Bad Checks

BAD CHECKS REFER TO banking instruments (checks) that are not suitable for payment at the time they are presented to the issuer's bank. There is a presumption by the acceptors of checks that there are sufficient funds available to cover the checks. When the funds are not available to cover the check, the check “bounces.” It is declined for payment as the account has insufficient funds (NSF), or the account has been closed. In the computer age, bad checks also include counterfeit checks that are written on nonexistent accounts.

Bounced checks include those written against insufficient funds due to inaccurate accounting by the check writer, as well as those from check writers who knew the funds were not present but still wrote the checks. In most criminal jurisdictions, there is a presumption of inaccurate accounting by the check writer, and the check writer is given a prescribed time period (usually 10 days) to “make the check good” by paying both the face value of the check as well as a processing fee, usually capped by legislation. After the prescribed time period for bounced checks, or for checks written on closed accounts, there is no longer a presumption of inaccurate accounting and the matter accelerates to the threshold of being a criminal act. The recipient of a check in this situation must supply to the police proof of notification to the check writer (certified mail with signed receipt) of the failure of the check to originally clear, a statement of nonpayment; or in the case of a closed account, proof that the account is closed, usually indicated on the check by the bank that refused to honor the instrument. Criminal prosecution is often deferred if, after being advised of the pending charge(s) by either police or the prosecutor, the check writer pays the face amount of the check, the prescribed processing, and possibly a fee added by the jurisdiction. If payment is not made, criminal charges can proceed forward.

Other examples of bad checks include stolen checks, counterfeit checks, and check-washing. Stolen checks refer to checks that have been stolen from the check-writer (from a mailbox, house, or wallet) and have been presented to others for payment. Due to lax check-acceptance policies in some operations, checks are accepted for payment without verifying that the person writing the check is the person listed on the check. In some cases, the theft of the checks is not realized until the first 10-day letter arrives. Counterfeit checks refer to checks that have been produced by nonlegitimate sources, and are encoded with either real or fictitious account numbers. In this situation, checks with real account numbers are originally honored but then later challenged as fraudulent by the account holder, who then files an affidavit of forgery with both the bank [Page 70]and the police. Checks encoded with fictitious accounts cannot be honored as there is no account for the funds to be drawn from.

Check-washing refers to a process by which individuals have obtained previously written checks (often from outgoing mail) and use chemical agents to erase some of the written information (payee, dollar amount, or signature) on the check. The altered checks can now be passed, often with the aid of fraudulent identification cards. Annual estimates of loss by check alteration/check washing have been reported as high as $815 million.

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