Check-Up on Bad Checks

By: Wilson Cole
Date: 1/1/2007

Can you prosecute someone if they give you a bad check? Well, the answer is, "It depends."

First, it will depend on the state in which you live. In a few states, it is not a crime to write a bad check. In most states, you do have recourse, but the penalties vary. Let me suggest that you contact a local attorney for a legal opinion. I want to make this information available to you, but it is not legal advice - if you need a legal opinion call me, and I can refer you to one of the attorneys in our legal-forwarding network.

The bad check laws were written to protect you from fraud. The bad check laws were not written to punish someone because they cannot pay your bill. Let me explain: If someone contacts you and you provide a service, and they bounce a check, then you may have recourse. However, if they contact you; give you a postdated check, and ask you to hold the check until next Monday, and you agree, then you cannot prosecute the check. The reason is because they have put you on notice that they do not have the money. You can still sue them and it will be a lot easier to win because the postdated check is a promissory note. But, you cannot have them prosecuted.

There are a few states that have some very nice protection on the books when it comes to bad checks. In Florida, they have the "three times the damages" rule and we have gotten three times the face value of the check for clients in a few cases. In most states, you only get the face value of the check and the cost of collection.

The biggest thing about bad checks is it can be an early warning sign that your client may have an issue. This is what I recommend if a client should ever bounce a check. First let me say that mistakes can happen at the bank, deposits do not get posted, but if a bank makes a mistake they will supply a letter to your client that says, "Sorry we made a mistake and it was not our client's fault." If a client ever bounces a check, and they give you the explanation that the bank messed up, ask them to supply a letter just so you can have it for their file. If they will not supply one, take that as your answer that the truth is, they did not have the money to cover the check. If that is the case, then watch that client very closely and do not let their balance grow. The bounced check is, at the very least, a sign that they are having cash-flow issues

I would also categorize bad check writers into two categories - and they are very easy to tell apart. The first category is an honest person working through issues. The other category is a Conman who bounces checks on a regular basis and uses a checking account like a line of credit. Here is the simple way to tell them apart. The honest person will pick up the phone and call you. They will say we had an issue and they will do this or that as a solution. The Conman will not call you and will avoid your calls.

A word of caution, in closing: NEVER take a partial payment on a bad check. If you do, in most states, you will forfeit your right to prosecute the check. You can still sue for the balance, but you cannot have them picked up. Also, if you are going to have someone prosecuted on bad check charges, make sure that the check was not postdated and that you did not take partial payment, because in some states, if you prosecute in these situations, you may leave yourself open for criminal or civil penalties. Back to my opening statement: I would seek the advice of an attorney before I moved forward with actually prosecuting a bad check - they will know the individual state laws. You may also want to call your county courthouse to ask the clerk about what you can and cannot do in your particular state.

If you would like a sample of a bad check letter that I have used in the state of Georgia, please email me at Wilson@aercollections.com and put: "Bad Check Letter" in the subject line; I, or someone on my staff, will email you a copy.

Wilson Cole is founder of Adams, Evens & Ross and cofounder of Recruiting and Staffing Solutions Magazine. He can be contacted at 800.960.4365, or by email at wilson@aercollections.com.