California Civil Code 1719

It seems we are forever encountering information and changes which make the job of the Credit Manager more difficult. For this instance the case is different.

As of January 1, 1996 the California Civil Code 1719, the law governing insufficient funds checks, has been changed, and it is a favorable change for all companies receiving insufficient funds checks.

The new Civil code states that you may charge three times the amount of the NSF check with a minimum charge of $100 and a maximum charge of $1500. The former law had a maximum charge of $500.

What is even better, you do not need to take your NSF check to court to be awarded the treble damages of three times the amount of the check. If you follow the procedure stated in the new law the award is automatic. The intention of the rewritten law is to decrease the amount of bad checks entering small claims court. The law makers have made Civil Code 1719 mandatory upon a court.

The following procedure should be followed:

1. Send a 1719 letter to the debtor who sent you the NSF check - certified mail.
2. Include in the letter , the amount of the check, your banks bad check charge, and the cost of certified mail.
3. Wait 30 days for cash or cashiers check.
4. If you receive a partial payment within 30 days, that only reduces the amount that you can charge treble damages on. For example you had a $500 bad check, the letter inspired them to pay $200. You can still charge treble damages on the $300 remaining.
5. If there is no response to your certified mail within 30 days you are awarded treble damages.
   

Here are some answers to questions you might be asking now.

Q: How do I collect the treble damages after I follow the above steps?

A: Negotiate with the debtor for payment of the NSF check, and use the treble damages as your bargaining chip. You might end up having to take you balance to small claims court for collection through judgment. If you do remember to itemize all costs and charges for the judge. Include your certified mail receipt and a copy of your 1719 letter.

Q: Since this is a California law, what happens to out- of -state NSF checks?

A: Unless you have a venue statement in your signed credit application which states that the laws of the State of California govern all transactions, your out of luck. There are positives and negatives to including this venue statement in your terms and conditions, just as there are positive and negative California laws.