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Bank draft: Lost and then found
November 2, 2019
1:33 pm
Norman1
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Happily, lost bank drafts do sometimes surface later:

Inheritance found: UPS tracks down missing $36,000 bank draft weeks after it was mailed from Edmonton (CBC Jan 19, 2018)

Ignore the part about bank drafts not allowed by UPS. According to UPS Canada's terms of service, they are:

3.3 Prohibited Articles

The following articles are prohibited by UPS. In the event that any such prohibited article enters the UPS system, this does not constitute a waiver on the part of UPS, and UPS shall have no liability whatsoever for delay, loss or damage to any such article, even if the Shipper has entered a Declared Value on the shipping document.

Articles Prohibited by UPS for Shipping within Canada and Internationally

Shippers are prohibited from shipping articles of unusual value via UPS. Articles of unusual value shall be deemed to include, but are not limited to:

– Currency, negotiable instruments (except cheques and money orders)
– Human remains in any form
– Any Package having a value of more than $50,000
– Any UPS Worldwide Express Freight® Service pallet with a value of more than $100,000
– Any Shipment that, in UPS’s judgment, could cause damage or delay to equipment, personnel, or other Shipments

November 4, 2019
9:12 am
Doug
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Interesting, Norman. For those who are aware of lost or otherwise uncashed bank drafts, you can redeem a lost or uncashed bank draft. (I suspect Norman already knows this, but this is for others' benefit.)

Since bank drafts are guaranteed funds, typically, this involves the customer and the bank completing some sort of indemnity agreement for the lost bank draft. Following the customer reviewing, initialing, and signing it, and the bank accepting this, the bank would typically reimburse for the lost item. In the event the uncashed or lost bank draft is properly cashed by the named payee, you agree to reimburse the financial institution for the amount refunded. In most cases, this doesn't happen (i.e., it really was lost never to be found again, accidentally shredded, etc.).

Cheers,
Doug

November 4, 2019
10:43 am
Oscar
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Doug ,
I thought that is the way it works also but according to this article the bank wants indemnity if anyone ever cashes it.

https://www.cbc.ca/news/canada/toronto/ups-td-canada-trust-bank-draft-1.4447384

Is there a way of viewing a bond of indemnity for a lost bank draft before obtaining a bank draft ? It should be a generic form , that is it should apply to all financial institutions shouldn't it ?

November 4, 2019
11:13 am
Doug
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Hi Oscar,

My understanding is that the indemnity agreement would be specific to the financial institution, but, typically, the major banks usually have proforma agreements that you could always ask to see prior to purchasing the bank draft.

Cheers,
Doug

November 4, 2019
7:28 pm
Norman1
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Oscar said

I thought that is the way it works also but according to this article the bank wants indemnity if anyone ever cashes it.

https://www.cbc.ca/news/canada/toronto/ups-td-canada-trust-bank-draft-1.4447384

Is there a way of viewing a bond of indemnity for a lost bank draft before obtaining a bank draft ? It should be a generic form , that is it should apply to all financial institutions shouldn't it ?

Bank drafts and certified cheques don't staledate after 6 months like a regular cheque does. So, the issuing bank is on the hook for it indefinitely.

A bank will not accept just an indemnity agreement if the customer doesn't look like he or she would be able to actually come up with the value of the lost bank draft should it eventually turn up. That's likely what happened in the CBC story. Risk management looked more closely at the family and had doubts whether they would be able to reimburse the bank for over $846,000 should the draft be deposited.

In such cases, one will need to buy an indemnity bond to provide to the bank. It will cost around 1% to 3% of the value of the indemnity. This is from an earlier discussion:

Norman1 said
It doesn't matter how the bank draft or stock certificate was lost. The banks and the stock transfer agents know that it happens. To get a replacement, one needs to provide for the issuer's indefinite liability for the missing bank draft or stock certificate. After that, a replacement will be issued.

TD Canada Trust discloses their handling in their Account Related Information and Administration Fees document:

Request a refund or replacement for a lost or stolen Canadian or U.S. dollar bank draft: $10
Request a refund or replacement for a lost or stolen bank draft in any other currency: $22

You may be required to buy a surety bond or pledge assets as security for the refund or replacement draft. Other bank fees may also apply.

November 4, 2019
7:49 pm
Doug
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Great points, Norman. Yes, indeed, if the bank doubts the person has the financial capacity to make good on an indemnity agreement, they likely wouldn't want to agree to it. Well said.

Cheers,
Doug

November 5, 2019
4:15 pm
Oscar
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It seems to me that in both instances it would have been safer to send regular cheques. If they didn't show up within a couple of days of expected arrival , sender could cancel and send another. I'm surprised that in this day and age people are still sending 3/4's of a million dollars in paper via courier and that lawyers or banks can't / don't suggest a better , safer way.

November 5, 2019
4:34 pm
Loonie
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I'm under the impression that the main reason for bank drafts is because the recipient insists on them as they are faster to cash. A cheque takes longer to clear, sometimes weeks to months,m depending on circumstances.
For example, when I bought a new car a few years ago, the dealership would only accept a bank draft, nothing else. This was not a problem in this case as I was delivering it in person and the distance between the bank and the dealer was only a couple of miles.

