Handling NSF Checks
Michael C. Dennis, MBA, CBF and Steven Kozack

I responded recently to a question from one of my consulting clients about a bounced check that seems to lend itself to a more comprehensive response than in the Q & A section. The caller indicated a customer’s check had bounced because it was drawn on a closed account and the creditor had been unable to reach the debtor by phone. I learned that this was the first sale, and that the new customer had offered to pay Cash on Delivery. As a result, the creditor had not done a credit check on the new customer. The rationale was that since the order was for under $1,000 the decision not to order the credit report was based on a cost benefit analysis. The creditor did verify funds in the applicant’s bank account, but the check that bounced was drawn on an account with a different bank than the bank listed on the application – which the applicant company faxed to the creditor. The caller asked for suggestions.

I responded that it was possible that the customer made an honest mistake. However, several facts suggested a potential fraud. The first was the fact that this was the first sale. The second was that the applicant offered to pay COD. The third was that the check issued was drawn on another bank account. The fourth area of concern involved the fact that the creditor had not been able to contact the applicant by phone to arrange for a replacement to the dishonored check in the form of a wire transfer payment. My advice was as follows:

1. Order a credit report and examine it carefully

2. Continue to leave voice mail messages daily

3. Issue a written demand and have that demand delivered overnight and by certified mail

4. Establish a deadline and let the customer know what that date is

5. If payment is not received by that date, consult an attorney or local law enforcement

6. Do not release the returned check to the customer until a replacement in clear funds is received

7. For the time being, change the terms to No Business

8. If the debt is paid, change the terms to Payment in Advance by wire transfer