I received a check from a customer that was returned for insufficient funds. What can I do? Should I hire a collection agency to go after them?
If the check does not exceed $10,000, the best way to handle it may be filing a small claims action.
Under certain circumstances, California Civil Code Section 1719 allows you to recover damages of three times the amount of the bad check, plus the face value of the check, up to $1,500. The check must be written for at least $100.
You must send a letter via certified mail to the check writer, demanding to be paid the amount of the bad check in cash or money order within thirty days. You can also demand the non-sufficient funds (NSF) fee from your bank, up to $25 for the first check and $35 for each additional check, and mailing costs.
You must then wait 30 days. If you have not received payment within the 30-day period, you may file a claim in small claims or superior court.
When you appear in court, bring a copy of the letter along with the signed certified mail receipt showing delivery or attempted delivery and proof of service of the complaint. You should also bring all relevant evidence, which should include the bank NSF notice and any communications between you and the check writer.
California Penal Code §476(a) criminalizes the act of intentionally drafting a check, knowing that there are insufficient funds to cover that check.
If you believe that someone knowingly wrote you a “bad” check, you should contact your local law enforcement agency. Although they used to aggressively pursue check fraud cases, the Napa County District Attorney’s office is no longer able to continue its Bad Check Restitution Program.
If you obtain a judgment, it may make sense to hire a collection agency to enforce it. If you don’t have the time or patience to collect, do a little research into these agencies and see if you find a good fit. The agency should be bonded, licensed and strictly follow debt collection laws.
Collection agencies typically pursue payments of debts for a flat fee or a percentage of the debt. It’s a good idea to make your best efforts to collect before you hire a collection agency because once you hire them you will not be receiving the full amount of the debt.
Debt collectors are prohibited from harassing people, and they cannot threaten conduct otherwise prohibited by law. There are many debt collection regulations—do some research before you attempt to collect on your debt.
Mary Luros is a business law attorney with Hudson & Luros, LLP, in Napa, and can be reached firstname.lastname@example.org. The information provided here is not legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information.