A Practical Guideline for Check Acceptance by a Small Business
By: Michael Rowland ESQ
At a recent meeting of the Denville Chamber of Commerce revealed how important it is for the small business owner to establish a clear check cashing policy. The following check cashing guidelines which will limit exposure to check-cashing scams and increase recovery on bad debts associated with dishonored checks.
- Limit or eliminate “cash-out” check cashing. Accept checks for the payment of merchandise or services but, to the extent possible, limit or eliminate cashing checks greater than the amount of the sale.
- Limit the maximum check amount your business will accept.
- Accept only local, in-state, checks. The difficulty associated with the collection on out-of-state banks and enforcement of criminal penalties across state lines mandates that you reject any check that is not drawn on a local bank.
- Businesses should only accept checks for payment of merchandise or services during normal banking hours. In the event that any check is suspicious or unusual, you can call the local bank to determine if the account on which the check is drawn has sufficient funds to cover the check face amount.
- Keep a list of all local bank telephone numbers near your cash register so that immediate contact with a bank can be established. Even if you never call a bank to verify a check, limited check cashing to banking hours will prevent many check scams which rely on after hours check cashing.
- Require adequate identification. Information required should be at a minimum. The name, address, telephone number and driver’s license number printed on each check. Require a picture I.D. or, in the absence of a picture I.D., two separate forms of I.D.
- Maintain a small copy machine near your cash register to make photocopies of the I.D. in the event of a suspicious check.
- Do Not Accept Post-Dated Checks under any circumstances. The only way a dishonored check can be effectively prosecuted is to assert that the person passing the check intended at the time the check was presented to defraud the business owner. A post-dated check implies that at the time of sale there is insufficient funds to cover the amount of the check. Therefore, the business owner cannot prove that the check passer intended to defraud the business owner at the time the check was presented.
- Local Police Departments will limit investigation of check scams to losses in excess of a certain minimum, typically $200 or $300. Most losses incurred by business owners are for checks substantially less than this minimum amount.
- The fact that Police Departments will not
prosecute under specified minimums does not prevent the local business owner from filing a criminal complaint in the local municipal court for passing a bad check. The business owner must, however, appear in municipal court on the date of trial in order to gain a conviction. Typically, defense counsel will advise the defendants charged with passing a bad check make pre-trial restitution to the business owner so as to establish the lack of criminal intent on behalf of their Client. Filing municipal court complaints on uncollected bad checks is an effective method of collection.
ONE FINAL NOTE...
These guidelines will not discourage business for these two important reasons:
(1) No one disrespects a business owner who insists on being paid for their goods or services.
(2) Any profit that is lost from the business which is discouraged by these reasonable guidelines can never make up for further losses incurred as a result of a business’s failure to establish and enforce these guidelines.
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