How the TIA can help solve your bounced check problem
How often do you receive a check from a customer only to have it bounce? According to the Federal Reserve there were more than 66 million bad checks written in 2013, representing more than $83 billion dollars.
To help deal with the problem for tire dealers, the Tire Industry Association has entered a formal partnership with ChecXchange — a company that has created an app to help businesses get the money they deserve from customers who’ve bounced a check on them.
What is checXchange?
ChecXChange is an app for your smartphone or tablet into which businesses can log the details of “non-sufficient funds” (NSF) checks. ChecXchange then pursues the check with the bank electronically, a process which the company claims is 75 to 80 percent successful. It’s also free because checXchange’s fee for a bounced check is paid by the customer, not you. So you can get back to work without worrying about chasing customers who owe you money.
ChecXchange takes advantage of a priority placed on electronic re-presentment. A check can only be presented for payment at your customer’s bank twice in hard copy. But when submitted electronically it gives a company another chance to get what they’re owed.
Why do so many checks bounce these days?
Checks are still used by about 20 percent of customers and they are more likely to bounce than in the past because they can now be processed in hours rather than days. NSF checks put retailers into the awkward and costly position of having to chase their customers for their unpaid balances. According to checXchange’s figures, those efforts are only 25 to 35 percent successful.
When you deposit a check your bank puts the funds into your account and starts the process of seeking the money from your customer’s bank. A clearing house presents the check to your customer’s bank seeking payment. If there are insufficient funds, the customer’s bank will refuse to pay and the check will be returned to your bank. Your bank then deducts the value of the check from your account and returns the check to you. That’s where the bank’s involvement ends and the bad debt becomes your problem.
How do I avoid bad checks?
There are a few ways you can avoid being in this position. You can use the services of a check authorization agency, which will allow you to scan a check to find out if that customer has had any checks bounce lately.
It’s entirely possible that a bad check is a simple error on the part of a customer and sometimes it can be sorted out with a quick phone call.
You can also approach the customer’s bank directly to see if the funds are available after your bank has returned the check to you.
But if it goes further than that, a little knowledge of the law is needed. Depending on your state, you will face different regulations for how you can reclaim the money you’re owed. In California, for example, you need to send a letter demanding payment via registered mail before you can take the matter to court. There may also be specific wording you need to use in any request for payment. Some states, including Arizona, California, Colorado, Florida, Illinois, Montana, New York and Washington, have bad check laws that favor businesses. Make sure you seek legal advice to find out where you stand.
Of course, electronic payments are a much easier way to do business: you know immediately if your customer’s bank account has insufficient funds. The Electronic Payments Association works with financial institutions to encourage consumers to use direct debit instead of checks.