Returned Check (NSF) Fees

[BusinessInNNY]

In re NSF/Closed Account/or otherwise bad checks:

Can anyone tell me if New York State limits the amount of money that a business may attempt to collect from the issuer of a bad check, over and above the face value of the check? I have been told that NYS caps "Returned Check Fees" at $20.00. This seems low, considering all of the costs incurred by the depositor (NSF bank fee, certified mail, LD telephone, time involved, etc.) when they finally collect, assuming they collect at all.

NYS GOL 11-104 speaks to the remedies available at trial, but I can't find anything from a verifiable source that answers my "out of court" question.

Any help pointing me to the appropriate code, if it exists, would be greatly appreciated!

Thanks!

 

[Michael Wechsler]

There is a difference between fees and expenses. Your outlay is an expense and it would be in contravention to law to refuse to allow someone to recover reasonable and necessary expenses in pursuit of a valid claim.

I worked on a consumer fraud case which the amount totaled $450. A judgment was obtained for $1,100 in one state which included expenses. Enforcement in another state (and a default judgment) resulted in almost $2,000. The defendant brought an order to show cause and the higher court didn't want to award judgment. We fought it and won $4,500 showing that the court allows us to obtain reasonable expenses and that the company could easily have avoided that attorneys fees and expenses had it simply resolved its bad act in a timely fashion. It didn't and as per much case law (state in NY and Michigan), the court cannot frustrate the law and public policy and was compelled to provide us with reasonable expenses. We won.

I'll see if we can post some cites at some point but may need some reminding if necessary.

In re NSF/Closed Account/or otherwise bad checks:

Can anyone tell me if New York State limits the amount of money that a business may attempt to collect from the issuer of a bad check, over and above the face value of the check? I have been told that NYS caps "Returned Check Fees" at $20.00. This seems low, considering all of the costs incurred by the depositor (NSF bank fee, certified mail, LD telephone, time involved, etc.) when they finally collect, assuming they collect at all.

NYS GOL 11-104 speaks to the remedies available at trial, but I can't find anything from a verifiable source that answers my "out of court" question.

Any help pointing me to the appropriate code, if it exists, would be greatly appreciated!

Thanks!

 

[Michael Wechsler]

Here is some additional information for those interested:

NYS General Obligations Law Section 11-104. Additional liability of drawer.

1. Notwithstanding any
contrary provision of law, a drawer negotiating a check who knows or
should know that payment of such check will be refused by the drawee
bank either because the drawer has no account with such bank or because
the drawer has insufficient funds on deposit with such bank shall be
liable, except as provided in subdivision four of this section, to the
payee who has presented such check for payment, not only for the face
amount of the check but also for additional, liquidated damages, where
the check is dishonored and the drawer fails to pay the face amount of
such check within thirty days following the date of mailing by the payee
of the second written demand for payment as provided in this section.

2. In the case of a drawer negotiating a check who knows or should
know that payment of such check will be refused by the drawee bank
because the drawer has no account with such bank, such additional,
liquidated damages shall be in an amount to be determined by the court
in light of the circumstances, but in no event shall such amount be
greater than twice the face amount of the check or seven hundred fifty
dollars, whichever is less.

3. In the case of a drawer negotiating a check who knows or should
know that payment of such check will be refused by the drawee bank
because the drawer has insufficient funds on deposit with such bank,
such additional, liquidated damages shall be in an amount to be
determined by the court in light of the circumstances, but in no event
shall such amount be greater than twice the face amount of the check or
four hundred dollars, whichever is less.

4. The drawer shall not be liable to the payee for the additional,
liquidated damages provided for by this section if:
(a) The drawer gave such check as payment for the rental of
residential premises; or
(b) The drawer gave such check as payment for residential service
supplied by a gas, electric, steam, telephone or water corporation; or
(c) The drawer gave such check as repayment of all, or a portion of, a
debt secured by collateral which the payee has repossessed.

5. Defenses which may be asserted against any person not having the
rights of a holder in due course, as specified in sections 3-306 and
3-408 of the uniform commercial code, shall be available to a defendant
in any action or proceeding in which additional liability is claimed
under this section.

