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Cleared Checks and Delayed Bounces
I use Check 21 to charge my clients. We got a bad check from a month ago that the check was cleared. I would think that there is a time limit for a person that writes a check to contest it. How can I fight it as a business when I deliver the product and a month later my bank comes back and takes those funds out of our account, saying it was not authorized, when we have a copy of the check faxed by the client, a signed agreement authorizing us to charge that account? Are there companies out there that offer services to collect on bad checks?
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 "I use Check 21 to charge my clients" doesn't tell the form in which you are creating charges to your customer's accounts. "Check 21" is a law involving check images and paper checks created from those images, and we aren't clear what you're doing.
If you are creating a paper item that is not signed by the client, but has on it all the other normal attributes of a check (dollar amount, bank name, encoded routing and account number, etc.), along with "your customer authorized this check" or something to that effect, you're creating what's referred to as a remotely created check. When you deposit that type of check, your bank makes a warranty good for up to a year that the check was, in fact, authorized. When the bank customer on whose account the check is drawn goes to his bank and claims that the check was not authorized, that bank really has nothing to go on other that its depositor's statement.
The paying bank then can push the check back to your bank for ninety days, and your bank can't contest that action. If the paying bank doesn't take action until later than ninety days, it has to approach your bank directly and ask for the funds, and your bank can deny the request if it believs that you got an authorization. Whether your bank can charge these old checks back to you is a matter that should be addressed in your account agreement or in a separate contract that allows you to deposit the unsigned checks.
All of that describes an answer if you are making these collection using remotely created checks. The rules are very onerous for a business in your position because a lot of fraudulent companies used remotely created checks to defraud consumers.
Published on BankingQuestions.com 7/27/09
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