What is a bounced check
A check that returns as non-payable due to "insufficient funds" is referred to as a bounced check. To bounce a check, it must be returned by the recipient’s bank, whether it be an individual or a business, and not honored due to insufficient funds in the account, "no account" existing, or the signature not matching the signature on file. A bounced check can result in several fees for both parties. The bank of the recipient will charge a bounced check fee (averaging from $5-$35). The account-holder’s bank will then try to collect this fee from the account holder in addition to charging a few fees of their own for the bounced check, resulting in a net loss of a minimum of $50-$70 before even touching the matter of replacing or collecting on the bounced check. In some states , a bounced check can also result in fines and possible jail time, depending on the circumstances, for the issuer of the bounced check. The initial reaction of many after writing a bounced check is denial; in some cases they blatantly refuse to pay the bounced check at all. After all of the fees levied by the banks, this is one of the last things the issuer wants to see. Unfortunately, refusal to pay does not stop the collection of the bounced check. The entity that received the bounced check, whether it be an individual, business, or landlord, has rights and protections granted them by the law that allow them to pursue collection. Even as a private individual pursuing collection of a bounced check, the laws are behind the victim.
The law regarding bounced checks
The legal ramifications of writing a bounced check often go far beyond the monetary value of the check itself. The law varies dramatically from state to state, but a bounced check can lead to a variety of civil and criminal penalties. These penalties can include fines, damages, and in the case of criminal penalties, even jail time.
Civil Damages
The simple act of writing a bounced check often gives rise to legal damages as set forth in various state copycat statutes. Most states also have similar provisions, such as the following statute from Pennsylvania.
(a) Any check, draft, or order which has been represented for payment and was not paid despite there being sufficient funds available, shall be prima facie evidence of the payer’s intent to defraud where: (1) prior to presentment, the drawer has been served with written notice that the payee intends to hold the drawer liable for the amount of the check, draft, or order; and (2) within 10 days after such service, the check, draft, or order was not paid.
(b) This section does not apply where the drawer makes payment on the check, draft, or order within 10 days of being served with the notice under subsection (a).
The majority of states have similar statutes allowing for a civil suit upon the presentation of a dishonored check. Generally the statutory damages are set by the statute. In Pennsylvania, the drawer can be sued for twice the amount of the check (not including costs and attorneys fees). Georgia has a similar statute awarding $500.00 or triple damages (whichever is higher), plus attorneys fees and expenses.
In Connecticut, it is even more difficult for the creditor to sue based on a bounced check. Connecticut General Statutes § 42-133g sets forth the remedies that are available for collectors of bounced checks:
(a) Any person who is engaged in the business of obtaining credit for consumers by means of a sales contract or through a personal loans [sic] contract, may charge and collect fees in the event that an account of such person is not paid on or before maturity, in an amount equal to five cents on every dollar, except that no charge under this subsection shall exceed twenty dollars on any one such account.
(b) No seller charged with the remedy under subsection (a) of this section shall seek to collect any amount allowed under this subsection through judicial process until such time as such buyer has been given written notice that such seller will seek a judgment against such buyer unless full payment, including the fee provided for in subsection (a) of this section, is made on or before a date specified in such notice. The notice shall be given at least ten days prior to the date payment is to be made. Nothing in this section shall be construed to give such seller any rights to attach property or income of such buyer in excess of the amount owed upon the contract prior to filing a summary process action, nor shall it otherwise alter or limit the rights of such seller in connection therewith.
(c) This section shall be construed to provide an alternative to the remedy provided to such seller in section 37-101 and shall not be employed in addition to such remedy.
Criminal Penalties
The criminal penalties for writing a bounced check are much harsher than the civil remedies provided by statute. Depending on the amount of the check, the crime may fall within a range of misdemeanor charges to felony charges. Often the penalties are codified into what are commonly referred to as "bad-check laws." The term derives from the Uniform Commercial Code (UCC) Section 3-804 which is the basis for many of the state bad check statutes.
