Bad Check Notices
When you receive a bad check, State law governs what type of notice must be sent before a criminal or civil action may be commenced. Download the notice required by your State. Free law summaries are available for all States.
What Can You Do About a Bad Check
What is a Bad Check?
Bad check is a term for a check that is dishonored or bounced because of insufficient funds in the account or the non- existence of the account. A check is dishonored when there are not enough funds in the bank account on which the instrument is drawn. The term NSF or non- sufficient funds denote that a check cannot be honored since the amount of money available in the bank account is not sufficient to cover the amount for which the check has been issued. It may also called a bounced check, hot check, dry check, or NSF check.
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.
Bad Check FAQs
What does "NSF" stand for?
The term NSF or a non-sufficient funds stamp on a check implies that the check presented cannot be honored because of a lack of sufficient funds in the account to pay the check. Checks that are returned as "NSF" are also known as bad checks, fraudulent checks or hot checks.
What can I do if I receive a bad check?
You can file either a civil or criminal case against the issuer of a bad check because writing a bad check or an NSF check evokes both civil and criminal liability. However, make sure you understand the laws related to bad checks applicable in your state because bad check laws vary from state to state. An issuer of a bad check can be prosecuted or can be sued for damages for a bounced check depending on the seriousness of the offense and particular state law. Banks may also charge a fee for every check bounced depending on the bank's policies.
When can I institute criminal prosecution for a bad check?
Bad checks are governed by state laws and the offense can be classified a misdemeanor or a felony. When a person issues a bad check with knowledge of the insufficiency of funds, s/he is guilty of a crime. Pursuant to bad check laws, criminal prosecution can be instituted against an issuer of bad check when:
- an account is found closed when the check is presented; or
- the check is dishonored because of insufficient funds in the account.
Check laws classify the offense of bad check into felony or misdemeanor depending on the amount of the check. Issuing bad checks continuously with fraudulent intentions is treated as a felony in many jurisdictions. A check is a draft drawn on a bank and payable on demand. Hence, writing a post dated check will not fall under bad check laws.
Many states have a Bad Check Restitution Program to retrieve funds from bad check issuers. Under the program, payee of bad checks can collect the amount of bounced check from the local district attorney's office. The district attorney collects the fund and some fees from the issuer through an agency. Bad Check Restitution Programs avoid criminal prosecution if the check issuer clears all the credit within a specified period.
What amount can I claim as damages for bad checks?
State laws govern bad checks and the procedure for obtaining damages when banks stamp a check bad vary from state to state. Pursuant to check laws, if a check is bounced because of lack of funds or a non- existent account, the payee can sue the issuer of the check for the amount of check. In some states, this may go up to treble the amount of the bounced checks. Under some jurisdictions, in addition to the treble amount of the check, courts may order bank/court costs and reasonable attorney fees as additional damages.
What exactly is ChexSystems?
ChexSystems is a credit reporting agency providing various services including check verification services and consumer credit reporting services. Majority of banks in the United States use ChexSystems. Banks that avail the services of ChexSystems will not open a new deposit account for a customer with a negative report.