Author Topic: WA Law- Collection laws for Checks- How, and how not to.  (Read 1371 times)

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dls7406

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WA Law- Collection laws for Checks- How, and how not to.
« on: August 10, 2009 07:26:15 AM »
A member was asking for advice about a check that bounced and the collection tactics a CA used to attempt collection on it. This is a road I have unfortunately been down due to theft of my checkbook. The fees and charges add up quickly, and it is a slow process to correct the matter.

As for the collection practices, I'll cover check laws here, then the basic collection laws take over. See my other WA-Law summaries for the Paul Harvey to this topic.

First, the basics:

The main laws governing checks are under "negotiable instruments" in the WA UCC (RCW 62A. Negotiable instruments is codified as RCW 62A.3.

62A.3-118
Statute of limitations.
(a) Except as provided in subsection (e), an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six years after the due date or dates stated in the note or, if a due date is accelerated, within six years after the accelerated due date.

There is much more to that statute, but (a) generally should be what applies to checks. Until rather recently it was a three year statute of limitations. On an interesting note, unless the lawmakers say that a new law is to be applied retroactively, it isn't. One could argue that any check written prior to the change has a three year SOL, since that is what the law was at the time it was written. The argument would be stronger if the check was dishonored (hence creating the COA) before the change in law occurred.






dls7406

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Re: WA Law- Collection laws for Checks- How, and how not to.
« Reply #1 on: August 10, 2009 07:36:28 AM »
I'm going to have to hold off on finishing this until I can resolve the Jumping post box issue since it prevents me from seeing what I am doing. Sorry for the delay.

dls7406

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Re: WA Law- Collection laws for Checks- How, and how not to.
« Reply #2 on: August 10, 2009 08:01:18 AM »
62A.3-415
Obligation of indorser.
(a) Subject to subsections (b), (c), (d), and (e) and to RCW 62A.3-419(d), if an instrument is dishonored, an indorser is obliged to pay the amount due on the instrument (i) according to the terms of the instrument at the time it was indorsed, or (ii) if the indorser indorsed an incomplete instrument, according to its terms when completed, to the extent stated in RCW 62A.3-115 and 62A.3-407. The obligation of the indorser is owed to a person entitled to enforce the instrument or to a subsequent indorser who paid the instrument under this section.

     (b) If an indorsement states that it is made "without recourse" or otherwise disclaims liability of the indorser, the indorser is not liable under subsection (a) to pay the instrument.

     (c) If notice of dishonor of an instrument is required by RCW 62A.3-503 and notice of dishonor complying with that section is not given to an indorser, the liability of the indorser under subsection (a) is discharged.

     (d) If a draft is accepted by a bank after an indorsement is made, the liability of the indorser under subsection (a) is discharged.

     (e) If an indorser of a check is liable under subsection (a) and the check is not presented for payment, or given to a depositary bank for collection, within 30 days after the day the indorsement was made, the liability of the indorser under subsection (a) is discharged.


dls7406

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Re: WA Law- Collection laws for Checks- How, and how not to.
« Reply #3 on: August 10, 2009 08:10:07 AM »
62A.3-503
Notice of dishonor.
(a) The obligation of an indorser stated in RCW 62A.3-415(a) and the obligation of a drawer stated in RCW 62A.3-414(d) may not be enforced unless (i) the indorser or drawer is given notice of dishonor of the instrument complying with this section or (ii) notice of dishonor is excused under RCW 62A.3-504(b).

     (b) Notice of dishonor may be given by any person; may be given by any commercially reasonable means, including an oral, written, or electronic communication; and is sufficient if it reasonably identifies the instrument and indicates that the instrument has been dishonored or has not been paid or accepted. Return of an instrument given to a bank for collection is sufficient notice of dishonor.

     (c) Subject to RCW 62A.3-504(c), with respect to an instrument taken for collection by a collecting bank, notice of dishonor must be given (i) by the bank before midnight of the next banking day following the banking day on which the bank receives notice of dishonor of the instrument, or (ii) by any other person within 30 days following the day on which the person receives notice of dishonor. With respect to any other instrument, notice of dishonor must be given within 30 days following the day on which dishonor occurs.

dls7406

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Re: WA Law- Collection laws for Checks- How, and how not to.
« Reply #4 on: August 10, 2009 08:11:04 AM »
62A.3-515
Checks dishonored by nonacceptance or nonpayment; liability for interest; rate; collection costs and attorneys' fees; satisfaction of claim.
(a) If a check as defined in RCW 62A.3-104 is dishonored by nonacceptance or nonpayment, the payee or person entitled to enforce the check under RCW 62A.3-301 may collect a reasonable handling fee for each instrument. If the check is not paid within fifteen days and after the person entitled to enforce the check or the person's agent sends a notice of dishonor as provided by RCW 62A.3-520 to the drawer at the drawer's last known address, and if the instrument does not provide for the payment of interest or collection costs and attorneys' fees, the drawer of the instrument is liable for payment of interest at the rate of twelve percent per annum from the date of dishonor, and cost of collection not to exceed forty dollars or the face amount of the check, whichever is less, payable to the person entitled to enforce the check. In addition, in the event of court action on the check, the court, after notice and the expiration of the fifteen days, shall award reasonable attorneys' fees, and three times the face amount of the check or three hundred dollars, whichever is less, as part of the damages payable to the person enforcing the check. This section does not apply to an instrument that is dishonored by reason of a justifiable stop payment order.

