Bad Check Notice/More Info

  Bad Check Notice  
Additional Information 
UCC Rules 
Article 4 of the Uniform Commercial Code (UCC) is the main source of law in each state (except Louisiana) for determining the rights and obligations of the parties in a bank check transaction.  Although some differences exist from state to state, the rules are reasonably consistent.  

There is a contract between the drawer and the bank (the "drawee") where the party has the checking account.   According to that contract, the drawee is obligated to pay a drawer's check unless there is not enough money in the drawer's account or the drawer has properly issued a stop payment order. Anyone who receives the check and tries to cash it or deposit it in his or her bank account is the "holder".  The drawee bank is required by law to either pay promptly or return ("dishonor") the check. 

Unfortunately for the holder, unless the check is certified, the holder probably has no claim against the drawee bank for failure to pay the check.  However, the holder may have a claim against the drawer, and any party that received the check prior to the holder and endorsed it.  In certain cases where the bank drags its feet, the holder may have some rights against the bank. Delay by the drawee bank beyond midnight of the day it receives the check may make the bank liable to the holder for the face amount. 

What if the Drawer Refuses to Pay? 
If the bad check writer does not respond to the demand for payment, the payee still has all of the rights of a party to a contract that has been breached.  If there is security for the obligation, the payee may be able to recover the collateral.  A would-be payee can sue for the breach.  For small amounts, it may be best to file that suit in small claims court.  Every state has limits on the maximum claim allowed in small claims court.  Call your local court clerk for more information. 

Criminal Law 
State law makes it a crime to knowingly write a check to someone without sufficient funds to cover the check.  Individuals and businesses that have been paid with an insufficient funds check or a check from a closed account should first try to get the problem resolved with the drawer and any other responsible party.  If that is not successful, the holder may ask the local prosecutor to bring criminal charges against the bad check writer.   

As a practical matter, local law enforcement officials bring criminal charges in only a handful of bad check cases.  Usually, prosecutors are most motivated to bring charges when the amount lost is high, the person is a chronic bad check writer, or the holder has suffered some particular hardship as a result of the bad check.  Prosecutors will likely not pursue charges if the amount is small or if the bad check writer has left the area.  

Be sure to keep a copy of the bad check notice, as well as any other correspondence to or from the bad check writer.  Also keep a written record of any conversations.  These records can be important if you are forced to sue.