Bounced Checks Laws and Regulations

Learn about and comply with bounced check laws and regulations

Federal, state, and local rules may apply to bounced checks. As a bank or other financial institution, it's in your best interest to learn all you can about these laws so that you provide complete compliance. Doing this will help prevent a regulatory review and thwart possible litigation from clients.

Banks can generally set their own rules through their own board of directors or other governing body to have some local control; however, compliance with all state and federal laws remains key. Consider this other information on bounced checks laws and regulations:

1. Federal law doesn't govern service fees on bounced checks, nor does state law, in most cases. Instead, service fees are seen as an individual contract between the bank and the customer.

2. Compliance remains tricky with the relatively constant advance of new bounced checks laws and regulations. Make sure you keep up to date on new legislation by hiring a regulation consultant firm or attorney.

3. Returned electronic checks or debit card transactions that come up as insufficient funds are generally bound by the same penalties and rules as bounced paper checks.

 

Research federal bounced checks laws and regulations

Federal regulatory agencies have some control over local banks; however, they have the most control over national banks. Many states adopt into their state statutes federal regulations such as the Uniform Commercial Code.
Try: Cornell University Law School provides a review of Uniform Commercial Code Article 3 dealing with check laws. Research the bank's responsibility for the collection of checks and other rules through the Federal Deposit Insurance Corporation's section on FDIC law, regulations, and related acts.

Comply with state bounced checks laws and regulations

Each state supplies its own unique banking rules, including the limit on the amount of overdraft or insufficient funds fees that may be assessed, especially if the institution is state chartered. Review the laws in the state where you do business when setting your policy or making any changes to it.
Try: Check out Wisconsin law on issuing a worthless check, Code 943.24. Use the Georgia Code Research Tool from LexisNexis to look up Georgia's 13-6-15 code on bounced checks.

Consult with an attorney on bounced checks rules and regulations

Even if you aren't facing a bank examination by any federal banking agency, it may be helpful to hire an attorney specializing in banking and finance. This attorney will be able to inform you on compliance issues with all state and federal banking laws. The attorney will also be able to advise you on any conflicts concerning rules you may want to set at the local level.
Try: The Jorden Burt firm can offer consulting in regulatory activities for those in the consumer finance and baking industry. The Maxim Law Firm of Atlanta, GA, specializes in banking and lending disputes.

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