Receiving a Bad Check: Your Rights and Responsibilities

In the current business climate, business owners are receiving bad checks more frequently, and many customers are unable to make good on the bad check

Most business owners have received a bad check from a customer, due to "Non-Sufficient Funds" (also known as NSF), "Stop Payment" or "Account Closed."

A.R.S. § 13-1807 defines the crime of issuing of a bad check as follows:

"A person commits issuing a bad check if the person issues or passes a check knowing that the person does not have sufficient funds in or on deposit with the bank ... for the payment in full of the check as well as all other checks outstanding at the time of issuance.”

As the holder of a bad check, what are your options? Ideally, after you receive a bad check, you can call the customer and reach an amicable resolution. Unfortunately, in the current business climate, business owners are receiving bad checks more frequently, and many customers are unable to make good on the bad check.

Criminal Enforcement. Issuing a bad check is a Class I misdemeanor for which the penalty is up to six months in jail. If the bad check is for $5,000 or more and the check writer refuses to pay the full amount of the check plus interest, the check writer can be charged with a Class 6 felony, which is punishable by up to two years in prison.

The County Attorney will prosecute bad check violations. However, before you seek the assistance of the County Attorney you must give notice to the check writer that you have received a bad check. You may give actual notice (i.e., informing the check writer directly), or you may give written notice sent by registered or certified mail, return receipt requested, or by regular mail that is supported by an affidavit of service by mailing.

The notice must give the bad check writer 12 days to pay the full amount of the check, in addition to any reasonable costs and fees incurred by you. If, after 12 days, you have not received payment, you may turn the matter over to the County Attorney for criminal prosecution.

Civil Enforcement. Arizona’s civil bad check statute (A.R.S. § 12-671) states:

"A person who, for himself or for another, with intent to defraud, makes, draws, utters, or delivers to another person or persons a check ... for payment of money, knowing at the time of such making, drawing, uttering or delivery, that he or his principal does not have an account or does not have sufficient funds … to meet the check or draft in full upon presentation, shall be liable to the holder of such check ... for twice the amount of such check ... or fifty dollars, whichever is greater, together with costs and reasonable attorney's fees[.]"

In other words, you, the check holder, can recover $50 or twice the amount of the bad check, whichever is greater. Again, before beginning a civil lawsuit to collect on the bad check, you must first provide actual notice or written notice sent as described above. After receiving notice, the bad check writer has 12 days to pay the full amount of the check. If the bad check writer fails to pay, it will be presumed that the person intended to defraud the check holder when writing the bad check. The notice should be sent to both the customer on whose account the check is drawn and the signer of the bad check.

Avoiding Bad Checks. So, how do you avoid accepting bad checks? Be cautious of new checking accounts, as the majority of bad checks are drawn on accounts less than a year old. Make sure the date is accurate and the written amount matches the printed amount of the check. Also look for watermarks or the presence of other fraud prevention markings.

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This article was published in the February 2010 issue of the Scottsdale Airpark News

 

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