How Are Bad Checks Tracked?
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How a Bad Check Originates
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When someone presents a check to cover the cost for goods or services, merchants often use a verification company such as TeleCheck to do an initial risk assessment based on the presenter's check-writing history. If the check passes this initial test at the terminal, the presenter is allowed to receive the goods. From there, TeleCheck or a similar agency, electronically presents the transaction to the presenter's bank for settlement.
How Does Notification of a Bad Check Take Place?
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The check-writer's financial institution will notify the business when the check presented can't be covered. That might occur because of insufficient funds, the account being closed or having a nonexistent account. Notification usually entails the check being marked "insufficient funds" or "NSF" and the item is then returned to the merchant or check vendor (such as TeleCheck). Next, the presenter should be notified immediately by phone call or by certified letter. If the vendor calls the presenter, the presenter should be asked to make the check good by paying immediately by way of cash or money order. There are laws that dictate how the presenter of the bad check can be approached--threats to publicize the debt or notify the debtor's employer are illegal.
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How Does One Avoid Bad Checks
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Bad checks cost businesses billions of dollars yearly. In order to avoid receiving a bad check, one should verify the presenter's identification with a driver's license or state identification card. When the identification is presented, the name and address on the check should be verified to see whether they match the identification presented. Furthermore, identifying information such as the driver's license number and birth date on the check should be written down. Being through on the front end puts businesses in the best position to track a bad check in the event that the check is not honored by the presenter's bank.
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