Every business owner has experienced the frustration of receiving an envelope in the mail from their bank with a bounced check enclosed from one of their clients. In some cases, it was a simple mistake and it is easily rectified. In other cases, the business owner must get aggressive and take legal action against the bad check writer.
Dealing With a Bad Check
The first thing that every business owner should have is a policy about bad check writers. There must be a fee attached to writing the bad check, and that fee must be within reason and compliant with local laws. In most cases, the business owner is allowed to charge the client the amount of the fee that the bank charged for the check, if it is paid for directly at the place of business.
- Establish Contact. The first thing that you must do is contact the person who issued the bad check and notify them that the check was returned for insufficient funds and that you request they return to your business with cash to pay for the check plus the applicable fee. It is preferred that you do this in writing so that you have documentation. Give the client a specific period of time to make the check right.
- Legal Action. If you do not hear from the client or they do not pay for the check, you have the right to seek legal action against them. You can either consult a lawyer, turn the check over to a collection agency, or you can turn the check into the District Attorney office for prosecution.
Consult an attorney to help settle the matter. However, it is important to choose a legal professional that is well versed in your state’s statues regarding fraudulent checks. For instance, a Minnesota business could contact a criminal defense lawyer in Minneapolis or Saint Paul.
When you turn it in for collections, the collection company will take a percentage of the recovered money to cover their fees. The District Attorney office will provide you with a full recovery amount, but this may be a very long and extended process. You will need to decide how quickly you want to recover your money before deciding which service to use.
Refusing Checks or Converting To AFT (Automatic Fund Transfer)
The only true ay to prevent any type of bad check from coming into your place of business is to refuse to accept checks. However, this is not always practical and could be damaging to your business. The only other option is to set up a service with your bank or credit card processing company to convert checks into automatic fund transfer (AFT) documents.
This means that once you accept the check and enter their driver’s license number into the processing machine, the money is made available to you just like a credit card. If the check is no good at a later date, the processing company deals with the issue, not you.
Bad Checks Are Serious
Many people do not realize the seriousness of writing bad checks. Often referred to as “check kiting” in legal circles, the Court does not treat bad check writers with kindness. If you are arrested for bad checks you will most likely spend some time in jail and be required to make restitution for your bad checks.
You will be required to hire a criminal defense attorney, and you may be banned from having a checking account by the banking system. Mistakes can be made, that is just a part of life. If a bad check has been issued, make sure that you pay for the check and the appropriate fees and try your best not to make the same mistake again.
How This Affects You
Bad checks can have a very negative impact on a business, as well as its owner. The level of trust that is broken between a vendor and their client can trickle down to future clients. The saying, “one bad apple can spoil the whole bunch” is a valid statement in this case.
Even though an encounter with a dishonest client can leave you with harsh feelings, it is implementing a standard method of operation regarding check acceptance can take away any personal projection of your prior experiences, especially when dealing with clients who have not warranted this stipulation.