PASSING BAD CHECKS:
A compilation of resources on check kiting, NSF issues &
fraud
Has your credit
history with Chexsystems
been ruined because of bounced checks? Whether you are the
perpetrator or a victim, the resources on this page can help
point you in the right direction.
Passing bad checks
is a way that people get what they need now and hope to pay
later. Trouble is, their timing is off or they have no intention
to pay later and the check bounces. The merchant is left with
a bad check. Whether you pass bad checks because you're dishonest
or it's a simple accident, stiff penalties can apply. Criminal
charges can be brought against you if the DA can prove all
criminal elements especially fraud and intent. Merchants lose
hundreds of thousands every year in bad checks and the consumer
who pays by legitimate means ends up picking up the tab. You
cannot however, escape risk free.
There
are a number of unpleasant consequences for writing bad checks:
-You could be charged
fees
-Your bank or credit
union could charge you an overdraft fee, which is typically
around $25.00 per check
-The place you
wrote the check could also charge you a fee
-The place you
wrote the check could refuse to take any more checks from
you
-You could receive
calls and letters asking you to repay the money
-Your name and
account information could be reported to an agency, like SCAN,
Telecheck, Equifax Check Solutions, or others where it would
be placed on a bad check list
-Then, other places
could refuse to take your checks
-Your bank could
close your checking account
-You would not
be able to write checks
-Your bank could
report your closed account to ChexSystems.
As a result other banks could refuse to open a checking account
for you for some time.
-You can ruin your
debit history
Civil &
Criminal Penalties
Bad checks, also known as NSF checks, bounced checks, rubber
checks, etc., can be a big problem for any credit department.
There are both civil and criminal penalties for this unlawful
act, although it is much more costly and difficult to prove
a criminal case.
-Is a check
considered a written contract, what is the SOL for checks?
A check is not considered a "contract" although
some may argue that it is (because it's a signed promise to
"pay"). A contract requires consideration by both
parties (an offer and acceptance) and consists of nothing
more than an (enforceable) promise to pay by one party
but no contract was drawn up by the other party. What
it is, is a negotiable instrument and therefore subject to
governing UCC (uniform commercial code) if there is
one for the state in question. UCC
is where you usually find the time limitations on checks.
Many states have their own specific (SOL) statute of limitations
dealing with checks. Those would trump any general statute
of limitations and even the UCC limitations. The UCC is not
a federal statute but rather a system set up to structure
commercial transactions. Since it isn't a federal rule there
would be no supremacy clause (as in who rules state or federal)
but rather the state could choose to adopt it or not. Most
states have adopted it. According to FindLaw, a more specific
statute rules over (trumps) a more general statute. Therefore
if a certain state has a more specific statute it will often
trump (rule over) the UCC entirely. Bottom line: read the
UCC but read the state rule as well and see which one applies--,
is more specific or offers more protection. You will usually
find the SOL for collecting the check in the state code.
The following two
links provide information about checks returned by banks and
other financial institutions.
Check
fraud describes a number of activities including:
Check Kiting - this involves
opening multiple checking accounts so that checks from one
account are written to cover checks from another account.
Recent legislation has required banks to make funds available
sooner and this has resulted in even more occurrences of check
kiting.
Counterfeiting
- the ease of desktop processing and the high quality of readily
available printing and copying have made counterfeiting a
significant factor in check fraud. These methods are used
to create or duplicate checks. In addition, counterfeiting
can involve chemical alteration to remove some or all of the
information on a check so that it can be replaced with other
information.
Forgery
- two common types of forgery exist. Stolen checks can be
endorsed and presented for payment at stores or banks. This
often also involves the use of false identification documents.
The other common type of forgery involves employees issuing
checks without authorization.
Paperhanging - this term
describes purposefully writing checks on closed accounts or
reordering checks for closed accounts.
Frequently, check
fraud starts with the theft of a check. A blank check might
be stolen from your home or car. An old or canceled check
could be stolen from your garbage. A check you have written
to pay a bill could be stolen from the mailbox.
What can I do to prevent
check fraud?
Since most check
fraud starts with the theft of a check, you should keep your
checks as safe as possible.
Always reconcile
your bank statements as soon as you receive them.
If you use automated
teller machines, do not write your PIN number on your card
or anywhere in your wallet or checkbook for a thief to find.
Don't use checks
or deposit slips as scratch paper.
Shred old checks
and bank statements before you throw them away.
Fill in the payee
line and amount line completely on any checks you write. Don't
leave blank space that someone can alter.
Don't provide your
bank information over the telephone.
Don't place outgoing
mail in an unlocked box.
Install a lock
on your mailbox. You can cut a slit in the mailbox large enough
to slide mail through but not large enough to fit a hand through.
What if I am a victim
of check fraud?
If you are a victim
of check fraud, it is in your best interest to call these
institutions:
Your local bank
or credit union. Report the fraudulent activity and ask them
to advise you on what steps to take next. For example, should
you close the account, put a stop payment on all checks other
than ones you know you wrote, whom else should you notify,
and so forth.
Your local law
enforcement office. Give them the necessary information and
answer all their questions in detail.
The check service
companies - these firms gather information on bad checks and
then report that information to their customers. Report to
these companies that you are the victim of fraud and that
you did not write the checks that were stolen. Ask what other
information you might need to provide. Telephone numbers for
the largest check service companies are:
The credit bureaus.
Again, tell these agencies that you are a fraud victim and
your checks were stolen. Ask what other information you might
need to provide.
Equifax
PO Box 105069
Atlanta, GA 30348
800-505-2136
Trans Union
PO Box 6790
Fullerton, CA 92634
800-680-7289
