Insufficient funds ( NSF ) is a term used in the banking industry to show that a check can not be honored because insufficient funds are available in the account on which the instrument was withdrawn. NSF checks are often referred to as bad checks , honorific checks , bounce checks , cold checks , checks rubber , returned items , or hot check . In England and Wales and Australia, such checks are usually returned marked "View Drawer", instructions to contact the person who issued the check for an explanation of why the check was not honored.
Video Non-sufficient funds
Reason for incompatible checking
The reason for receiving a bad check is mostly related to the party issuing the check not having sufficient funds available in the amount presented for withdrawal from the checking account. Other reasons checking may not be honored including account holders canceling checks for intentionally holding payments; account holder funds are frozen; the account does not actually exist because of the false examination being presented; and damage to checks.
Maps Non-sufficient funds
Consequences
Among the consequences of issuing an NSF check are actions by financial institutions, civil liability to the drawee, and possible criminal penalties. When a poor check is negotiated, the check receiver may choose to take action against the drawer. The action taken may be a law suit or lawsuit, or seeking criminal charges, depending on the number of checks and laws in the jurisdiction where the check was taken.
Financial institutions
When bad checks are taken, check authors may be charged by their own financial institution. If paying an item places the account holder in negative status with a relatively small amount, the bank may choose to honor the check. When this happens, the account will be overdrawn, and the fees charged by the bank will put additional expense on the account until the overdraft is closed. If an item's payment will significantly make the account exceed the limit, the bank may choose not to honor the check. The item will be returned to the depositors bank, and finally to the depositor. Total check plus depositors 'fees will be debited from depositors' accounts. The depositor may then elect to resubmit the check, hoping to be clear on the second attempt, or else proceed immediately with any collection, civil or criminal activity.
Civilian consequences
If an unsatisfied check has been scanned and replaced with a replacement check, the original check is not returned to the depositor, but otherwise the surrogate check will be marked "insufficient funds" and returned to the depositor. Recipients may choose not to accept future checks from authors (usually noted on paper or electronic "Do not accept checks from..." list), or may suspend check author privileges until the check author has made good in debt.
The recipient may also choose to report the author to the database service. This may cause other merchants in the future to refuse to accept checks from authors or shared account holders, or the authors have difficulty obtaining a checking account at another bank. If a merchant or other place of business receives too many bad checks from customers, it may just decide not to accept any checks from anyone.
Criminal consequences
In some cases, issuing an NSF check may result in criminal prosecution of a check drawer. Criminal allegations are more likely where a drawer may be shown to issue a check knowing that it will not be respected. The allegations are also more likely when the NSF checks for large amounts, or where the drawers issue some NSF checks.
Prevention
Measures that can be taken to reduce the likelihood of a poor examination include:
- Carries a higher balance in a checking account; ie always have a number of "buffers" just in case there is no unclear check.
- Better balancing techniques
- Overdraft protection - This may be in the form of a link to a savings account from which funds will be automatically transferred, credit cards, or credit lines designed specifically for this purpose.
- Using a credit/debit card or cash instead of a check.
Legal issues
India
In India, the inspected examination is a criminal offense, punishable by fines and/or imprisonment, pursuant to Section 138 of the Negotiated Instrument Instrument, 1881. Until January 2013, bounce inspection is a criminal offense in the United Arab Emirates causing the prison of the person who wrote it.
United States
In many jurisdictions in the United States, there is a poor check-back program that allows recipients of checks to collect funds from the local district attorney's office, regardless of the amount. An agency run by the county prosecutor will pursue the check drawer by trying to raise funds in exchange for avoiding criminal prosecution. Check the drawer will be responsible for covering the check amount, plus all charges that the recipient is legally entitled, plus the cost of the program. Drawers will also be required to take courses designed to improve the writing-check habits. These programs are controversial and in recent years, have come under fire in lawsuits. Usually, if the check writer can cover their bad debts within sixty days, all charges will be imposed.
In some jurisdictions, for criminal prosecution on a poor examination there must be some element of fraud involved in issuing checks. In some U.S. states, if the check drawer tells the party that they are saying a check that it will not be clear at the present time (such as asking someone to "hold" a check for several days), if the check soars, they can still be sued for value check, but alert the recipient before accepting that the check will not immediately remove the fraud element and prevent the criminal prosecution. For similar reasons, post-date checks do not typically support confidence to issue an NSF check.
United Kingdom
The use of the term "Refer to Drawer" became the standard in England and Wales after the bank was successfully prosecuted for defamation after returning the check with the phrase "Inadequate Funds" after making a mistake; the court ruled that, because there was sufficient funds, the statement proved wrong and damaged the reputation of the person who issued the check. Even with the use of this revised phrase, the mere implication that insufficient funds have been ruled out in cases of other banks that mistakenly refuse to pay checks.
Metaphorical usage
Martin Luther King used this concept as a metaphor in his speech I Have a Dream. He compared the Declaration of Independence with a bad examination.
Another example is the phrase "Do not let your mouth write your butt checks can not cash." (Alternatively, "check" or "body" (not "ass" (alternately, "boom" or "ass" (with "drum" or "grass" to continue the poem)) is used to mean "Don" do not make your boastfulness can not back down, "and comes from urban English, which has been proven since the 1960s, although today it is found more commonly, as in the 1993 film Dazed and Confused.
See also
- Bad check return program
- Check out fraud
- ChexSystems
References
External links
- National Inspection Center. Describes laws relating to bad checks in all fifty US states.
Source of the article : Wikipedia
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