Bounced Check Laws in Texas

What is a Bounced Check in Texas

A bounced check, as defined by Texas law, is one that is returned for lack of sufficient funds to pay. Under the Texas Business & Commerce Code section 3.506, a check must be presented and returned within 30 days after the day on which it was payable (the date written on the front of the check), which triggers the notice and right to sue provisions of the bounced check statute. Sufficiency of funds is generally determined by whether the account has sufficient funds to cover the check when it is presented and returned within 30 days of presentment. So if you present a check that exceeds the amount on deposit does not bounce until 60 days later , under Texas law it is not a bounced check and you do not have any rights under the bounced check statute. Additionally, there are three other circumstances under which a check can bounce for lack of funds. If the check cannot be paid because of a stop payment order, legal process, or an endorsement dispute, and if you have complied with the requirements of the applicable banking statutes, then you may have a basis for a bounced check claim.

The Legal Implications of a Bounced Check

A bounced check can have serious consequences for a check writer in Texas. Not only do you have an obligation to make the check good, but if certain conditions are met on the part of the person to whom you wrote the check, you may be facing a criminal charge if the payee of the check presses the matter. It is a criminal misdemeanor in Texas to dishonor (or bounce) a check for failure to pay based on insufficient funds (and other reasons). Although such a charge is a class C misdemeanor, the penalties can be serious.
The maximum punishment for a Class C misdemeanor in Texas is up to $500 fine, but at least in my experience, what is more frequently assessed in practice is restitution (including civil penalty and fees), which is set by statute to be $100 for the first offense and $200 for the second offense. In addition, the person who issued the bounced check is responsible for the expenses incurred by the payee in collecting on the fee. A person who has been victim of a bounced check may be able to recover on the following broken down fees: $30 for the first $100 of the fee, $10 for each additional $100 afterwards, $15 for each check returned for insufficient funds or closed account, and $10 for each electronic payment accepted and returned. The statute that sets these fees provides that they are the only fees that are recoverable in a civil action in court for which the bounced check was written and that the fees have to be in addition to the amount of the unpaid check. There is an exception to the criminal penalty if the issuer makes the check good in the payee’s favor within seven days after receiving notice from the payee that the check was not paid. Notice must be made in writing, sent by certified or registered mail and include certain specified items of information about the check, including the date, amount, and the name of the issuer.

Texas Law on Bounced Checks

The Texas Crimes Against the Family statutes, specifically section 32.41, provide a legal definition for a "bounced check." Most people commonly understand a bounced check to be one that has not been honored by a financial institution for insufficient funds. They are surprised then when told that a bounced check is defined under section 32.41 as a check or other order for the payment of money made or drawn by a person from an institution with which the person does not have an account. If the check bounced because the person did not have an account at all, then a criminal charge for Bouncing a Check (also referred to as Issuing a Bad Check) is appropriate. However, if the person had an account, but there was simply not enough money in the account, then that is a civil issue that is governed by separate sections in the Texas civil statutes, specifically Title 11. An important provision in the civil statutes states: "(c) A person commits an offense if: (1) the person issues or passes a check or similar sight order for the payment of a debt or for the purchase of property or services; and (2) the person: (A) knows that the issuer or passer does not have an account with the financial institution requested to pay the check or sight order; or (B) issues or passes the check or sight order for the payment of a debt or for the purchase of property or services knowing that it will not be paid by the financial institution requested to pay it.

What You Should Do If You Have Issued or Received a Bounced Check

To some, a bounced check may seem like a trivial matter between the two parties involved. Of course, this isn’t the case for the lender, who has jumped through all of the legal hoops necessary to qualify for this load, only to have that same bank reject the check he or she thought would be cleared. And if you’re on the receiving end of a bounced check, the bank may not even speak with you about it, confidence that the check is being processed as it legally must by state law.
So what happens now? If you’ve received a bounced check:
• Attempt to contact the other party, and – if you have his or her current address – send a formal letter via certified mail. Make sure your name and contact information is included in the letter.
• If you’ve obtained a contract or service from the other party, you may have the right to withhold any services until payment for the bounced check is received .
If you’ve issued a bounced check:
• Once you are notified of the bounced check by the bank, make sure you have an alternative form of payment on which you can rely. If possible, ask for a replacement check if you are able to do so in greater than 10 days’ time. Please note, this does not apply to checks used in legal proceedings. If the bounced check is in response to a lawsuit, the court will always require that the plaintiff provide a cash bond for the full amount of the dispute.
• If you are notified of a bounced check and you do not currently have an alternative form of payment, talk to the other party to see if you can make alternate payment arrangements for a later date.
If the bank has authorized the bounced check and you have not provided the payment for it to clear, the lender has every right to file a Texas Bounced Check Lawsuit against you.
One last piece of advice: If you believe you may be filing a Texas Bounced Check Lawsuit soon, contact a professional legal team to get started with the process.

How to Prevent Bounced Checks

As while no business wants to receive a bounced check, there are some preventative measures you can take to at least minimize the risk. First and foremost, people issuing bad checks in Texas usually have absolutely no problem with ordering another supply of checks once theirs run out. To prevent your customers from doing this, sign up for a service like TeleCheck or ChexSystems which allow you to share bounced check information with other participating members. This might ultimately require you to turn down a sale for a new customer, but it’s better to lose one sale and never get paid than to lose potential revenue every month because one of your repeat customers is a habitual check bouncer. A service like this can cost anywhere from nothing to $65 per year depending on the size of the area you conduct business in.
Beyond this, make sure you verify a check before you accept it for payment. Don’t just glance at a driver’s license or involve yourself in a long conversation with the check writer about how their signature looks different from the one on their ID. If the check is valid, it’ll have an MICR line with indicator symbols like a decimal point before the dollar amount, asterisks before and after the Check Number, Account Number and Routing Number and so on. You can find the exact order of these indicators in the American National Standards Institute (ANSI) 3.17-2008 standard.
Finally, never let your customers know that you verify their checks through a special service or that checks take longer to process than other payment methods. If they realize that you’re verifying checks, they will simply give you the check number ahead of time and advise you to process the payment with whatever TeleCheck or ChexSystems-enabled service they’ve written you. It’s a good idea to maintain a policy that all checks take two weeks or two business days to clear and that pending deposits for checks accepted as payment won’t be honored until they clear.

Getting Assistance with a Bounced Check

If you have had an account for any length of time, there is a reasonable chance that a recurring client or patient has not paid you. It may be because they have moved away or changed jobs and cannot be tracked down, or maybe they have filed bankruptcy. Perhaps it is because your regular client has now fallen on hard times, and simply can’t afford to pay you. Or maybe a "customer" gave you a bad check and immediately booked it out of town before the check cleared.
The law can be complex , so it can be helpful to speak with a knowledgeable attorney about your options in dealing with bad checks. And if a "return check" has been issued against you with multiple bank charges, then this is especially true. Even if you are not owed return check fees, it is still worth your while to speak to a lawyer who understands bounced checks and can advise you on how to best pursue the recovery of your money.