Last updated: January 2007

The following question was submitted to John Roska, an attorney/writer whose weekly newspaper column, "Q&A: The Law," runs in the St. Louis Post-Dispatch (Illinois Edition) and the Champaign News Gazette.

Question 1

I didn't balance my checkbook and my check for some Christmas gifts bounced. Now the store sent me something saying I owe the store the amount of the check plus a penalty of up to $500. Do I really owe that much?

Answer 1

Only if the store sues you and proves that you wrote the check "with intent to defraud." Otherwise, you just owe the face amount of the check. Your check was a written and enforceable promise to pay, so you're definitely liable for its face amount.

Illinois law permits a merchant to charge a standard $25 fee when it has to collect on a bad check. These fees cover the extra cost of processing the bad check. Depending on who you believe, for a bank that expense is really the bank's fee, or--according to some consumer advocates--about 87 cents per check. Some suits have challenged such fees, but I don't know of any successful cases in Illinois.

Illinois law also gives the store the right to sue you for damages of three times the amount of the check, plus court costs and attorney fees. If you are sued and lose, the damages must be at least $100, and at most $1,500.

These damages are provided under the Illinois criminal law on Deceptive Practices. Like any criminal law, it can be enforced by the state's attorney prosecuting criminal charges. Unlike most criminal laws, though, the Deceptive Practices law also provides a way for private parties to collect damages in a civil suit. Since the state's attorney probably won't prosecute you unless you're a serious check kiter, this law gives some clout to the merchant who wants you to make your check good.

The law's main idea is full payment on the check, not penalties. That's why the store is required to give you the chance to pay the check before suing for the penalties. The store must first send you a demand by certified mail, giving you 30 days to pay the check. Those demands usually contain a little saber-rattling about the possible penalties, and is probably what you just received. You only have to pay the amount of the check; the store can't make you pay the damages without a trial.

If you don't pay the check within 30 days of getting the store's demand, the store can sue. Even then, you can avoid the penalties by paying the check amount, along with court costs and attorney fees, before the case actually goes to trial.

If the case does go to trial, the store must prove that you intended for the checks to bounce. Not every bounced check is a deceptive practice, so you shouldn't be liable for the extra damages if you simply couldn't balance your check book. (84% of adults can't.)

So, you probably don't owe the threatened penalties beyond the standard $25 fee. The sooner you pay the check, though, the more you'll save on court costs and attorney fees.

Question 2

What about bad check fees? Is there any limit on the fee a bank can charge its customer for writing a bad check?

Answer 2

There's no law that limits bank charges like bad check or ATM fees. The only limit is the invisible hand of the free market, and what that market will bear. And that market will bear a lot, since banks don't usually compete for check-bouncers by offering low bad check fees.

Just what happens if your check bounces? After you give your check to the merchant, the merchant gives the check to its bank, who sends it to your bank for payment. Your bank determines you’re overdrawn, stamps the check "NSF" (non-sufficient funds), charges you the bank's bad check fee, and bounces it back to the merchant. (That's how some places are able to display bad checks at their check out counters.) The store can either forget about it, or seek payment directly from you, rather than your empty bank account. For that trouble, the merchant can collect its own $25 bad check fee. If its actual expenses exceed $25 the merchant can collect more, but has to jump through some extra hoops.

That's why a bounced check can wind up costing an extra $50 (or more), on top of the check's face value. There's the bank's fee, which can be $25 (or more), and another $25 for the merchant's bad check fee.

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