In Pennsylvania, the penalty for writing a bad check depends on the value of the bad check. If the amount of the check is less than $200.00, the crime is a summary offense. If the amount is more than $200 but less than $2,000.00, the crime is a misdemeanor of the 3rd degree. If the amount is more than $2,000.00 but less than $5,000.00, the crime is a misdemeanor of the first degree. If the amount of the check is more than $5,000.00 the crime is a felony of the 3rd degree. So a $5,001.00 check would be a 3rd degree felony while a $6,000.00 check would be a 2nd degree felony.
Regardless of the relatively low monetary value of the damage, the potential for a felony charge can have devastating consequences for the writer, including potential imprisonment.
Georgia and Connecticut also have bad-check laws similar to Pennsylvania’s uniform commercial law provision. Georgia’s law differentiates misdemeanors from felonies based solely on the amount of the check.
Notably, When writing a check, you are essentially signing a legal contract promising to pay. Therefore if you are sued on a bounced check, it’s important to treat the suit with the seriousness of any other breach of contract.
What to do when a check bounces
When it comes to dealing with a check that bounces, there are a number of steps that you must follow so that you can lay the groundwork for a future lawsuit, if necessary. Though there’s a chance that you will be able to come to an agreement with the check writer outside of court, it is critical to document all communications, and have evidence of the original contract, so you’re not scrambling to find documents when a lawsuit becomes your only option. The following steps should be taken in the order they appear:
- Make contact with the issuer Upon notification that the check has bounced, immediately contact the issuing party to see if the mistake was an accident. Be clear that your contact is about their bounced check, and not the service or product provided to them in the first place. Framed properly, the call can be very successful, as people are embarrassed by bouncing checks, even when the mistake is an accident. Once the check writer is assured that they are not being contacted for additional payment, they may be more likely to resolve the issue that caused the check to bounce.
- Preserve evidence Be sure to keep a copy of the bounced check, as well as the notice you received from your bank informing you that the check has bounced. This is important evidence if a lawsuit needs to be filed at some point in the future.
- Keep records Just as you would if you were paying an essential bill, keep accurate records of all attempts to collect upon the bounced check. This includes:
- Create an affidavit In certain states, statutes governing bounced checks require that notice of the bounced check be sent, any amount of time passed without being paid, and attempts at resolving the issue be collected in the form of an affidavit. It is advisable to work with a lawyer to ensure that your affidavit is properly formatted and contains all vital information.
Though the process should help the other party to understand that a bounced check is a serious matter, it may be necessary to wait a specific amount of time before taking further action. Follow the law, though it may take a long time. Most states have an expiration date for any checks being collected, and you’ll be able to use this as a reason to cease contact with the bounced check writer if the time period has passed.
Once a period of time has passed, it is time to make a final attempt at collection of the bounced check. Send a final demand letter stating the amount owed, including additional fees as dictated by state law, and demanding payment within ten days. If the bounced check writer still fails to make payment, it is time to consult with a lawyer to discuss options for filing a civil lawsuit against them.
Starting a small claims case
Alternately, you can file your case in Jacksonville small claims court. The rules regarding how much you can recover in small claims court vary by state- in Florida, you can recover either $5,000.00 or $15,000.00, depending on whether the defendant resides in the county where the a small claims case is filed. Small claims court is quasi-legal proceeding that provides an inexpensive and expedient way for litigants to file cases against others in court. The filing fees in a small claims court are significantly less than in circuit or general district court which is more costly and time consuming. For example, to file cases in the United States District Court- the federal court system- costs $350.00 or more depending on the type of case filed. To file case in the Florida courts system for a civil case is $400.00 and $131.00 for a small claims court suit. As the litigant suing someone, the litigant will need to carefully review the laws regarding the Florida Small Claims court system which can be found in Fla.R.Civ.P. 7.020. Under the rule, one party sues the other party in small claims court with a complaint stating the grievance. The responding party must then answer this complaint or file a counter claim or affirmative defense. Next, the Clerk of the Court issues a summons and enters a proposed judgment. If the defendant still fails to appear before the judge, the judge enters judgement for the plaintiff. The plaintiff can then turn the judgment into a lien by filing the judgment in the state real property records and a certified copy with the appropriate court.
