Answer: First, we need to be clear on the difference between a “bad check” and a check written with the “intent to defraud”.
In simple terms, a bad check is usually the result of poor math calculations or your bank making a miscalculation. In either case, your intentions were good when you wrote the check. You thought you had enough money to cover the check and can show where the mistake was made thus proving your good intentions. Crooks, on the other hand, write bad checks with the intention of ripping people off. Writing checks when you know you do not have the money to cover them is a serious crime that, if caught, can land you in jail or even prison.
Make no mistake about it, writing bad checks is always illegal. However, just about every state has a statute of limitations (SoL) on the collection of bad checks; typically 2 or 3 years. If you receive a collection notice or call about a bad check, don’t panic! First, check to see if the Statute of Limitations has expired.
Next, decide whether you want (or can afford) to pay the debt. If you plan to pay the debt, be sure that you are only paying what state law allows. Check your state law to determine what fee(s) (if any) collectors can add to the face value of the check. Many states limit collection fees to a certain amount such as $100 or to a percentage of the face value of the check and prohibit interest charges.
The FDCPA, Section 808 makes it an unfair practice to collect “any amount (including any interest, fee, charge or expense . . ..) unless such an amount is expressly authorized by the agreement creating the debt or permitted by State law.”
Debt collectors may attempt to collect a fee or charge in addition to the debt if either:
(A) the charge is expressly provided for in the contract creating the debt and the charge is not prohibited by state law, or
(B) the contract is silent but the charge is otherwise expressly permitted by state law.
Conversely, debt collectors may not collect an additional amount if either:
(A) state law expressly prohibits collection of the amount or;
(B) the contract does not provide for collection of the amount and state law is silent.
NOTE: If state law permits collection of reasonable fees, the reasonableness (and consequential legality) of these fees is determined by state law. So, unpaid debts sent to collection agencies, whether closed or charged off MAY still accrue charges and fees IF the credit contract allows it and State law does not prohibit it. Many states do limit the amount that can be charged and, if the State does have a law, it overrules the credit contract.
Cancelled Checks: When you write a check, it’s like writing a promissory note that says the funds are available and when the instrument (in this case a check) is presented to your bank, funds will be withdrawn from your account to cover the amount of the check. When this happens, the debt is, in effect cancelled, thus the term “cancelled check”.
However, the same term can also be used when you cancel a check. For instance, after sending a check, you change your mind, you can ask your bank to cancel (stop payment) on the check. This means the bank will not honor the check if presented. Banks usually charge a fee for this service.
You may want to retain an attorney to help you settle that bad check debt or determine if any of your rights were violated by the collector trying to collect that check. Click here for a free consultation.