WHAT IS BOUNCED CHEQUE
The bounced cheque occurs when there is insufficient fund in the respective account. Bank doesn’t accept a cheque in which there are no sufficient funds in the account and bank return these cheques are also known as rubber cheques. But at the same time banks also charge fees of NSF (non-sufficient funds).
KEY TAKEAWAYS
- A bounced cheque generally occurs when there is an insufficient amount in the writer of the cheques and he is not able to pay or fulfil the proper amount to the payee.
- When a cheque bounced then the bank never deposit the amount to the payee account and charge a fee of insufficient funds.
- This can lead to additional penalties which may include a negative score of credit cards and the person might land into legal trouble.
- Banks often provide protection of overdraft so that cheque won’t bounce.
UNDERSTANDING BOUNCED CHEQUE
The cheque can be bounce by anyone which is quite normal because it happens by mistake with some people as they were unaware of the insufficient funds or bank balance is too low to fulfil the requirement of the payee. Some the payer uses the protection of over drafting and some attach a line of credit to their account.
A bounced cheque always results in the penalty fee for insufficient funds taken by the banks and may result in the low credit score which creates problem while using or issuing the credit cards. It will also create a problem in future when paying to the merchant by writing too many bounced cheques. Most of the merchants generally use a good verification system called Tele chequer to have a check on customer’s cheque that whether the cheque is good or not. But, their system checks the unpaid amount and then merchant ask the account holder to pay from the different mode for the approval of money to the merchant.
There can be many other reasons for a bounced cheque:
- There can be a mismatch in the signature sometimes style of the signature comes as a mismatch.
- The amount mentioned in the cheque exceeding the amount which has to be drawn from the account by the virtue of a prior arrangement.
- Because of post-dated cheques.
- Suspicion of a forged cheque and can be many more other reasons as well.
ARE THERE FEES FOR UNBOUNCED CHEQUES
Yes, there will be a fee called as NSF fee for the bounced cheque. When there is low balance in account holder then automatically bank decline the cheque and termed it as bounced cheque. And when the bank accepts the cheque but the account status is in negative then they may charge a fee of overdraft. If the account is still in negative status then the bank may charge an extra overdraft fee. Hence, most of the payee or the account holder has the protection of overdraft.
Every bank has its own terms and conditions and they charge different fees all over the world. But as of 2019 statistics, the average overdraft fees were calculated as$33.36[1]. Banks generally take this fee on drafts worth of $24, and these drafts also include cheques as well as electronic payments mode and some debit card transactions.
WHAT HAPPENS WHEN A CHEQUE BOUNCES
If the cheque bounces, then anyone can take legal against it and payee needs to file a legal notice through the court within the 30 days of the return of the memo from the bank. But if within the 30 days the drawer pays or fulfil the sufficient amount then there is no need to file for legal notice.
One can also take civil or any other charge for the cheque bounce against the issuer of the particular cheque. This can be filed under section 138 of the Negotiable Instrument Acts which is governed under the clauses of this act. A dishonoured cheque also may lead to jail for a certain period of time.
CONCLUSION
The occurrence of the bounced cheque is quite normal and happened on a daily basis which is reported by the bank. Therefore, we can take legal help to deal with such cases. In India, we have sufficient laws to deal with these issues. This is a very basic thing. Now, almost everyone has their own bank account so everyone should know what to do when a cheque bounces. And also not to give any cheque which can be a bounce in future.
REFERENCE
[1]Statista. Average bank overdraft fee in the United States from 1998 to 2019. Accessed May 27 2020.
This article is written by Sneha student of 2nd year B.A.LL.B at Christ academy institute of law
Also Read: How Many Times A Cheque Can Be Bounced?