     (b)(1) Subsequent to the commencement of an action on the check (subsection (a)) but prior to the hearing, the defendant may tender to the plaintiff as satisfaction of the claim, an amount of money equal to the face amount of the check, a reasonable handling fee, accrued interest, collection costs equal to the face amount of the check not to exceed forty dollars, and the incurred court costs, service costs, and statutory attorneys' fees.

     (2) Nothing in this section precludes the right to commence action in a court under chapter 12.40 RCW for small claims.


dls7406

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Re: WA Law- Collection laws for Checks- How, and how not to.
« Reply #5 on: August 10, 2009 08:11:43 AM »
62A.3-520
Statutory form for notice of dishonor.
The notice of dishonor shall be sent by mail to the drawer at the drawer's last known address, and the notice shall be substantially in the following form:





NOTICE OF DISHONOR OF CHECK


     A check drawn by you and made payable by you to . . . . . . in the amount of . . . . . . has not been accepted for payment by . . . . . ., which is the drawee bank designated on your check. This check is dated . . . . . ., and it is numbered, No. . . . . . ..

     You are CAUTIONED that unless you pay the amount of this check within fifteen days after the date this letter is postmarked, you may very well have to pay the following additional amounts:

     (1) Costs of collecting the amount of the check, including an attorney's fee which will be set by the court;

     (2) Interest on the amount of the check which shall accrue at the rate of twelve percent per annum from the date of dishonor; and

     (3) Three hundred dollars or three times the face amount of the check, whichever is less, by award of the court.

     You are also CAUTIONED that law enforcement agencies may be provided with a copy of this notice of dishonor and the check drawn by you for the possibility of proceeding with criminal charges if you do not pay the amount of this check within fifteen days after the date this letter is postmarked.

     You are advised to make your payment to . . . . . . at the following address: . . . . . . . . . .

dls7406

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Re: WA Law- Collection laws for Checks- How, and how not to.
« Reply #6 on: August 10, 2009 08:12:24 AM »
62A.3-522
Notice of dishonor Affidavit of service by mail.
In addition to sending a notice of dishonor to the drawer of the check under RCW 62A.3-520, the person sending notice shall execute an affidavit certifying service of the notice by mail. The affidavit of service by mail must be attached to a copy of the notice of dishonor and must be substantially in the following form:





AFFIDAVIT OF SERVICE BY MAIL


     I, . . . . . ., hereby certify that on the . . . . . . day of . . . . . ., 20. . ., a copy of the foregoing Notice was served on . . . . . . by mailing via the United States Postal Service, postage prepaid, at . . . . . ., Washington.

          Dated:               . . . . . . . . . . . . . . . .

                                   (Signature)


     The person enforcing the check shall retain the affidavit with the check but shall file a copy of the affidavit with the clerk of the court in which an action on the check is commenced.

dls7406

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Re: WA Law- Collection laws for Checks- How, and how not to.
« Reply #7 on: August 10, 2009 08:13:38 AM »
62A.3-525
Consequences for failing to comply with requirements.
No interest, collection costs, and attorneys' fees, except handling fees, are recoverable on any dishonored check under the provisions of RCW 62A.3-515 where a person entitled to such recovery or any agent, employee, or assign has demanded:

     (1) Interest or collection costs in excess of that provided by RCW 62A.3-515; or

     (2) Interest or collection costs prior to the expiration of fifteen days after the mailing of notice of dishonor, as provided by RCW 62A.3-515 and 62A.3-520; or

     (3) Attorneys' fees either without having the fees set by the court, or prior to the expiration of fifteen days after the mailing of notice of dishonor, as provided by RCW 62A.3-515 and 62A.3-520.


dls7406

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Re: WA Law- Collection laws for Checks- How, and how not to.
« Reply #8 on: August 10, 2009 08:15:52 AM »
62A.3-530
Collection agencies Checks dishonored by nonacceptance or nonpayment; liability for interest; rate; collection costs and attorneys' fees; satisfaction of claim.
(1) If a check as defined in RCW 62A.3-104 is dishonored by nonacceptance or nonpayment and the check is assigned or written to a collection agency as defined in RCW 19.16.100, the collection agency may collect a reasonable handling fee for each instrument. If the collection agency or its agent provides a notice of dishonor in the form provided in RCW 62A.3-540 to the drawer and the check amount plus the reasonable handling fee are not paid within thirty-three days after providing the notice of dishonor, then, unless the instrument otherwise provides, the drawer of the instrument is liable for payment of interest at the rate of twelve percent per annum from the date of dishonor, and a cost of collection of forty dollars or the face amount of the check, whichever is less, payable to the collection agency. In addition, in the event of court action on the check and after notice and the expiration of the thirty-three days, the court shall award reasonable attorneys' fees, and three times the face amount of the check or three hundred dollars, whichever is less, as part of the damages payable to the collection agency. This section does not apply to an instrument that is dishonored by reason of a justifiable stop payment order.

