Postdated Checks
During the collection process, a collector may sometimes ask the
debtor to send a set of postdated checks covering a period of several
months that will reduce or pay off the balance of the debt. A postdated
check is one that is written but is dated at a day in the future.
This is not a good idea because the debtor's ability to cover the
checks in the future may be uncertain. Though the debtor cannot
be prosecuted if his or her check be returned as insufficient,
the debtor will have the added charge for "bounced" checks.
The Federal Fair Debt Collection Practices Act states: A
debt collector may not use unfair or unconscionable means to collect
or attempt to collect any debt. Generally speaking, according to
this law, a debt collector should not:
- Accept a check or other payment instrument postdated by more
than five days unless such person is notified in writing of the
debt collector's intent to deposit such check or instrument not
more than ten nor less than three business days prior
to such deposit.
- Ask for a postdated check or other postdated payment instrument
for the purpose of threatening or instituting criminal prosecution.
- Deposit or threaten to deposit any postdated check or other
postdated payment instrument prior to the date on such check
or instrument.
Accepting postdated checks was one of the most controversial collection
techniques considered by the United States Congress in drafting
the Fair Debt Collection Practices Act. The major problem is
that debtors do not understand that they are not required to send
postdated checks.
There are some specific rules for the collector's use of postdated
checks. The first involves notification requirements.
A consumer must be given an opportunity to make a deposit or to
tell the collector not to cash the check because the debtor has
insufficient funds to cover it. Just as a collector should not
deposit a postdated check prior to the date of such check, he or
she should not delay in depositing it after the date of the check.
Other rules for the use of postdated checks concern the intended
purpose at the time of solicitation and the actual
use of the postdated check. A collector cannot ask for a postdated
check from a consumer if he or she intends to threaten to deposit
it prior to the date of the check and then institute criminal
proceedings for a "hot" check. Also, debt collectors may not
threaten to deposit the check or actually deposit it prior
to the date of the check.
It is better not to write postdated checks. If you have already
sent a series of postdated checks to a creditor and you know you
cannot pay them or it will be a financial burden, stop payment
immediately. Unfortunately, there is usually a fee, but attempt
to sit down with a customer-service representative at your financial
institution and see if the fee can be waived or reduced. Charges
are generally higher for non-sufficient funds and more embarrassing.
Many times, one bounced check results in many more as the bank
withdraws the NSF fee from the account. You should notify the collection
agency that you have stopped payment, but are making arrangement
to pay the debt. Remember that postdated checks are not legally
binding instruments that give rise to any type of criminal prosecution.
The above information should be understood to be a general
discussion of the subject matter and DOES NOT constitute
a legal opinion about the situation. For further information
please consult a qualified attorney.
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