Legal Factoid...
G. Bradley Hargrave, Esq.
Retail merchants who accept checks as payment understand that some of those checks will be returned unpaid. To follow are a few of the collection options available to the holder of a dishonored check.
Many retailers elect to offset the risk of dishonored checks by subscribing to a check guarantee service. Dishonored checks are paid in exchange for the payment of a monthly fee on all checks approved through the service. Others may elect to forward their dishonored checks to a collection agency in exchange for the receipt of approximately 50% of any funds collected. And still others may forward all or a portion of their dishonored checks to the local District Attorney for possible criminal action and restitution.
Those retailers electing to perform their own collections must be aware of the consumer protection laws which favor the bad check writer. While the Federal Fair Debt Collection Practices Act does not apply to creditors who collect upon their own accounts, many states, including California, have expanded their statutes to include creditor collections. All of these state statutes provide for fairly significant monetary penalties in the event of a violation. An unwary retailer who commits a violation may find itself in the unenviable position of owing more to the debtor than the principal amount of the debt. Retailers are urged to proceed with caution.
