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How Do You Collect On Checks Written From Closed Accounts?

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indie_pizza

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How do you guys handle this? It’s not been a huge issue until the last year for me. I’m getting sick of it, but I don’t know where to even start when someone writes me a check from a closed account. I’m pretty sure it’s considered fraud, is this something I’d report to the police?
 
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Sure, file a police report. Do some research, I believe there’s a process * for sure…( I’m certain someone at your local police station can help you) I didn’t bother. I stopped accepting checks sometime in 2009. I think the total for 3 years was about $500 or so. I wrote it off as bad debt last year.

There are resources, your bank may know, who will purchase your debt (provided its within the SOL). I didn’t bother because they’ll want to buy it for pennies on the dollar, and your business will be the blame line for the debt collectors to collect full payoff + fees. I have not read the latest changes, but as of a few years ago, you could only blemish their credit report if the original amount was above $70 or so. Lots of BAD debt collectors get around this by adding their FEE and filing it as a LOAN - which is illegal. Bad check for $20?? Unless you can hound them at their house, pretty much uncollectable, unless the po-lice go after them.

Good luck. STOP accepting checks, nowadays, all checking accounts come with a debt card option. If its a business, by VERY suspect. It has not been a good few years for businesses or individuals in the economy, and checks are… just don’t accept any. Anymore!
 
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In our county the solicitors office has a bad check unit that handles NSF and closed account checks.
As far as refusing checks, I get about $800.00 to $1000.00 a year in bad checks. About 70% of them are paid at some point. If I collect them I get face value plus $10.00 for bank fees. If I turn them over to the county they collect face value plus $30.00 for me and $90.00 for them. So I lose about $200 or so in bad checks every year, a lot cheaper than if these transactions were paid with credit card.

Rick
 
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Bad checks are certainly a frustrating problem. My annual bad check losses are about equal to my MONTHLY credit cards fees. I estimate that bad check losses for the last decade amount to maybe half of 1% of the value of checks accepted. If I look at bad checks as a cost of accepting checks, it is far cheaper than taking credit cards.

With that said, a few other comments:
  1. I couldn’t care less what people who write checks on closed accounts think of my buisness. I am more than happy to have the collection agency chase them.
  2. Bad checks from our store go directly to the collection agency. If the customer contacts us and says they made a mistake and bounced a check, we call the agency and they send us the check and we settle it without fees to the customer beyond the $4.00 the back charges us for a returned item. This happens to about 1 out of 4-5 bad checks.
Our check deposits are steadily shrinking as a portion of the business. Most now are businesses. We have had no issues with local businesses bouncing checks. If we were to stop taking checks from individuals, I don’t think it would impact sales… but the fees for the credit cards the customers would use instead would cost us more to accept.
 
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If a check is returned from a closed account we had them over to the police. They do a pretty good job of getting the offender in to pay, however we are a small town where there is not a lot of crime. Our county also has a bad check offender program, however I have not used it. I agree that ther are risks in taking checks, however make sure that the check address and delivery address are the same, make sure they have proper id. Following all the little steps make it easier to get reimbursed. Also are pos lets us keep a list of bad checks so if that address tries to order again, it is flagged.
 
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I practiced law (FDCPA even) for a while so I have a little expertise in this area…

First off, it is little known that pizza checks are one of the most sought after debts to buy by collection agencies. Why? They are typically very small debts. Small debts have the highest collection rates. I met the attorney that did bad-check collection for one of the big chains. It was astonishingly profitable. His secret was to not gouge them with fees - just add the $10 bad check charge and you will collect a huge amount of them.

I have a simple letter I send to bad check writers. It is polite and firm. It also must have a threat of something worse to be effective. Anyone who cares a lick about their credit will gladly pay you $35.00 to avoid being sent to collections. Unfortunately, because I’m an attorney still, I can’t give you guys the letter as it may be construed as practicing law. But sit down and draft a template letter. Make sure you show it to an attorney to avoid FDCPA laws (it shouldn’t be hard). It ought to take you a few minutes each time you need to send one. You can follow up with each one time if you want. After that, you are just spinning your wheels. Write it off as bad debt and move on.

I would not waste time with an agency. They are almost all shady.

Or, as so many others said, just don’t take checks.

“I’m offering this information as an independent pizza operator even though I’m a lawyer. Nothing above should be construed as legal advice. You should consult an attorney on all legal issues.”

Patrick Cuezze
Next Door Pizza
 
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Last time I crunched the numbers, accepting checks (figuring in deposit fees, bad checks written off and recovered bad-checks) cost us about the same percentage wise as credit cards.

We use CheckCare out of Murfreesboro, TN. They charge the bad check writers a fee and reimburse us for the face value of the check whenever (if) they collect. All I have to do is mail the bad checks to them.

The local prosecutor’s office offers a collection service also, but they make you jump through a bunch of hoops before they will accept the check. Too much time & effort required to use them.
 
