IBA PROFIT REPORT - 2405
Prepared by: Independent Business Association

COLLECTING ON BAD CHECKS


Current state laws are extremely helpful in collecting on bad checks if the procedures are followed.  Bad checks include NSF, closed account, unjustified stop payment, etc.  If used properly, current state laws provide the following benefits to a business owner receiving a bad check:

1. Recovering collection costs - up to $40
2. Receiving interest on the amount of the check until paid
3. Receiving reasonable attorney fees - up to 3 times the amount of the check -  if court action is required to collect on the check

The key steps in using the current state law are:

1. Send a "notice of dishonor" to the issuer of the check at their last known address.  The proper language for a "notice of dishonor" is included below.
2. Provide proof the notice of dishonor was sent either by using an "affidavit of Service by Mail" (see below for the proper language for such an Affidavit), or by receiving a "return receipt" showing that they check issuer received the notice by mail.
3. Not less than 15 days after the issuer of the bad check receives the Notice of Dishonor, the holder of the check (the business) can begin legal actions to collect the amount of the check along with interest and legal fees.

Below are the existing state laws that clearly explain what is required and provides the proper language for YOU to use in preparing a Notice of Dishonor and the Affidavit of Service by Mail.


RCW 62A.3-515 Checks dishonored by nonacceptance or nonpayment; liability for interest; rate; collection costs and attorneys fees; satisfaction of claim. 
(a) If a check as defined in RCW 62A.3-104 is dishonored by non-acceptance or nonpayment, the payee or holder of the check is entitled to collect a reasonable handling fee for each instrument.  If the check is not paid within fifteen days and after the holder of the check sends a notice of dishonor as provided by RCW 62A.3-520 to the drawer at the drawer's last known address, and if the instrument does not provide for the payment of interest, or collection costs and attorneys fees, the drawer of the instrument is liable for payment of interest at the rate of twelve percent per annum from the date of dishonor, and cost of collection not to exceed forty dollars or the face amount of the check, whichever is less.  In addition, in the event of court action on the check, the court, after notice and the expiration of the fifteen days, shall award a reasonable attorneys fee, and three times the face amount of the check or three hundred dollars, whichever is less, as part of the damages payable to the holder of the check.  This section does not apply to an instrument that is dishonored by reason of a justifiable stop payment order.
(b)(1) Subsequent to the commencement of an action on the check (subsection (a)) but prior to the hearing, the defendant may tender to the plaintiff as satisfaction of the claim, an amount of money equal to the face amount of the check, a reasonable handling fee, accrued interest, collection costs equal to the face amount of the check not to exceed forty dollars, and the incurred court and service costs.
(2) Nothing in this section precludes the right to commence action in a court under chapter 12.40 RCW for small claims. 

RCW 62A.3-520 Statutory form for notice of dishonor. 
The notice of dishonor shall be sent by mail to the drawer at the drawer's last known address, and the notice shall be substantially in the following form:

NOTICE OF DISHONOR OF CHECK

A check drawn by you and made payable by you to . . . . . . in the amount of . . . . . . has not been accepted for payment by . . . . . ., which is the drawee bank designated on your check.  This check is dated . . . . . ., and it is numbered, No. . . . . . ..
You are CAUTIONED that unless you pay the amount of this check within fifteen days after the date this letter is postmarked, you may very well have to pay the following additional amounts:
(1) Costs of collecting the amount of the check, including an attorney's fee which will be set by the court;
(2) Interest on the amount of the check which shall accrue at the rate of twelve percent per annum from the date of dishonor; and
(3) Three hundred dollars or three times the face amount of the check, whichever is less, by award of the court.
You are also CAUTIONED that law enforcement agencies may be provided with a copy of this notice of dishonor and the check drawn by you for the possibility of proceeding with criminal charges if you do not pay the amount of this check within fifteen days after the date this letter is postmarked.
You are advised to make your payment to . . . . . . at the following address:  . . . . . . . . . . 


RCW 62A.3-522 Notice of dishonor--Affidavit of service by mail. 
In addition to sending a notice of dishonor to the drawer of the check under RCW 62A.3-520, the holder of the check shall execute an affidavit certifying service of the notice by mail.  The affidavit of service by mail must be attached to a copy of the notice of dishonor and must be substantially in the following form:
AFFIDAVIT OF SERVICE BY MAIL
I, . . . . . ., hereby certify that on the . . . . . . day of . . . . . ., 19. . ., a copy of the foregoing Notice was served on . . . . . . by mailing via the United States Postal Service, postage prepaid, at . . . . . ., Washington.
  Dated:   . . . . . . . . . . . . . . . .
      (Signature)
The holder shall retain the affidavit with the check but shall file a copy of the affidavit with the clerk of the court in which an action on the check is commenced.

RCW 62A.3-525 Consequences for failing to comply with requirements. 
No interest, collection costs, and attorneys' fees, except handling fees, are recoverable on any dishonored check under the provisions of RCW 62A.3-515 where the holder of the check or any agent, employee, or assign of the holder has demanded:
(1) Interest or collection costs in excess of that provided by RCW 62A.3-515; or
(2) Interest or collection costs prior to the expiration of fifteen days after the mailing of notice of dishonor, as provided by RCW 62A.3-515 and 62A.3-520; or
(3) Attorneys' fees either without having the fees set by the court, or prior to the expiration of fifteen days after the mailing of notice of dishonor, as provided by RCW 62A.3-515 and 62A.3-520