A Look into Bad Check Laws

A Look into Bad Check Laws

Writing a bad check or bouncing a check is officially known in the financial world by the term non-sufficient funds, or NSF. Non-sufficient funds means that there is not enough money in the bank account to cover the total amount written on the check.

There are both federal and state laws regarding bad checks. While the federal laws are standard and have the final say, prosecution and enforcement are done at the state level. Though each state has its own unique set of laws concerning bounced checks all agree that the offense is punishable by jail time and that history and motive are crucial elements in determining the fate of someone who has handed over an NSF check.

Accidentally handing over a bad check is a common mistake. The rise in the use of electronic funds transfers has led to an increase in accidental bad checks. The main factor in determining punishment is whether or not the person in question intentionally handed over a bad check.

Purposely attempting to defraud a merchant is punishable by civil and even criminal penalties. State laws ultimately determine punishment. First time offenders are typically penalized by probation or a fine, while repeat offenders can be sentenced to jail time.  

Civil penalties typically award the merchant the amount they are owed, though sometimes they receive up to three times the amount of the bad check – as is the case in Indiana, Illinois and Ohio. In other states the penalty will cover the original amount due plus any debt collection, legal fees, or court charges that were necessary to recuperate the lost funds.

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How quickly and cooperatively the person in question responds to an NSF notice and the individual, debt collection agency or attorney attempting to reach them is also taken into account when determining punishment.

If intent to defraud is proven then criminal penalties will be assessed. This includes arrest, prosecution and possibly jail time. Though passing a bad check cannot affect your credit rating, there are companies that record the information and share it with banks. A history of writing bad checks may be just cause for a bank to deny someone a checking account.

In order to pursue payment on a bounced check you must first research the NSF check laws for your state. Also, familiarize yourself with the Fair Debt Collection Practices Act. The FDCPA articulates specific rules and regulations to debt collection and the penalties you can suffer for not following them.

Then draft a letter to the check writer informing them that their check bounced and the state’s grace period for paying it back. Usually a state will allow the check writer 30 days to pay before prosecution can move forward.

If the guilty party does not respond within the allotted time file a claim with small claims court. The next step would be to contact your local district attorney’s office.