Minimize the pain of check recovery

$350 million in bad checks are written every week. That fact alone makes bounced checks a serious problem for American businesses. It’s almost inevitable that if your business accepts checks, you’ve been affected by this. In addition to having to pay bank fees for depositing a bad check, and the very real possibility that the bad check could affect your results, there is the time, hassle and cost associated with recovering the funds. It often happens that recovering the check can generate more costs than the value of the original debt. Inevitably, many smaller businesses cancel bad checks, believing they can’t afford to pursue debt. However, there are several ways your business can fight back and minimize the pain of bounced check recovery.


For small and medium-sized businesses, the first recourse is to call the customer and explain the problem. Don’t immediately assume that the client intended to defraud his company. It is often true that an innocent mistake has been made and a calm and reasoned phone call will recover your funds and keep what may be a valuable customer. Keep in mind that threatening a debtor to publish their name or notify their employer is illegal, so only talk to the person who owes the funds and stay calm!


In most states, you must send a certified letter to the issuer of the check before starting a court proceeding. You can request that the debtor also pay the bad check fee you have incurred. The check writer is usually required to respond within 10 or 30 days. This varies by state, so check with your state Attorney General’s office. Again, a calm and reasonable tone often works well and will ensure that you stay within the law. It is recommended that you review the Fair Debt Collection Practices Act ( before composing your letter or making a call.

While both of these methods are time and cost effective, if you still haven’t been able to recover the check, the obvious next step is to start court proceedings or hire a professional debt collection agency. However, these are time-consuming and potentially expensive options and, for many small businesses, can mean the cost outweighs the benefit. However, there are alternative check recovery methods that do not have these potential drawbacks.


Some areas now have a check executing or check recovery unit that is part of the state or district attorney’s office. These are not available in all states and the services provided vary. Generally, however, the check execution unit will investigate and prosecute the debtor on your behalf, and you will receive the full face value of the check. Contact your local district attorney’s office to see if this service is offered in your area.


A better overall option is to consider using one of the electronic check recovery services now available. There are many advantages to electronic check cashing over traditional recovery methods, including the fact that many of the companies that offer this service do not charge your company a fee. Other benefits include:

i) Higher Recovery Rates: The National Automated Clearing House Association (NACHA) reports increases in recovery rates of up to 50% compared to traditional recovery methods.

ii) Low retrieval costs: No bank fees for redepositing an NSF check electronically.

iii) Customer Benefits: Customers are not required to receive collection letters and calls or provide a money order or cashier’s check.

iv) Fast recovery times: Traditional recovery methods can take 30-60 days. On average, electronic check recovery takes 7 days, after which the recovered check is deposited into the merchant’s account.

v) Checks from out of town are handled with the same speed and ease as local checks.

While bounced checks are a fact of business life, recovering funds owed to you is not the Herculean task it might seem at first. You can fight back and still avoid many of the headaches that have traditionally been associated with pursuing debt.

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