Protest of Checks

"Protest" in the popular sense of the word means taking all the steps necessary to fix the liability of a drawer or endorser. In a strictly legal sense, "protest" refers to a formal, written declaration executed by a notary, which states that an instrument was presented at a certain time and place, and was dishonored. Under former law, a formal protest was required to obtain recovery from the original drawer. With the enactment of the Uniform Commercial Code (UCC) the requirement of a formal protest has largely been eliminated.

The UCC provides that "unless excused, protest of any dishonor is necessary to charge the drawer and endorsers of any draft which on its face appears to be drawn and payable outside of the states and territories of the United States and the District of Columbia." Accordingly, formal protest is not necessary except on checks/drafts drawn or payable outside the United States. In the case of checks, share drafts, and other domestic instruments where formal protest is not required, the fact of dishonor can be presumptively established. As is the case with other payable through items, dishonored share drafts are either stamped with the reason for dishonor by the payable through bank or the bank attaches a ticket stating the reason for dishonor. Under the New York UCC, Section 3-510, that stamp or ticket is all that is required for the holder to proceed against the drawer.

While formal protest is no longer required with respect to a draft payable within the U. S., prosecuting attorneys require that evidence of dishonor and insufficient funds be obtained before they commence criminal prosecution under the state's "bad check" laws. When making such a request, a member or an attorney might use the term "protest." However, the NYS Penal Law provides that the dishonor of a check by the drawee and insufficiency of the drawer's funds may be proved by a notice of protest or a certificate under oath of an authorized representative of the drawee declaring the dishonor and insufficiency. In the majority of cases where a formal protest is not required, a certificate executed by an authorized representative of the credit union would be appropriate. To this end, a form is attached which the credit union may complete when it receives a request to "protest" a share draft which does not require a formal protest.