Recently I had an incident occur where one of the government agencies made an error in entering the amount of the check I wrote to them. They did not enter the leading "1" on the amount, so it looked like I had paid $10K less than the amount I had clearly printed on the "Dollars" line of my check; the line under the line where the "$" box is at for numerals to be written.

When I talked to the agency at first the representative said "there is only a 1 followed by a comma" in the numeral written. I had the copy of the cancelled check that was included in my bank statement in my hands, and two ones were clearly shown before the comma. But the government agency representative (very poor customer service skills, btw) did confirm that the amount written in words was correct...which of course I knew, looking at the copy of the cancelled check from my bank.

After more questioning, the representative finally admitted she could see the first "1" but it was on the left-side line of the box of the "$" amount, so "it wasn't apparent." Guess I write my "1"s too straight! "The person processing your check probably didn't see that first "1"."

I have always made it a point to print, very neatly, clearly and almost in block print, the amounts I write for my checks. I want to make sure there are no mistakes.

Well, guess what, there was a mistake...and the government agency made it...and they were trying to charge me a penalty and interest for their mistake!

I vaguely remembered from high school accounting that when an organization processes a check they are legally obligated to use the written word amount first before the numeral amount. So, even *IF* I had forgotten the first "1," because the words clearly were for the correct amount the agency should not have made the mistake. The government agency did not follow the law specifying how to process a check. I asked the agency representative about this. She said, "No, we go by the numerals in the box."

Hmm...

Yes, I have finally gotten this taken care of, with the wonderful help of my bank's compliance officer (thanks Laura!) working through the Federal Reserve Bank (who deals with mistakes made for check processing) to correct the government agency's mistake. I still ended up spending 8 hours of my time dealing with the situation and filling out the paperwork the government agency, who made the mistake, required me to do to get the penalty and interest, they tried to charge me, abated.

It was very revealing to know that the government agency did not know about the check processing law. And, interestingly enough, while both my accountant and bank knew there was such a law, they could not tell me the specific passage.

I like to know exactly what the laws say! So I did a bit of research on my own, found the law at the Cornell Law site (I spent a lot of time trying to find it on a .gov site without any luck) and let my banker and accountant know where it can be found.

You can find the passage about processing bank checks with regard to numerals and written word amounts within the Uniform Commercial Code (UCC) Article 3 § 3-114.

"§ 3-114. CONTRADICTORY TERMS OF INSTRUMENT. If an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers."

Notice how important it is for the words written for the amount to be used by the entity processing the check. The "words prevail over numbers."

Do you know about this law? When a business you've written a check to makes this same mistake, have you been charged a penalty or interest for their mistake?

Does your organization process checks? Do the folks processing the checks know they must look at the written words and not just at the numerals? Do they know they are legally obligated to do so?

The rest of UCC Article 3 is also good to know.