Bringing criminal charges
In certain circumstances, a bounced check may lead to criminal charges. First and foremost, the check must have been issued with the intent to defraud the payee. Said otherwise, the issuer must have intended to commit fraud at the time he or she issued the check. This will likely involve some sort of lying or misrepresentation to the payee, such as claiming he or she has an account when that person does not or providing an account number corresponding to an account with insufficient or no funds. Here, the important point to note is that if the issuer knows there are not sufficient funds in the account to cover the check s/he is writing, and that the funds will likely never come into the account, then the issuer’s intent to defraud the payee remains.
The reason this is such an important distinction is because in many cases when someone issues a check from a bank account that is closed at the time of issuance, or for which insufficient funds are available, the issuer likely did not intend to defraud the recipient. The issuer may have had an account that was closed or had insufficient funds at the time of issuance, but may have expected to receive money into that account before the check cashed or were expecting to credit the account after the check was issued. Thus, it is important for the payee to determine whether the issuer had an account at the time of issuance and whether the account had sufficient funds to cover the check. If it appears the issuer had good intentions , then no fraud was committed.
If it appears the intention was to defraud at the time of issuance, the payee must then determine whether it wants to pursue criminal penalties. Section 31-41b-3 of the Connecticut General Statutes provides that it is a crime to issue a bad check, and sets forth the procedure the plaintiff is required to follow before bringing an action for a bounced check. Essentially, in order to start a prosecution "for any bad check or other dishonored instrument," the plaintff must first send the defendant notice that the check has bounced and that the defendant should contact the plaintiff with further information. It is not until fourteen (14) days after receipt of the notice that a criminal action may begin.
However, there is also a specific exception to that fourteen day notice period. Pursuant to Section 31-41b-3(b), if the bad check or dishonored instrument was in the amount of one thousand dollars ($1,000.00) or more, there is no fourteen day notice requirement "if the transferor makes an additional written demand by certified mail or any commercial delivery service to the drawer or maker for payment of the instrument within thirty days after the demand." In either case, if the defendant does not respond, then the plaintiff should consider consulting a local prosecutor’s office in order to bring an action for the bounced check.
Avoiding bounced checks
To prevent writing or receiving bounced checks, there are best practices that both individuals and businesses can follow. The key is communication and accountability within any agreements. Immediately establishing a payment schedule and informing all parties of their specific obligations reduces the chances they won’t follow through.
On the business side, banking tips for helping ensure the availability of funds include:
• Enroll in overdraft protection, which will help cover small overdrafts
• Set up account alerts to help eliminate overdrafts
• Maintain a sufficient reserve in your account to avoid overdrafts and checks bouncing
• Keep current and unused checks in a safe location
• Secure a credit card with a low credit limit to use in case of an account overdraft
Similarly, individuals can also help make sure their account has enough money by enrolling in overdraft protection, setting up account alerts, and securing their checks away from anyone who is not authorized to access their account. In addition, individuals should be diligent about keeping their checks safe and secure, and only writing them for well-known and legitimate debts.
Legal help
In cases where the check amount is small or the defendant has limited means, you may wish to speak with a legal aid lawyer about representation. You can find more information about legal aid and how to contact them from the Legal Aid Society here.
The Centre for Public Legal Education ("CPLE") offers general legal information for Canadians , including information on Promissory Notes and Cheques. CPLE has also created a pamphlet calling "Understanding Cheques" which is available on the CPLE website.
Often people are unaware that there are free or sliding scale lawyers out there who will represent you for a promissory note issue or bounced cheque. Such lawyers may be connected with law school clinics or non-profit corporations. This may be particularly desirable for those people on a limited income or for the poor.
If you still have questions on your options, we invite you to contact Grove and Co. which has criminal lawyers out of Calgary, Alberta who can assist with these issues.
