How to Handle Chargebacks and Bad Checks in Florida Webinar

Checks are a common mode of payment in the construction industry. However, there may be situations wherein you have been handed a bad check resulting in non-payment issues. This is why it is important for construction professionals to know what a bad check is, how to deal with them, what are the penalties associated with them, how to handle chargebacks, etc. This will help you to ensure that you are not deceived by the other party, and you do get paid successfully for the work you perform.  

In this blog, presented by SunRay Construction Solutions and Alex Barthet, Principal, The Barthet Firm, construction professionals in Florida can learn in detail about bad checks and chargebacks and how to deal with them successfully.

What Are Civil & Criminal Bad Checks Penalties?

So, let’s start with understanding what a check is. A check is merely a promise to be paid in future. Unlike real cash which you can use immediately, a check is just a piece of paper which you will have to run through the bank who in turn will make the payment. Some of the common bad checks are designated as:

• Non-Sufficient Funds (NSF) meaning that when the check was presented, the said account did not have sufficient funds in it.

• Account is not found meaning you were either given a fake check or the account was closed after the check was issued.  

• Stop Payment meaning that someone issued the check to you and then asked their bank not to honor the check whenever it is presented.  

Typically, a check can be dishonored up to 30 days after it is presented, but in some cases, it can be dishonored after 30 days as well. One very important point to remember is that:

• The availability of funds does not mean that the check has been cleared. What it means is that the fact that your bank has given you access to those funds does not mean that the check has been cleared.

• For example, you have a $100,000 in your bank account and you deposit a $10,000 check. Now your bank may make this check available immediately or within a few days. The reason why they do is not because the $10,000 check is good but because they know that if the check is dishonored, there is enough money in your account for the bank to protect themselves.

• So, based on this example, your balance on paper is $110,000 and if somebody puts a stop payment on your check on the 29^th day, the bank will deduct that $10,000 from your account.  

• This is why you should not assume that a check is cleared or won’t be dishonored just because your bank has made the funds available to you.  

Also, there are different penalties for passing a bad check. You can either get a civil penalty, which means you can sue someone in court and get the payment, or a criminal penalty, which means someone can get arrested or go to jail for passing a bad check.  

Let’s look at what these penalties are and how they are implemented.

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A) Criminal Penalty

In the state of Florida, a bad check worth $150 or more is considered a felony. Here are some of the things that you should avoid:

• If you are concerned whether the check is good or not, avoid signing any bond or lien release. Do not give them an unconditional lien or bond release if you are not certain that the check will be cleared.

• Avoid recording a satisfaction of lien before the funds are cleared. So, if you have recorded a lien and someone says, here is the check, please satisfy the lien, then make sure that the funds have been cleared before you go ahead and satisfy the lien.

Here are a couple more things to bear in mind:

• Do not believe that holding a check means that you are holding the actual payment. As mentioned earlier, the check is just a promise to pay, it does not mean that you have the money in hand.

• Do not accept any post-dated checks. So, if you receive a check today but the date on the check is for next week, then it means that it is a post-dated check. If you accept a post-date check, then the maker cannot be criminally prosecuted because they have already informed you in advance that you cannot deposit the check until the date written on the check.

• Do not agree to hold a check. This means that you have been given a check today, but the maker of the check has told you not to deposit it until they tell you to do it. In such cases also, the maker cannot be criminally prosecuted because you have agreed to hold on to the check at the time of its presentation.  

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Let’s say you have accepted a check, now for criminal penalties to apply, you must do the following:

• If you are accepting the check in person, you need to get the below details from the check maker and write it on the check:

1. Full name

2. Home address and phone

3. Place of employment

4. Sex

5. Date of Birth

6. Height

7. Driver’s license number or State Identification Number, specifying the state of issuance

• Although no one really does this, it is a requirement of the law. So, if you want to prosecute someone, then the police or the district attorney will expect to see all these details to ensure that you have complied with all the legal requirements.  

