Customer Issues a NSF Check that Does Not Clear

Even with all the payment options available today, paper checks are still a popular form of payment especially in the business world.  So, what options are available to you to help recover the check if your customer’s NSF check does not clear?  North Carolina law provides several options for creditors.

Civil Penalties

The person or corporation who knowingly issues a check or draft and does not have sufficient funds to cover the check may be held liable for the nsf check amount, service charges imposed by the bank and processing fees imposed by the creditor.  North Carolina law also provides that once a written demand is made by certified mail, return receipt requested to the debtor for the nsf check amount, service charges and processing fees and if the amount is not paid within 30 days, the person or corporation shall also be liable for additional damages of at least $100.00 or three times the check amount not to exceed $500.00.  For the creditor to avail themselves of the additional damages, two demand letters are required to be sent.

Processing Fees Available:

North Carolina law provides that a creditor who accepts a check that does not clear due to insufficient funds or because the debtor did not have an account at the bank the account was drawn on may add a processing fee of up to $25.00 for each check.

Criminal Penalties

North Carolina law also provides that it is unlawful for any person or corporation knowingly to issue a check or draft and who does not have sufficient funds to cover the check.  The violation of this section becomes a Class 1 felony if the check amount is more than $2,000.00.

North Carolina law provides that a creditor may pursue and use both the civil and criminal law to collect the check.  However, a credit may not collect twice on the check.  Thus, the creditor may only collect the amount of the check and any penalties associated with it.

If you have any questions regarding your options as a creditor who has accepted a check which is returned for insufficient funds or the account is closed, please feel free to contact me.