Bad Checks and Possible Remedies

My client Jim owns Lubricate This, a local oil and lube shop, which provides super-quick oil changes, and free shoe shines to its waiting patrons.

Jim called me. He had had enough. He had been stiffed again with a bad check. In the past month, one customer paid with a check obviously written on rubber, because
as it bounced so high when he deposited it. Another person gave Jim a check and then stopped payment on it.

When Jim contacted these ne’er-do-wells, they both urged him to put the checks through his bank again. As he had found to be typical with this type of person, they offered
excuses and rationales for what happened.

“Oh, I deposited my paycheck a day late.” Or, “That damned bank. This is the fifth time they’ve done this. I have a mind to take my business elsewhere.” (Actually the last one
should have been a clue to Jim, but he’s always been a glass half-full-type of guy.) Not surprisingly, when Jim tried depositing the checks again, they came back again,
unpaid. Now the bank charges for the bad checks were threatening to exceed the value of the original checks.

Jim wanted to know if the death penalty was available for such scofflaws. Or at least have a court order them to pay all of the money owed plus bank charges plus interest plus
attorneys fees plus pain and suffering damages.

“Well, Jim, I have good news and bad news,” I told him.

Yes, you can get a court order that says the person passing bad paper has to pay you the face value of the check, plus some service fees and a penalty of up to $1,500. Sorry, no
pain and suffering or attorneys fees.

Under California Civil Code section 1719, if you get a bad check from someone, and you follow proper procedures, you can recover 1.) the face amount of the check, 2.) a $25
service fee for the first check and $35 for each subsequent ones and 3.) three times the face amount of the check or $1,500 (whichever is less).

This how the California Supreme Court in the 2009 decision of Imperial Merchant Services Inc. v. Hunt described the process:

“If the payee sends the check writer a certified letter seeking the amount due on a dishonored check, the debtor has 30 days from the date the written demand was mailed to
pay the amount of the check, the statutory service charge and the cost of mailing the written demand for payment (§ 1719, subd. (a)(2)).”

“Failure to comply with subdivision (a)(2) renders the check-writer liable for triple the amount of the outstanding balance on the check (the face value of the check minus any
partial payments made within this 30–day window), which shall not be less than $100 or more than $1,500. If a check-writer is liable for treble damages, he is not required to pay
the statutory service charge, or the cost of mailing the written demand.”

Section 1719 even has a helpful draft of the letter that the person who received the bad check (that is, the “payee”) has to send to the check writer.

Now, simply sending a certified letter demanding payment does not immediately entitle you to $1,500 plus the face value of the check.

The check-writer can offer defenses that include having a good-faith dispute about whether the money is actually owed, or that the bank screwed up and the check should
have been paid, or if the only reason the check bounced was because a Social Security or “government benefit assistance payment” (something like unemployment or disability
insurance) check was late.

But, as I told Jim, once he sends the certified letter (and keeps a record of sending the letter and evidence as to whether the letter was either delivered or refused), he’s set up a
situation where it’s now up to the guy who wrote the bad check to prove that he’s got a good excuse for why it bounced. It may seem like a hassle but it’s one way to go after the
bad check-writers.

The company and client in this column are fictional for purposes of illustrating a California Supreme Court ruling of state Civil Code section 1719.

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