• If you are accepting the check in mail, then the recipient of the check must have the original contract, order or request for services for which the check purports to pay, bearing the signature of the check signer.  

• If the check is returned and marked as NSF or account closed by the bank, then you must send a written notice by regular and certified mail. This written notice is the criminal bad check letter which basically says that the check that has been presented is not good and if you don’t make good on the check promptly, then you will have to pay penalties.  

• The letter is a required document that must be sent before the criminal penalties associated with check will be imposed.

• After 15 days, if the check is still not paid, then you can report it to your local state attorney’s office. These offices will have a ‘bad check’, or ‘worthless check’ division and they will also have a certain process on how to report bad checks. Then, it is up to them whether they want to prosecute someone or not for passing a bad check.    

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B) Civil Penalty

As mentioned earlier, a civil penalty is where you can sue a person and get them to pay you the money. For civil penalties to apply, you do not have to do the things that are required for a criminal penalty. Civil penalties will apply to checks designated as NSF, account closed or stop payment.

For civil penalties to be imposed, all you need to do is:

• Send a statutory demand letter by regular and certified mail. If the check is not cleared within 30 days of you sending this demand letter, then you are entitled to the following:

• The amount of the check that was no good;

• An additional three times of the amount of the check; and

• Legal fees and costs incurred in suing and recovering the money.  

• So, overall, you will receive four times the original amount of the check.

• The statutory demand letter is a straightforward letter which states that the check they issued has not been cleared and if the payment is not made within 30 days, then you will sue them for treble damages plus legal fees.  

One thing you need to bear in mind is that if someone is giving you a bad check, it is highly unlikely that they will have enough money to pay you the actual amount of the check, let alone four times the value of that. However, you should still exercise your rights and try to get your payment as quickly as possible.  

Credit Card Chargeback Procedures

Let’s look at credit card chargebacks and how they work.

• First, the consumer must submit a complaint to the issuing bank, and you must do this within 60-120 days.

• The bank will then verify whether the dispute is valid or not and whether it meets the minimum threshold.  

• If it does, then the money is immediately refunded to the customer, the money goes back in their account and the cardholder’s bank initiates a chargeback process to the merchant bank which is your bank.

• If you are the merchant, then the chargeback goes from the consumer’s bank to your bank. The merchant bank will then verify if the request is valid and checks if it meets their minimum threshold.

• You will also be informed that a chargeback is being processed. Now, there are two things that can happen:

• One, if the chargeback is deemed as invalid by the merchant bank, then you don’t have to do anything. The processor will contact the consumer’s bank and inform them about their findings. This is a very rare situation where you end up winning.

• Second, if the chargeback is deemed valid by the merchant bank, then you as the merchant, will be asked to provide documentation so that the bank can dispute the chargeback.  

• If you provide sufficient documentation, the chargeback will be stricken off from the record and the issuing bank will remove the funds from the cardholder’s account again.  

• If you are not able to prove it, then, the funds are removed from your account, and you may also be charged additional fees.  

If you want to win a chargeback, then you must ensure that you understand what your merchant bank and the processing networks expect you to do with each of the transactions. In general,

• One, you must get proper verification from the customer.

• Two, make sure that they sign the receipts, and the name of your business is legible on the bill.

• Three, verify that the card is not expired.  

• Four, verify that the cardholder is who they say they are. You can verify this by checking their identification and verifying the signature on the back of the card.

• To be on the safe side, you might want to keep a copy of all the information so that if a chargeback happens, then you can prove that you have done all the required things.  

• You also need to meet the minimum-security standards like chip readers.

• You need to have evidence that you are capturing your customer’s signature. Since this is all done digitally nowadays, you can compare their signature to the one on the back of the customer’s card.

• Also, you should never accept credit cards that do not have a signature on the back.

