Best Practices When Issuing Trust Cheques
The Law Society’s Trust Safety Team would like to remind Alberta lawyers to adhere to best practices when using paper-based payments, and to be cognizant of the holding periods these forms of payment may be subject to at financial institutions.
Paper-based payment instruments such as cheques, certified cheques, money orders and bank drafts can be subject to forgery and fraud. They can also be returned due to insufficient funds, holds, restrictions on deposits or stop payments. As such, financial institutions have adopted strategies to minimize risks, which sometimes involve holding money until they can verify the funds.
A financial institution may hold money from a deposited cheque to:
- make sure that the person or company who wrote the cheque has enough money to cover it;
- make sure that the person or company who wrote the cheque has not put a stop payment on it;
- check the details with the cheque writer to make sure that it has not been altered; or,
- make sure that the account on which the cheque was written is still open.
We understand that a hold on a legitimate payment can cause potential issues with closings and lawyers’ undertakings, as it can take three to five business days to be validated, if not more. This holding process is the new standard and law firms must prioritize client management and set their clients’ expectations accordingly. When appropriate, lawyers should consider using electronic payment methods if they want to avoid holding periods.
The Law Society does not guarantee trust cheques because we do not know the financial position of the lawyers’ clients that made the deposits. Additionally, the Alberta Lawyers Indemnity Association Group Policy does not cover financial loss due to overdrafts or trust shortages.
For further details on cheque holding periods and access to funds for small- and medium-sized businesses, including consumer rights, visit the Financial Consumer Agency of Canada website. For information on the Canadian payments system, please visit the Payments Canada website.
If you have any questions regarding your trust accounts, please contact Trust Safety.