Have you received bad checks from customers? Doesn’t it feel like a slap in face? Not only do you have to go back to the customer to get the money owed to you, but you get charged a fee by your bank. Talk about adding insult to injury!
Certainly some bad checks are clearly errors, while others may be a deliberate attempt to defraud. Some bad checks are the result of not enough money (“insufficient funds”) in the account. Other bad checks are due to a check written on closed accounts. Both are technically criminal acts, but are often best resolved with civil action.
Here are some things to remember:
1. Get to know the laws in your city and state regarding bad checks. Start with the police department where your business is located. The local police will likely be able to give you a great deal of information.
2. Once you know the law, give the customer the appropriate notice and opportunity to make good on the check. It is very important that your notice be in compliance with bad check laws. In Maine, your notification requires certain statutory language. Other state, county or local laws require giving the check writer a certain number of days, call for certain language or necessitate the use of certified mail.
3. You can recover bank fees and perhaps other costs, but your ability to recover bank fees or other costs will also depend on the law. Know what you can or cannot demand.
4. Partial payment of a bad check amount may not be a good option and may hinder your ability to recoup your money. Again, know the law.
5. Don’t delay! Deal with bad checks right away. If you wait, certain remedies may not be available to you.
6. If you accept a large number of checks, you may want to look into a check verification service, which can tell you right away, before you deposit a check, if the check is good or not.
7. If you accept credit cards, and have a merchant service provider you like, you can contract for a service to verify funds. There are usually several levels of service available, at varying prices.
8. If you sense that a check may not be good, you can call the bank before you deposit it. However, due to privacy laws, your bank may give you only limited information, or no information at all.
9. Once your customer has settled the bad check, do not take any more personal checks from them. Set up a payment plan requiring an automatic credit/debit payments or ask for certified funds.
10. If you submit a debt to your collection agency, make sure that you let the agency know that the debt involves payment by bad check. Include the front and back of the bad check.
Every business, even businesses that do not extend credit, can run the risk of being stuck with a bad check. The important thing is to have a procedure to deal with them, and a way to recover the money owed to you as soon as possible.