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Bad Checks

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Should we accept that check?

Our area sees its share of worthless checks: NSF (non sufficient funds), account-closed, and stolen/forged. There ARE things you can do to avoid taking a check that ‘bounces’. Whether you are in business supporting a family, or holding a yard sale, be cautious if you accept a check at all. Checks are the easiest form of payment for a determined ‘customer’ to defraud you with.

Most people taking a check (on a personal OR business account) fail to ask for identification - the single largest mistake. Once you obtain ID, record it properly. This is insurance against most forms of check fraud (theft and forgery), and assurance that you can identify/locate the customer if the check was on an NSF or closed account (for initial notification, or eventual court).

Establish rules of acceptance and stick to them; train and require the same of your clerks/cashiers. Post your rules by the cash register so that everyone is reminded. Accept current picture ID only. Write the ID number on the check yourself (ignore ID numbers printed on checks) including name (if the signature is not legible or if the check is on a business account/name); write in the state the ID is from, and expiration date (don’t accept expired ID). Verify that the name matches on the ID and the check (including signature block) and look at the picture - if it is not your customer, don’t take the check.

It takes time for banks to close overdrawn accounts (remember, the unused checks are still out there), and time (often weeks) for the check you deposit to proceed through the banking maze. Where theft and forgery are an issue, it can be days/weeks/months before a person discovers his/her checks missing/stolen, and only upon discovery can measures be taken to avoid them being circulated by unauthorized persons. (Always dispose of your own unused or outdated checks properly.) All this time creates opportunity to a person hoping to defraud you. Some customers really did goof on their account balances – they are the ones who replace the loss practically before you end your phone call with them.

Don’t be embarrassed (by trying to remain "friendly") or too busy to obtain ID. Your income is at stake. Don’t be tempted to take 2-party checks (written by any person other than your customer). Recognizing a customer as someone you have "seen around a lot" is not identification. Rules of thumb – if your customer did not write the check or does not have picture ID, don’t take the check - let bank professionals handle those situations; never give cash back - accept payment for the purchase price only (again, let the bank handle cashing of checks). There is one bank in Airway Heights and a number of ATM’s; travelers carry credit cards/travelers’ checks they can use (always verify ID on credit card/travelers’ check users as well).

Nothing will guarantee an account has adequate funds, but proper ID will help locate the author. Rule of thumb: If you suspect something is wrong, call the bank to verify funds BEFORE giving the customer the goods, or don’t take the check. Many businesses allow local checks only – also good insurance.

A word about refunds: Never give a cash refund for any purchase made with a check or credit/debit card until you verify the check or the credit/debit card cleared. Many businesses require a 2-week (or even 30 day) waiting period prior to giving refunds. Where small businesses (like ours) are involved, business owners would do well to require that only a trained manager be authorized to give refunds.

We also see "payment stopped" checks - those dishonored when a dispute occurs. Sometimes a person whose checks were stolen/forged will stop all checks until the legitimate checks are identified; reimbursement is then made. More often, a customer disputes payment for services he/she feels were unfair. In all "payment stopped" checks, the customer is responsible for otherwise resolving the issue within a 20-day period. Treat these the same as any other dishonored check - notify the customer and allow that time for him/her to make alternate payment, return the merchandise, or file a court claim, etc. If there is no resolution, send a formal, return receipt requested, certified letter, then seek assistance.


Procedures for handling bad checks:

You have several options for trying to recuperate your losses from bad checks; none are fool-proof.

  1. Contact the account holder: Start here, and give him/her a few working days to reimburse you for your loss. In most cases, the customer made an accounting error and will reimburse you within 24 hours.
  2. Try cashing the check personally at the customer’s bank, especially if a traditional pay-day (1st or 15th of the month, etc.) is near. Their new deposit may allow your check to clear so that you are reimbursed. (You won’t recover any costs you incurred from the check bouncing back to you, or toll calls to the customer.)
  3. Repossession of merchandise: You may wish to decline to deliver the merchandise to the customer until you are certain the check will clear. However, if the customer has his/her purchase, you may contact them to return the item unless, of course, the check is made good. Personal contact is not always a good idea because it can lead to an unpleasant (or worse) confrontation; phoning the customer to return the merchandise to you is a better option.
  4. File a ‘small claim’ or lawsuit: There is a filing fee, and the court will hear all the evidence from both you and the customer, then make a ruling. Caution: This ruling does NOT guarantee you will be reimbursed.
  5. Utilize a collection agency: There are several available in our area, and most will attempt the collection, then reimburse you for your full loss. Remember that collection agencies are successful less than 50 per cent of the time.
  6. Request criminal charges through your local law enforcement agency: This will not necessarily provide restitution for you. We MAY be able to bring about criminal charges resulting in a fine or jail term, but as with the above, guarantees nothing, especially reimbursement for your loss. Such reports can be investigated, but are time consuming and costly; a defendant must be proven guilty, beyond a reasonable doubt, of intending to defraud you at the time they issued the check.


If you do request an investigation:

1. You must have obtained current picture ID from the customer (and written the information at the top of the check), and be able to testify that your customer was the account holder.

2. You must send a demand letter, certified and return-receipt requested, and allow at least a few (no more than 5) working days for the customer to respond.

3. You must have the involved cashier write a statement describing the transaction, customer and conversation, etc., and provide us with a copy of a sales receipt/purchase order.

4. The check must be a local check - the customer was a resident of Spokane, Stevens or Lincoln Co. (check for under $250), or a resident of Washington (check for over $250). For checks of much larger amounts, prosecutors MAY authorize extradition from surrounding states, but remember that prosecuting the defendant depends upon whether they can be located.

Conclusion:

Careless check-cashing policies result in losses for you and difficulty for the honest customer to cash checks at all. We urge you to establish a check-cashing policy and require all your cashiers stick to it. We encourage you accept only local checks if you accept checks at all, obtain picture ID on your customer and insure he/she is the account holder. Never accept a 2-party check, and never give any cash back. If ever in doubt, don’t take the check, instead ask for another form of payment or verify funds before handing over the merchandise. If you suspect someone is trying to pass a worthless check to you, make immediate notes describing the customer in detail, and obtain a vehicle description and license number. If you suspect a customer is trying to issue you a stolen and/or forged check, call Crime Check at 456-2233; that customer description and vehicle identification you provide may become invaluable.

Airway Heights Police Department,
1208 S. Lundstrom St.,
Airway Heights, WA. 99001
(509) 244-3707

Updated: July 7, 2003.