What Are the Penalties for a Bounced Check?
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.
@mrwormy- I bounced a check one time and had the same problem with cascading fees and penalties. A $15 check to a barber ended up costing me over $150 when everything finally got settled. I asked my bank if there was anything I could do to avoid getting hit with so many bounced check fees. They said they did have some discretion when it came to applying those fees. If someone really did make an honest mistake, like forgetting an old check, then the bank could decide to drop the fine on some bad checks.
The other thing they suggested was to set up a line of credit and connect it electronically to your main checking account. If your checking account ever dropped below a zero dollar balance, the difference would be automatically deducted from the line of credit. It's a good way to prevent all of those fees from kicking in, but the money is still considered a loan, and the interest rate could be fairly high.
I try not to make bouncing a check a habit, but there were a few times when I forgot to check my balance and wrote more checks than I could cover. It's a nightmare when all of those bad checks come in and they all get fees added onto them. Fortunately for me, the recipients didn't try to prosecute me or anything. The bank, however, did send me a stern letter implying I had better be more careful in the future.
I think one of the worst things people can do is hold onto a personal check for more than a few weeks. My problem with bounced checks all started when a lawn mowing service lost the check I wrote two months earlier, and then found it on the same day when my account was low. Every check I wrote that week bounced, because I didn't know that company had cashed the one I wrote to them.
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