ALL AGENCIES, DEPARTMENTS, AND DISTRICTS
GOVERNED BY THE BOARD OF SUPERVISORS
EFFECTIVE: 01/79
REVISED: 12/00
_________________________________
David E. Sundstrom, Auditor-Controller
1.
POLICY
All County departments and agencies shall charge
and attempt to collect a returned check service
charge on all checks payable to the County of Orange
that are returned unpaid by the bank, with certain
exceptions as enumerated below in Section 2. All
departments and agencies shall charge a $25 returned
check service charge for the first returned check,
and a $35 charge for each subsequent returned check
by the same payor, pursuant to California Civil
Code Section 1719. If the payor fails to pay the
amount of the check, the returned check service
charge, and the mailing costs of the demand letter
30 days after mailing a proper written demand, the
payor could be liable instead for the amount of
the check and treble damages.
This Policy and Procedure does not apply to the
County Treasurer-Tax Collector. That department
is covered by separate law covering insufficient
funds checks.
1.1
Purpose
The intent of this procedure is to provide
more efficient and cost effective collection
of returned checks by imposing a service charge
and pursuing treble damages when appropriate.
This will partially compensate the County
for additional time spent on collection efforts,
and also may provide a deterrent to future
writers of checks on insufficient funds. The
service charge is to be $25 or $35, as applicable,
and treble damages are to be three times the
amount of the returned check, but in no case
less than $100 or more than $1,500, in accordance
with Civil Code Section 1719.
1.2
Authority
1.2.1
State of California Civil Code Section
1719
California Civil Code Section 1719
imposes the $25/$35 returned check service
charge on payors of checks on insufficient
funds, provides for imposition of treble
damages for failure to pay after demand
for payment, and provides for certain
exceptions.
1.2.2
State of California Government Code
Sections 25257 to 25259.5
California Government Code Sections
25257 to 25259.5 govern the discharge
of accountability of debts due and payable
to the County and allow the Board of
Supervisors, by resolution, to authorize
the County Auditor-Controller to discharge
any department, officer, or employee
from accountability for collection.
1.2.3
Board of Supervisors’ Resolution
No. 79-675 dated May 8, 1979
Board Resolution No. 79-675 authorized
the Auditor-Controller to discharge
County departments, officers, and employees
from accountability for collection of
debts due and payable to the County.
1.2.4
Board of Supervisors’ Resolution
No. 00-445 dated December 5, 2000
Board Resolution No. 00-445 directs
all departments and agencies to charge
the returned check service charge provided
in Civil Code Section 1719 (with the
exception of the Treasurer-Tax Collector).
1.3
Definitions
1.3.1
Insufficient Funds Checks/Checks Returned
from the Bank Unpaid
"Insufficient Funds Checks,"
"Checks Returned from the Bank
Unpaid," or "Nonsufficient
Funds Checks (NSF Checks)" are
terms used interchangeably. They include,
but are not limited to, checks returned
because of: insufficient funds, closed
accounts, stop payments, incorrect date,
inconsistency in amounts, incorrect
signature, and/or lack of signature.
1.3.2
Treble Damages
Treble damages is an additional amount
for which the writer of a returned check
shall be liable for if the check amount
plus the returned check service charge
and the mailing cost are not paid within
30 days of the date that the County
mails, by certified mail, a written
demand for payment. In addition to the
amount of the check, the writer of a
returned check shall be liable for treble
damages of three times the amount of
the returned check, but in no case less
than $100 or more than $1,500. When
a person becomes liable for treble damages
through a court judgment, the returned
check service charge and mailing cost
of the demand notice no longer apply.
1.4
Allowable Waivers of Returned Check Service
Charges
1.4.1
Civil Code Section 1719 Waivers
The returned check service charge
shall be waived in those instances as
provided in Civil Code Section 1719
as follows:
The payor of the check has stopped
payment in order to resolve a good
faith dispute, as defined in Civil
Code Section 1719(b), with the payee
(the County), as provided in Civil
Code Section 1719(a)(3).
The payor of the check presents
the County with written confirmation
by the payor’s financial institution
that the check was returned to the
County by the financial institution
due to an error on the part of the
financial institution, as provided
in Civil Code Section 1719(a)(4).
The payor of the check presents
the County with written confirmation
that the payor’s account had
insufficient funds as a result of
a delay in the regularly scheduled
transfer of, or the posting of,
a direct deposit of a social security
or government benefit assistance
payment, as provided in Civil Code
Section 1719(a)(5).
The payor of the check has become
liable for treble damages for a
check that is the subject of a written
demand, as provided in Civil Code
Section 1719(a)(2).
1.4.2
Department/Agency Waivers
Board Resolution No. 00-445 authorizes
County department/agency directors to
waive the returned check service charge
in the following instances:
The department/agency finds that
the payor of the check is indigent,
and further efforts at collection
of the service charge would be fruitless
due to the indigence of the payor.
The department/agency determines
that the collection of a returned
check service charge from a particular
payor would be adverse to the effective
provision of County services to
that payor under the program being
provided by the department/agency,
such as, behavioral health services
or other health services.
The department/agency determines
that very few returned checks in
small dollar amounts are handled
by the department/agency, and that
charging and collecting the returned
check service charge would occur
so infrequently that the cost of
charging and collecting the returned
check service charge would exceed
the amount of additional collected
service charges.
2.
PROCEDURE
2.1
Collection by Auditor-Controller
The Auditor-Controller provides returned
check collection services for many County
departments, agencies, and districts. The
procedures in this Section 2.1 apply to insufficient
funds checks for those departments, agencies,
and districts.
