Collection basics: Sending a returned check notice

Have you had a customer's check returned by the bank and need to collect the amount owing from your customer? Learn more about sending a returned check notice.

by Belle Wong, J.D.
updated May 11, 2023 ·  3min read

There are various reasons why a customer's check may be returned due to nonsufficient funds, or NSF. Regardless of the reason, however, for business owners, a returned check means the money owing still needs to be collected. In such cases, it's often a good idea to begin the collection process by sending out a returned check notice.

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Returned checks

A returned check means the bank account on which the check was drawn did not have enough money in it to cover the check on the day the check was processed. A customer's check may be returned for a number of reasons, and often it's not something your customer has done intentionally. For example, the customer may have deposited a check into their account to cover the check they wrote you, and that check did not clear in time.

In most cases, when receiving a returned check, many business owners want to give their customers the benefit of the doubt. Unless your customer has a history of giving you checks that turn out to be NSF, alerting your customer of the need for repayment by using a notice of returned check or a returned check letter can be a good first step, as it helps you manage your relationship with your customer without aggressively escalating matters too quickly.

Returned check fee

In addition to giving you a notice of returned check, your bank also will have charged you a fee for that returned check. You are entitled to receive the amount of this fee back from your customer, and, in most states, you also can include in your returned check fee an additional amount to cover your costs of handling the returned check.

If you want to charge a returned check fee that is more than what your bank charged you, keep in mind that the maximum you can charge as a returned check fee is governed by state laws.

Since individual states have different returned check fee laws, it's always a good idea to check the laws within your state first, to see how much you are permitted to charge.

If you don't already have one, it's also a good idea to have a returned check fee policy, so your customers know what they will be charged if they pay you with a check that ends up being returned. Again, when you write up the policy, make sure the returned check fee you charge for returned checks is consistent with the limits imposed by your state's laws.

Returned check letter

Most returned-check collection letters are fairly short and to the point. An efficient way to write a notice of returned check is to start with a template and then customize it to your specific circumstances. Your completed letter should include the following information:

  • The name and address of the customer who wrote the returned check
  • The check number of the returned check
  • The amount of the returned check
  • The amount of the returned check fee
  • A request for payment or remittance of the original amount owing plus the returned check fee
  • The date by which payment is required

In many cases, customers will repay the amount they owe plus your returned check fee within the deadline you've stipulated. If, after sending the letter, you encounter trouble getting your customer to pay, you may then consider escalating the collection process with a more aggressively worded payment notice.

Unfortunately, returned checks are a fact of business for many small business owners. Sending a returned check notice is a customer-friendly way of initiating the process of collecting the outstanding payment.

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Belle Wong, J.D.

About the Author

Belle Wong, J.D.

Belle Wong, is a freelance writer specializing in small business, personal finance, banking, and tech/SAAS. She spends h… Read more

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of the author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.