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It’s a bunch of bs in my town to go after customers who write bad checks. When I receive a bad check my bank charges me $10 and mails the check back to me. Normally I will call the customer repeatedly and try to get them to come in and take care of it (which is only successful maybe 25% of the time). If that doesn’t work I then mail them a letter (which once again, most of these customers just don’t care and ignore it). If I want to have them arrested I have to go into my bank and get a form to dispute the check. Next I have to take that form to the police station and they proceed from there. The kicker is that the bank charges you $25 for the dispute form. This seems so unfair to me! I feel that if a customer buys food from me, pays for it with a check, that check then bounces, and they do not contact me to take care of it, it’s stealing!

The last thing I want to do is have someone arrested. But at the same time, it pisses me off that people will bounce checks and not even try to take care of them. I’m a pretty reasonable and compassionate person. If they would just come and talk to me, I would even let them make payments if they had to. When people do screw me over and “steal” from me (by giving me bad checks), I have to pay to have them arrested. At the same time if a person walks into a grocery store and steals something off the shelf, they will get arrested free of charge!

The whole $25 dispute letter is a load of crap! Most of the time the checks are for like $20. So is it really worth it to go after them? So with the $10 that the bank charges me for the bad check, along with the $25 for the dispute letter, I’m already $35 in the hole before I start the legal process. The state will allow me to tack on a $25 fee on top of the face value of the check. The problem with this is that I have to wait for the person that wrote the bad check to go to court and have to the judge order them to pay me. But even then there’s no guarantee that they will pay up and I will be out even more money (dispute form fee, gas money, etc.) and not to mention the hassle and time it takes for this process. To me I just don’t know if it’s worth it.
 
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Roger - Ouch. You seem unhappy and I can see why. That’s brutal.

Patrick - If you get a chance, maybe you could post a link to one of the bajillion forms online that claim to be able to get all of our money back? Also, I’m gonna need to get another Hippie Chic airlifted down here sometime soon.
 
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The company we use to collect our bad checks reimburses us for the bad check amount (under $30) in advance whether or not they collect from the checkwriter. We get paid within a month for the check. We just have to make sure that the customer’s phone number is on the check and that they have not written a bad check to us in the past. They charge $30 collection fee to the checkwriter which is how they get paid. This works on stop payment, closed account or NSF checks. This system works good so that we are reimbursed automatically for most of our bad checks, as long as they are under $30. They use electronic debiting to try and get the money from the customer’s account and then use collection measures if that is unsuccessful.

If the check is over $30 and the customer comes in and takes care of it with us, we get to keep the $30 collection fee that they would charge. Checks that they are unable to collect on our turned over to our local Justice of the Peace and they put out warrants…that usually gets them to pay us right away.
 
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I must have jinxed myself by talking about bad checks. I just checked my bank account online and it shows 3 more bounced checks from customers all in the same day! They’re good size ones too ($200 worth). This month has been brutal to me as far as bad checks are concerned. I’m really close to the point of not accepting them anymore.
 
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Roger,

Can you use check care or some other company. They normally do the whole thing at no charge and are fairly succesful at collecting.

I am surprised that all states don’t do the collection thing, it is a big money maker for our county. They add $120.00 to the face value of the check and pass $30.00 on to me keeping $90.00 for the county. If the perp does not pay, they get a warrant, and then inform them that they are going to be arrested if they don’t pay. At that point they can start adding court costs and stuff. It really give the ones that are trying to cheat you motivation to pay, and as I said the county makes money in the deal so it’s good for the taxpayers as well as the businesses.

Rick
 
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Colorado allows for collecting 3X the face value of the check or $300 whichever is MORE. Never have done it, but it makes a good threat.
 
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I feel sorry for you guys. You have no idea how easy life and business can be, living in a place that has never had checks foisted on them by the banking industry. I was amazed how smooth commerce runs without them.
 
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I feel your pain!! If any of you are seriously mulling over the idea of not taking checks anymore - go for it! I stopped taking them in January of 2009. I got so dang sick of checking my account everyday just to see how many bad ones were coming through each day. I think I peaked out averaging about $800/month in returned checks before I stopped altogether. I put a box topper on every box for about 6 weeks on bright, hot pink paper saying “beginning 1/1/09, we will no longer be accepting checks, sorry for the inconvenience. We proudly accept all major credit cards”. I was really worried about losing a ton of business. I was getting about 150 checks a week and less than 10 total people complained when I stopped. No major chains have accepted them for years. So stop, its not worth your stress!

On a side note, does this happen to anyone else - About 3 times a week, a customers check card will be declined, and they say “Oh, can I just write you a check?” Thats my favorite part of our job… :roll:
 
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I also like it when they try, “I lost my debit card, can I just write a check?” Ummm, we do not accept checks. See you when you get your debit card replaced.
 
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Houston - What company do you use? I tried using one about a year ago, sent them about $250 in checks and got maybe $30 back with no report or anything. Have no idea if they collected and just kept all of it. :roll:
 
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