6. The additional liquidated damages provided for in this section
shall be available only to those persons or entities which post or
otherwise give conspicuous notice to the public of the additional,
liquidated damages which may be imposed pursuant to this section. Such
notice shall set forth the additional liquidated damages that may be
imposed if a check is dishonored and the section of law authorizing
imposition of such damages, and provide notice that criminal penalties
also may apply.

7. The first written demand for payment on the dishonored check shall
be in the form prescribed by subdivision eight of this section and shall
be sent to the drawer`s last known residence address or last known place
of business by first class mail and by certified mail return receipt
requested with delivery restricted to the drawer, on or after the date
the payee received notice that such check had been dishonored. The
second written demand for payment on the dishonored check shall be in
the form provided in subdivision eight of this section and shall be sent
to the drawer at the drawer`s last known residence address or last known
place of business by first class mail on or after the fifteenth day
following the date of receipt of the first written demand for payment.

8. The written demands for payment required by subdivision seven of
this section, shall be in the following form and shall be printed in at
least ten point type in both the English and Spanish languages:
DEMAND FOR PAYMENT OF DISHONORED CHECK
DATE: 1ST NOTICE
2ND AND FINAL NOTICE
TO: _____________________ WARNING: YOU MAY BE
NAME OF DRAWER SUED 30 DAYS AFTER
_____________________ THE DATE OF THIS
_____________________ NOTICE IF YOU DO
_____________________ NOT MAKE PAYMENT
LAST KNOWN RESIDENCE ADDRESS
OR PLACE OF BUSINESS
YOUR CHECK IN THE AMOUNT OF $___________ DATED____________________
PAYABLE TO THE ORDER OF__________________ HAS BEEN DISHONORED BY
THE BANK UPON WHICH IT WAS DRAWN, BECAUSE:
________YOU HAD NO ACCOUNT WITH THAT BANK.
________YOU HAD INSUFFICIENT FUNDS ON DEPOSIT WITH THAT BANK.
IF YOU DO NOT MAKE PAYMENT, YOU MAY BE SUED UNDER SECTION 11-104 OF THE
GENERAL OBLIGATIONS LAW TO RECOVER PAYMENT. IF A JUDGMENT IS RENDERED
AGAINST YOU IN COURT, IT MAY INCLUDE NOT ONLY THE ORIGINAL FACE AMOUNT
OF THE CHECK, BUT ALSO ADDITIONAL LIQUIDATED DAMAGES, AS FOLLOWS:
--IF YOU HAD NO ACCOUNT WITH THE BANK UPON WHICH THE CHECK WAS DRAWN,
AN ADDITIONAL SUM WHICH MAY BE EQUIVALENT TO TWICE THE FACE AMOUNT OF
THE CHECK OR SEVEN HUNDRED FIFTY DOLLARS, WHICHEVER IS LESS; OR
--IF YOU HAD INSUFFICIENT FUNDS ON DEPOSIT WITH THE BANK UPON WHICH
THE CHECK WAS DRAWN, AN ADDITIONAL SUM WHICH MAY BE EQUIVALENT TO TWICE
THE FACE AMOUNT OF THE CHECK OR FOUR HUNDRED DOLLARS, WHICHEVER IS LESS.
PLEASE MAKE PAYMENT IN THE AMOUNT OF_______ TO:
____________________________________________________________________
NAME OF PAYEE
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
ADDRESS TO WHICH PAYMENT SHOULD BE DELIVERED
IF YOU DISPUTE ANY OF THE FACTS LISTED ABOVE, CONTACT THE PAYEE
IMMEDIATELY.

9. The public service commission shall study the extent to which
checks given in payment for residential service supplied by a gas,
electric, steam, telephone or water corporation are dishonored either
because the drawer had no account with the bank on which the check was
written or because the drawer had insufficient funds on deposit with
such bank, including the extent of chronic payment with checks that
are dishonored and the impact of such dishonored checks on the
operating costs of these corporations and their requests for rate
increases, and whether any penalty for dishonored checks, in addition
to recovery of the utilities` administrative costs, is necessary. The
commission shall report to the governor and the legislature no later
than one year after the effective date of this section.

 

[Michael Wechsler]

You are correct that a holder of an NSF check can charge a $20 fee but penalties can also double the liability as you can see right at the beginning of the GOL.