One question that we occasionally receive from clients is, “We received a payment from a customer and the check bounced. What do we do now?” While this is a situation that no business wants to find themselves in, it is one that almost every business owner will experience at least once, but more likely several times, through the life of their business. Though each county’s rules and exact procedures will vary slightly, below are a few simple steps that you can take to help collect on a bounced check.
Send a certified “Notice of Dishonor” to the check writer. Texas Penal Code Sec. 31.06 lines out the language required in your Notice of Dishonor letter. In the letter you will also want to a.) demand payment within ten days of receipt of the notice; b.) request a merchant collection fee if it is authorized by Texas Statute (Art. 9022); and c.) send a copy of the check(s) to the check writer. You will want to retain a copy of the bounced check along with the Notice of Dishonor and certified mail return receipt.
If the check writer does not respond within the timeframe provided, you will want to visit or call the Worthless Check Division (sometimes call Bad Check Division or Hot Check Division) of your county’s District Attorney’s office. Often, the division will permit you to submit the required documents via the mail. The required documents that you will need to bring or submit include: a) the original check, b) a copy of the Notice of Dishonor, c) the return receipt card from the certified mail (the green card) or, if the letter was rejected, refused or not otherwise claimed you will want to bring or submit the sealed returned envelope.
Each District Attorney’s office has a slightly different procedure in place regarding pursuing the check writer, but typically the District Attorney will send a formal demand to the check writer to pay full restitution, which will include the amount of the check, any applicable merchant collection fees and the bad check fee charged by the District Attorney. Any check writer who fails to pay the total amount owed will be subject to criminal prosecution under Texas’ Hot Check Fee Act, provided the check meets the statutes requirements for prosecution. It is important that you do not accept restitution from the check writer once the check has been submitted to the District Attorney’s office.
As discussed above, each District Attorney’s check collection policies will differ slightly, but generally they are designed to help you as a business owner receive restitution in the event you accept a bad check.
Eric R. Thiergood, Sr.
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