November 5, 2019
4:57 pm
Doug
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Loonie said
I'm under the impression that the main reason for bank drafts is because the recipient insists on them as they are faster to cash. A cheque takes longer to clear, sometimes weeks to months,m depending on circumstances.
For example, when I bought a new car a few years ago, the dealership would only accept a bank draft, nothing else. This was not a problem in this case as I was delivering it in person and the distance between the bank and the dealer was only a couple of miles.  

That used to be the case, Loonie. Due to fraudulent bank drafts, though, banks and credit unions are increasingly holding funds on bank drafts. You can sometimes avoid this hold, if you ask in advance from the CSR of the issuing bank or credit union for a business card with a direct line and a preprinted carbon receipt of the draft. If you show this to the depositing FI, and the FI is willing to call and verify the draft's legitimacy, no hold is placed.

The clearing time on a cheque and a bank draft is no different. That is, it's the exact same. The difference, though, is cheques stale date after 6 months (sometimes they will still clear, depending on their face value as often FIs won't check small value paper-based clearing items) whereas bank drafts do not stale date (left uncashed, they do transfer to the Bank of Canada after 9 or 10 years whereby the payee or the payor can redeem the draft from the Bank of Canada).

Thus, if they're going to place a hold, you're better off just depositing a cheque, waiting for the hold to expire, and saving yourself the fee. 😉

Cheers,
Doug

November 5, 2019
5:51 pm
Norman1
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Oscar said
It seems to me that in both instances it would have been safer to send regular cheques. If they didn't show up within a couple of days of expected arrival , sender could cancel and send another. I'm surprised that in this day and age people are still sending 3/4's of a million dollars in paper via courier and that lawyers or banks can't / don't suggest a better , safer way.

There is a better way: Wire transfer. But, some people rather save the difference in cost.

A TD Bank bank draft is $7.50. The UPS courier fee was $32. Total cost is $39.50.

Sending a wire transfer over $50,000 at TD is $80. Receiving a wire transfer at TD is $17.50. Total $97.50.

If nothing goes wrong, the bank draft is $58 cheaper.

Yes, I think a regular personal or business cheque would have been better. If lost, a stop payment can be done on the cheque and another one issued. As Doug mentioned, crooks are able to counterfeit bank drafts with all the security features. So, there's really no advantage over a regular cheque unless some day, the banks start issuing polymer bank drafts.

November 7, 2019
10:00 am
Oscar
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Norman1 said

Oscar said
It seems to me that in both instances it would have been safer to send regular cheques. If they didn't show up within a couple of days of expected arrival , sender could cancel and send another. I'm surprised that in this day and age people are still sending 3/4's of a million dollars in paper via courier and that lawyers or banks can't / don't suggest a better , safer way.

There is a better way: Wire transfer. But, some people rather save the difference in cost.

A TD Bank bank draft is $7.50. The UPS courier fee was $32. Total cost is $39.50.

Sending a wire transfer over $50,000 at TD is $80. Receiving a wire transfer at TD is $17.50. Total $97.50.

If nothing goes wrong, the bank draft is $58 cheaper.

Yes, I think a regular personal or business cheque would have been better. If lost, a stop payment can be done on the cheque and another one issued. As Doug mentioned, crooks are able to counterfeit bank drafts with all the security features. So, there's really no advantage over a regular cheque unless some day, the banks start issuing polymer bank drafts.  

I think the recipient of the draft in this story would have taken the wire transfer hands down if he was made aware of the option , as he stated that he regrets not driving the 440kms to pick up the draft at the lawyers office. He would have spent that extra money on gas alone.
I think it has a lot to do with perception as opposed to knowledge as well . I have used bank drafts a couple of times and had the false perception that it was something similar to a travelers cheque , and if it went through the washing machine I could just go back to the bank and have it replaced for a small fee. Maybe I have a false perception of how travelers cheques work as well but I don't plan on using them and I think they've fallen out of fashion anyway. Thanks for enlightening me , this thread may save others from a similar experience when settling estates etc.

November 7, 2019
6:26 pm
Norman1
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True, sender can return to the bank and arrange a replacement bank draft for a fee. However, the size of the fee depends on the value of the draft.

It is quite possible the TD branch staff have never dealt with the loss of a draft for as much as $846,000. Perhaps, the largest draft from that branch lost was under $1,000 until then.

If someone loses a $150 draft and the TD customer is good for $150, then the customer could sign a $150 indemnity agreement and a replacement draft would be issued. But, for a $846,000 draft, it won't be as easy. Most people are not good for $846,000.

For comparison, Lost, Stolen or Destroyed Certificated Bonds details the process to replace lost or destroyed certificates for Canada Savings Bonds. One needs to sign an indemnity agreement and pay for a surety bond from an insurance company to back the agreement up. The surety premium is

  • $25 for up to $1,000 of lost bonds,
  • $65 for up to $3,500, or
  • 2% for up to $100,000.

I found a story of a widow who misplaced the $273,225 bank draft from her lawyer for the proceeds of selling an investment property: ACTION LINE: Bank draft still missing, but Hjordis has a home.

Didn't find the draft. Fortunately, she found another way to get the needed money to close the purchase of a condo.

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