• One of the most important things that you should do is have strong written terms and conditions of sale that the customer must sign. If you can show that this transaction is valid because your terms and conditions control the outcome of this dispute, then you will significantly increase the likelihood that you're going to win.

• For example, If you have terms and conditions that say, all sales are final, no returns, all merchandise sold as is, and then someone charges an item on the card, and then they do a chargeback, when you present your evidence that they signed this agreement, they understood that all sales are final, you have a much higher likelihood of prevailing than if you had no such terms and conditions signed by the consumer.

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Best Practices for Dealing with Bad Checks and Credit Card Chargeback

Here are some of the best practices for dealing with bad checks and credit card chargebacks.

Graphic - Best Practices for Dealing with Bad Checks and Credit Card Chargeback

• Opt for Wire Transfers – Instant funds transfer within a business day.

• Protect Your Lien & Bond Rights – Essential for securing your payment.

• Never Sign a Release – Use conditional releases when uncertain about checks or credit cards.

• Wait for Certified Funds – Avoid recording a lien satisfaction until payments clear.

• Chargeback? You Can Sue – If you have evidence of work done, you can still win in court.

• If in doubt, get a wire transfer. A wire transfer is instant transfer of funds which means that you will have the funds in your account within a business day. So, unlike a check which is just a promise to pay, a wire transfer is the immediate transfer of the funds into your account.

• Always protect your lien and bond rights. These are the best ways to secure your right to be paid.

• Do not ever sign a bond or lien release if you are concerned about a check clearing or a credit card chargeback. The best option is to use a conditional release and use the make me conditional stamp whenever you are accepting a check or receiving payment via credit card.

• Do not ever record a satisfaction of lien for a credit card payment or while waiting for a check to clear. This is because there is a possibility that once you satisfy the lien, then they may put a chargeback on the credit card or put a stop payment on the check. So, you should always say that you will satisfy the lien, but you need certified funds, and it is preferable to get a wire transfer done.  

• Also, if someone prevails on a credit card chargeback, then you can still sue them. If you have enough evidence and you have performed the work, then there is a high chance that you will win the case.  

Since checks and credit card payments are common, you must ensure that you know how to deal with situations where a bad check or chargeback is initiated on the credit card payment. The above-mentioned best practices are a great way to deal with them successfully, secure your payment rights, and receive the amount owed to you.  

Key Takeaways

• Understanding Bad Checks: Common bad checks include Non-Sufficient Funds (NSF), fake accounts, closed accounts, and stop payments. It’s crucial not to assume funds are secured just because they’re available in your account.

• Criminal Penalties: A bad check over $150 is a felony in Florida. If accepting a check in person, specific details (e.g., name, address, and ID number) must be recorded on the check for prosecution.

• Civil Penalties: Send a statutory demand letter to recover the check amount, plus three times the check value and legal fees.

• Credit Card Chargebacks: Chargebacks can be initiated by the customer within 60-120 days. To win disputes, merchants must provide proper documentation, such as signed receipts and terms and conditions.

• Wire Transfers: These are instant and secure, avoiding potential issues with checks and chargebacks.

• Lien Rights: Protect lien and bond rights and avoid signing lien releases until funds are cleared.

Common Questions Contractors Ask

1. What is the law on bad checks in Florida?

Florida Statute Chapter 832 covers various check-related crimes. The most common law for prosecuting those who issue worthless checks is 832.05. This statute includes multiple sections addressing different crimes involving checks, drafts, and debit cards.

2. What is the fee for a bad check in Florida?

The service fees for bad checks are as follows: $30 for checks between $0.01 and $50, and $40 for checks ranging from $50.01 to $300.

3. What should you do if someone gives you a bad check in Florida?

You should send a notice to the person who issued the bad check, either via certified or registered mail (with return receipt requested) or First-Class U.S. Mail (with an Affidavit of Service). The notice gives the person 15 days from receipt to pay the check’s amount plus a $25 service charge.

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