes containing the words dishonoured and/or cheques:
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—Philip Dormer Stanhope, 4th Earl Chesterfield (1694–1773)
“The earth is mankind’s ultimate haven, our blessed terra firma. When it trembles and gives way beneath our feet, it’s as though one of God’s cheques has bounced.”
—Gilbert Adair, British author, critic. quoted in: London Sunday Correspondent Magazine (Dec. 24, 1989)