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Can a bank refuse to cancel a bank draft?
February 20, 2013 4:45 PM   Subscribe

My former bank refuses to give me a refund on an un-cashed bank draft.

A few years ago I got taken by a con man and ended up owing the Canada Revenue Agency thousands of dollars. After attempting to work out a payment plan, asking for leniency and failing every single appeal, I had to declare bankruptcy. Years of building up good credit had gone to waste and it hurt.

Two debts were wiped out: the huge amount owing to the CRA and about $7000 in a line of credit with Royal Bank of Canada (RBC). The line of credit was in good standing.
That was almost two years ago. Last week, I received a letter from RBC saying that a bank draft I had sent to this person remains unredeemed and, that I could either contact this person or request a refund.

I asked for a refund but was told that they could not because he might show up one day and they would have to pay him and charge me. I don’t bank with them anymore and don’t have any assets to speak of. They also brought up the line of credit that was written off, stating that it had a part in their decision.

Can they do that? If not, then what are my options?
posted by fiTs to Work & Money (5 answers total)
 
Did you use an attorney to file bankruptcy? I would consider talking to that attorney, or at least contacting the attorney to ask if a consultation would be worthwhile.

It sounds like thousands of dollars are potentially at stake - to me, that would make paying for good legal advice on the situation worthwhile.
posted by insectosaurus at 4:51 PM on February 20, 2013


This is one you move up the ladder beyond the branch. Contact the RBC's Customer Care department if the branch won't assist you. Don't go to Ombudsman until you've worked with Customer Care people.
Customer Care in banking is "serious business", so they will be your best source for action on your issue.

http://www.rbc.com/customercare/

They are the department that will be able to give you proper answers.

I won't get into rules in Canada regarding bank drafts, they may have changed from when I last worked in bank branches (I never worked for RBC). The general rule was that drafts had to essentially be treated as cash, and cancelling or recalling a draft was difficult and not foolproof -- that said, go to RBC Customer Care.
posted by smitt at 4:53 PM on February 20, 2013 [3 favorites]


This doesn't add up. How can you be ripped off by a con man who didn't cash the check?

I asked for a refund but was told that they could not because he might show up one day and they would have to pay him and charge me. I don’t bank with them anymore and don’t have any assets to speak of. They also brought up the line of credit that was written off, stating that it had a part in their decision.

If you owed the bank $7000 that they had to write off due to bankruptcy, and this draft was for less than $7000, then they really don't owe you anything. If nobody ever cashes that check, then they just end up losing less money. I doubt that it would be 100% legal for you to collect this money, because it could be considered a form of laundering/fraud when combined with the bankruptcy.

But I'm not sure why they would send you a letter that said one thing and the people on the phone said another.
posted by gjc at 5:47 PM on February 20, 2013


If you owed the bank $7000 that they had to write off due to bankruptcy, and this draft was for less than $7000, then they really don't owe you anything. If nobody ever cashes that check, then they just end up losing less money. I doubt that it would be 100% legal for you to collect this money, because it could be considered a form of laundering/fraud when combined with the bankruptcy.

I may be mistaken but it seems to me that the OP is saying that the debt was not just written off by the bank but was discharged by bankruptcy. A write off is a uniltareal decision by the bank based on collectibility--basically just informing investors "yeah, we're owed this money but fyi it doesn't like we're not going to collect it." In a write off the debt still exists and can be collected at a future date (with the bank making an accounting adjustment). In bankruptcy, there is a repayment plan approved by a judge and if that plan says the debt isn't going to get repaid, then the debt no longer exists and it cannot be collected on. So if OP had the debt discharged, the bank can't collect on it and it doesn't sound like that's what they're trying to do.

From rbc's website (footnote 2) bank drafts can't be cancelled, so the bank can ask you to give them a Bond of Indemnity (a guarantee that if a double payment occurs you'll make the bank good on their loss). My guess is that what they're saying is that the bankruptcy has dropped your credit score down and for that reason you cannot issue them an acceptable Bond of Indemnity and because they have no protection on double payment, they cannot cancel the bank draft. So the bankruptcy plays a role--not because they're claiming the money in lieu of the debt but because they don't have the guarantee they need to cancel the existing draft.

Definitely call customer cares to confirm this and I would also suggest asking them if someone else could provide the Bond of Indemnity they require--I don't know if you have any family/friends who bank at RBC and would be willing to do that.
posted by limagringo at 3:45 AM on February 21, 2013 [1 favorite]


In bankruptcy, there is a repayment plan approved by a judge and if that plan says the debt isn't going to get repaid, then the debt no longer exists and it cannot be collected on. So if OP had the debt discharged, the bank can't collect on it and it doesn't sound like that's what they're trying to do.

What I was getting at was that the uncashed bank draft could be considered an asset that wasn't reported to the bankruptcy court. If the asker demands payment, the bank would go to the court and say the legal equivalent of "hey, this guy said he has no assets and couldn't pay us. But now we see this asset, and we would like it to be applied to our loss."
posted by gjc at 7:16 AM on February 21, 2013 [1 favorite]


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