I have been reviewing the State Bad Check Service Fee Laws and need clarification ...

Q. (cont.) We are an insurance company located in Michigan. We write business in six states. To determine the amount that we are allowed to charge for a returned check (NSF), do I use the amount allowed for Michigan? Or do I need to cap the amount based on the lowest amount allowable by the states with which we do business?

Example - Michigan allows $25 for returned check fee. Wisconsin only allows $15. Do I use the $25 or the $15?

A. Each state and the District of Columbia legislates penalties and service fees that can be assessed for writing bad or NSF checks. Credit managers who want to collect the monies their companies are owed for NSF checks must adhere to each state’s laws. For example, if a bad check writer resides in Wisconsin, the maximum service fee that can be charged is $15. If they live in Michigan, the returned check fee is capped at $25.

Although your insurance company is located in Michigan, since you do business in six states you need to know the NSF laws in each of those states to determine the size of the service fee you can legally charge in each state.

States also spell out proper procedures to follow. For example, Ohio requires "proof of delivery." Credit managers attempting to collect money owed on a NSF check from an Ohio resident are required to send the debtor a letter and ask for payment within 30 days. If the payment hasn't arrived at the end of 30 days according to Ohio statues, the check writer has committed a crime. The check's amount determines whether the issuer committed a misdemeanor or felony.

For more information please see When You Can't Bank on it and State Bad Check Service Fee Laws.


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