Bad Check Law
The maker of a bad check, who issues a check with the knowledge of insufficient funds in his/her account, is guilty of a crime. Laws governing bad checks or NSF checks are state laws and check laws vary from state to state.
There are both civil and criminal penalties for issuing bad checks. Pursuant to bad check laws, civil penalties are awarded to the creditor on the basis of the amount on the bad check. Sometimes it may go up to treble the amount of the bounced checks. In some jurisdictions, in addition to treble amount of the check bounced, bank /court costs and reasonable attorney fees are to be paid. State law governs procedures for obtaining reimbursement and penalty of bad checks.
Writing a bad check with fraudulent intentions is a criminal offense. Depending on the amount on the check, the bad check laws have classified the offense of issuing a check bad as either a felony or a misdemeanor. A majority of the states in the US consider such offenses as larceny and punishments may also be dealt on the scale of a misdemeanor. Under some jurisdictions, issuing a bad check for the second time with fraudulent intentions is considered a felony. The criminal offense of issuing bad checks results in prosecution and arrest. For criminal prosecution on a bad check, there must be an element of fraud.
Under bad check laws, the party who signed the fraudulent check is generally found guilty. But, in some states persons who deliberately pass the bad check on or third parties who endorse the check are also found guilty. Some bad checks are not considered fraudulent checks and are exempt from punishment under the bad check laws. For instance, criminal provisions as regards bad checks do not apply to post-dated checks.
State law typically mandates when a dishonored check is considered and can be termed as a bad check. A dishonored check is considered a bad check when:
- the check is not paid by the banker on presentation for payment; and
- the issuer did not pay the money within a specified number of days after written notice of dishonor of the check. For recovering the amount of a dishonored check, the debtor should send a notice to the creditor within a period specified by the state law intimating that the check was dishonored.
Bad Check Prevention and Enforcement
Since, bad checks are a growing menace hampering payment schedules and systems, check verification agencies like ChexSystems are getting popular. Such agencies provide various services including check verification services and consumer credit reporting services. Additionally, many states have Bad Check Restitution Programs run by prosecutors. Bad check restitution programs aim to recover funds from bad check writers and repay money to the recipients of the checks.