     (2) Subsequent to the commencement of an action on the check under subsection (1) of this section but prior to the hearing, the defendant may tender to the plaintiff as satisfaction of the claim, an amount of money equal to the face amount of the check, a reasonable handling fee, accrued interest, collection costs equal to the face amount of the check not to exceed forty dollars, and the incurred court costs, service costs, and statutory attorneys' fees.

     (3) Nothing in this section precludes the right to commence action in a court under chapter 12.40 RCW for small claims.


dls7406

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Re: WA Law- Collection laws for Checks- How, and how not to.
« Reply #9 on: August 10, 2009 08:17:32 AM »
62A.3-540
Collection agencies Statutory form for notice of dishonor.

     *** CHANGE IN 2009 *** (SEE 1042.SL) ***

(1) If a check is assigned or written to a collection agency as defined in RCW 19.16.100 and the collection agency or its agent provides a notice of dishonor, the notice of dishonor may be sent by mail to the drawer at the drawer's last known address. The collection agency may, as an alternative to providing a notice in the form described in RCW 62A.3-520, provide a notice in substantially the following form:





     NOTICE OF DISHONOR OF CHECK


     A check drawn by you and made payable by you to . . . . . . in the amount of . . . . . . has not been accepted for payment by . . . . . ., which is the drawee bank designated on your check. This check is dated . . . . . ., and it is numbered, No. . . . . . ..

     You are CAUTIONED that unless you pay the amount of this check and a handling fee of . . . . . within thirty-three days after the date this letter is postmarked or personally delivered, you may very well have to pay the following additional amounts:

     (a) Costs of collecting the amount of the check in the lesser of the check amount or forty dollars, plus, in the event of legal action, court costs and attorneys' fees, which will be set by the court;

     (b) Interest on the amount of the check which shall accrue at the rate of twelve percent per annum from the date of dishonor; and

     (c) Three hundred dollars or three times the face amount of the check, whichever is less, by award of the court.

     You are also CAUTIONED that law enforcement agencies may be provided with a copy of this notice of dishonor and the check drawn by you for the possibility of proceeding with criminal charges if you do not pay the amount of this check within thirty-three days after the date this letter is postmarked.

     You are advised to make your payment of $. . . . . to . . . . . . at the following address: . . . . . . . . . .

     (2) The cautionary statement regarding law enforcement in subsection (1) of this section need not be included in a notice of dishonor sent by a collection agency. However, if included and whether or not the collection agency regularly refers dishonored checks to law enforcement, the cautionary statement in subsection (1) of this section shall not be construed as a threat to take any action not intended to be taken or that cannot legally be taken; nor shall it be construed to be harassing, oppressive, or abusive conduct; nor shall it be construed to be a false, deceptive, or misleading representation; nor shall it be construed to be unfair or unconscionable; nor shall it otherwise be construed to violate any law.

     (3) In addition to sending a notice of dishonor to the drawer of the check under this section, the person sending notice shall execute an affidavit certifying service of the notice by mail. The affidavit of service by mail must be substantially in the following form:




     AFFIDAVIT OF SERVICE BY MAIL


     I, . . . . . ., hereby certify that on the . . . . . . day of . . . . . ., 20. . ., a copy of the foregoing Notice was served on . . . . . . by mailing via the United States Postal Service, postage prepaid, at . . . . . ., Washington.

          Dated:               . . . . . . . . . . . . . . . .

                                   (Signature)


     (4) The person enforcing a check under this section shall file the affidavit and check, or a true copy thereof, with the clerk of the court in which an action on the check is commenced as permitted by court rule or practice.

dls7406

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Re: WA Law- Collection laws for Checks- How, and how not to.
« Reply #10 on: August 10, 2009 08:18:05 AM »
62A.3-550
Collection agencies Consequences for failing to comply with requirements.
No interest, collection costs, and attorneys' fees, except handling fees, are recoverable on any dishonored check under the provisions of RCW 62A.3-530 where a collection agency or its agent, employee, or assign has demanded:

     (1) Interest or collection costs in excess of that provided by RCW 62A.3-530; or

     (2) Interest or collection costs prior to the expiration of thirty-three days after the serving or mailing of the notice of dishonor, as provided by RCW 62A.3-530 or 62A.3-540; or

     (3) Attorneys' fees other than statutory attorneys' fees without having the fees set by the court, or any attorneys' fees prior to thirty-three days after the serving or mailing of the notice of dishonor, as provided by RCW 62A.3-530 or 62A.3-540.


dls7406

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Re: WA Law- Collection laws for Checks- How, and how not to.
« Reply #11 on: August 12, 2009 10:37:07 PM »
Here is a class action filed against someone who violated the above and the CPA/CAA. The case was settled after defendant's MSJ failed.

http://www.debtorboards.com/index.php/topic,8399.0.html