Bounced check penalties vary by business, banking institution, and legal jurisdiction. In many cases, those who write checks with insufficient funds can expect to pay fines and fees to both their bank and the person or business to whom they wrote the check. The person who writes a bad check may also lose his check-writing privileges at the business where he wrote the check and, if he continues to write insufficient funds checks, may even lose his checking account. If the matter is not resolved quickly, a person who writes a bounced check may also face civil lawsuits and even criminal charges.
In many places, writing a check when a person is aware that there are insufficient funds in the account to cover the check is actually a crime, although the likelihood of being prosecuted depends largely on the customs of a particular legal jurisdiction. In some places, individuals who write bad checks may be charged with theft or fraud, The severity of the penalty faced by the check writer typically varies, depending on the value of the check. Fines, probation, and even imprisonment are all possible punishments for writing a bad check. Laws may also allow recipients of a bounced check to sue the check writer for the amount of the check, any legal or banking fees incurred, as well as punitive damages.
In addition to possible legal consequences, many businesses have strict policies regarding returned checks. The check writer may be subject to public embarrassment if the business chooses to display a list of the names of bad check writers or even copies of the checks where other customers can see them. The business owner may require the check writer to not only pay the full amount due in cash but may also ask the check writer to pay an additional, and often significant, bounced check fee.
Banks often take a firm line on the issue of writing checks on an account with insufficient funds. At the very least, the bank will typically charge a fee for each bounced check. If a bank customer develops a pattern of writing bad checks, the bank may close his or her account. In addition, banks in some jurisdictions report bad check writers to a banking report service that provides reports to banks on a consumer's management of her previous checking accounts. Many banks use these reports when making decisions about opening accounts for new customers. Negative information on such a report can make it very difficult for a bounced check writer to get a new account.