How to Handle a Bad Check in Houston: Check IDs, Charge a Fee and have a Company Policy

As a business owner, we have all been there. You open your bank statement only to find one or more bad checks marked, “Insufficient Funds.” Fortunately, dealing with this common situation is easier than most people think, and with little to no effort you can quickly and easily either recover your money or put the check writer in jail.

Why should I accept checks? 

Though it may seem so 20th century to accept checks, the simple fact is many people still use them. Personally, I find my money easier to manage when I write checks. I am much less likely to buy small, frivolous items when I write a check, and I think keeping track of your purchases is simpler overall than when using a credit or debit card. Plastic makes me forget I am spending real money, but checks remind me of the limited nature of my checking account.

Of course, as a lawyer, I have another reason I love checks. They tell me where a person banks. In a normal retail situation, this is less important, but when dealing with bigger customers or clients, knowing where someone banks is a huge advantage when attempting to collect on a debt. Texas is friendly to debtors and collecting can be a trying process. Knowing where someone banks is extra insurance should the relationship go awry.

Preparing for Bad Checks

Taking a Texas check in Houston is something every business owner should encourage. As long as you take down the check writer’s information before accepting his check, you should have no problems recovering if the check should bounce.

First, check the customer’s Texas Driver License or ID card. Make sure the information on the ID matches the information on the check. From the ID, write on the check the check writer’s:

  • Driver License Issuing State (should always be Texas)
  • Driver License Number
  • Address if not already on the check
  • Date of Birth

Having these four key pieces of information will make collecting on the check should it go bad much, much easier. Failing to get this information will make collecting on the check more difficult if not completely impossible.

Charge a Fee for a Returned Check

Under the law, you may charge up to $30.00 for a returned check in Texas. At your place of business, post a sign stating that all returned checks are subject to this fee. If the check is returned, when you send the demand letter for the balance of the check, you may include this fee in addition to the amount of the check. It’s not much, but it should help cover the time you spend writing the letter and attempting to collect.

I will talk more about the actual collection process and writing letters in the next post, How to Handle a Bad Check in Houston, part 2.

Have a Written Company Policy for Accepting a Check

While you as the store owner know the do’s and don’t’s of accepting checks, your employees may not. In addition to teaching employees about the store’s policy on accepting checks, you should also write out a procedure for which checks to accept, which checks to decline, and what information should be collected when accepting a check.

Having a written policy will prevent mistakes down the road. You will save time because employees will not have to ask you or the manager for the procedure to accept checks. All checks accepted will have the necessarily information to collect on the checks should they be returned, and you won’t find yourself with a huge loss because someone forgot to write the date of birth of the check writer on the check.

Further Reading

For more information on bad checks, explore the actual Texas law: Texas Penal Code – Section 32.41. Issuance Of Bad Check.

Or, check out the Harris County Office of the District Attorney’s page on Check Fraud.

Read Bad Checks: Part II.