2.1.1
County Treasurer-Tax Collector and
Bank Procedures
The County Treasurer-Tax Collector
forwards checks received by County departments,
agencies, and districts to Bank of America
for deposit. Bank of America re-deposits
any "unpaid" checks in an
attempt to clear checks covered by a
subsequent deposit. Checks returned
"unpaid" after the redeposit
are returned to the County Treasurer-Tax
Collector. The County Treasurer-Tax
Collector retains the returned checks
payable to that office and forwards
the remaining returned checks to the
Auditor-Controller, together with copies
of the Notice of Checks Returned Form
(refer to Exhibit
I of this procedure).
2.1.2
Journal Voucher Preparation and Notification
Upon receipt of the returned checks,
the Auditor-Controller General Ledger
Section makes the appropriate journal
entries to cancel the payments, and
forwards notification of each returned
check to the payee department, agency,
or district.
2.1.3
Auditor-Controller Collection Procedures
The Auditor-Controller Collections/Accounts
Receivable Section sends a letter to
the writer of a returned check, requesting
payment by cashier’s check or
money order (refer to Exhibit
II of this procedure), and, if payment
has not been received, sends a follow-up
demand letter, by certified mail, two
weeks from the date that the first demand
letter was mailed (refer to Exhibit
III of this procedure). The Auditor-Controller
Collections/Accounts Receivable Section
also utilizes other reasonable means
available to obtain payment when cost
effective (e.g., state tax intercepts,
outside collection services). If payment
is received for the original amount
due, but the returned check service
charge is omitted, the Auditor-Controller
will make reasonable efforts as described
above to collect the service charge.
2.1.4
Legal Action
If payment has not been received within
thirty (30) days from the date the certified
letter was mailed, the Auditor-Controller
initiates legal action against the payor
for the amount of the check plus treble
damages.
2.1.5
Collection of Payment
When a payment is received by the
Auditor-Controller as a result of Auditor-Controller
collection efforts, the Auditor-Controller
notifies the payee department, agency,
or district, and deposits the original
amount of the check plus the returned
check service charge in the appropriate
fund of the payee department, agency
or district. The original amount of
the check is credited to the account
that was credited when payment was first
made, and the service charge is credited
to Revenue Source Code 7690, "Returned
Check Charges." Treble damages
received as a result of Auditor-Controller
collection efforts are deposited in
Auditor-Controller Fund/Agency 100/003,
Revenue Source Code 7670, "Miscellaneous
Revenue," sub revenue 21.
2.1.4
Relief of Accountability
After all collection efforts have
been exhausted, the Auditor-Controller
grants relief of accountability, in
accordance with Government Code Sections
25257 through 25259.5 and County
Accounting Procedure (CAP) #B.3.,
Discharge of Accountability for Collections,
and notifies the affected department,
agency, or district when relief of accountability
has been authorized.
2.2
Limited Responsibility for Collection by
Certain Departments/Agencies
Due to legal restrictions or department/agency
preference, certain departments/agencies are
responsible for their own initial efforts
for collection of returned checks, and are
excluded from the initial collection process
of the Auditor-Controller described above
in Section 2.1. These departments/agencies
are:
Clerk of the Board of Supervisors
Community Services Agency - Public Administrator/Public
Guardian
County Clerk-Recorder
District Attorney - Family Support
John Wayne Airport
Sheriff-Coroner - Marshal Division
Orange County Housing Authority
Probation
Social Services Agency
Other small agencies who have infrequent
returned checks and do not use Auditor-Controller
Collection Services.
The procedures in this Section 2.2 are applicable
to the above-listed departments/agencies.
2.2.1
Receipt of Returned Checks/Journal
Entries
The County Treasurer-Tax Collector
retains the returned checks payable
to that office and forwards the remaining
returned checks to the Auditor-Controller
Collections/Accounts Receivable Section,
together with copies of the Notice of
Checks Returned Form. The Treasurer-Tax
Collector also sends copies of the Notice
of Checks Returned Form to the Auditor-Controller
General Ledger Section. Upon receipt
of the Notice of Checks Returned Form,
the Auditor-Controller General Ledger
Section makes the appropriate journal
entries to cancel the payments. The
Auditor-Controller Collections/Accounts
Receivable Section then forwards the
returned checks to the departments/agencies
listed above, along with the Notice
of Checks Returned Form.
2.2.2
Department/Agency Collection Responsibilities
The payee department/agency has a
responsibility both to monitor their
own returned checks and the applicability
of the $25 or $35 returned check service
charge, and make a reasonable effort
to collect the returned checks and the
applicable returned check service charge.
The payee department/agency must attempt
to contact the payor by telephone and,
if the telephone contact fails, send
a letter requesting payment (refer to
Exhibit II of this procedure). Notification
of possible legal action should be included
in this correspondence.
If payment is not received, the payee
department/agency sends a follow-up
demand letter, by certified mail, two
weeks from the date that phone contact
was first made or the first demand letter
was mailed (refer to
Exhibit III of this procedure).
2.2.3
Referral to Auditor-Controller
If payment has not been received within
thirty (30) days from the date the certified
letter was mailed, the returned checks,
together with copies of all correspondence,
may be referred to the Auditor-Controller
Collections/Accounts Receivable Section
for final collection efforts and the
enforcement of treble damages. If payment
is received, the Auditor-Controller
Collections/Accounts Receivable Section
notifies the payee department/agency.
The original amount of the check is
credited to the account that was credited
when payment was first made, and the
service charge is credited to Revenue
Source Code 7690 in a fund of the payee
department/agency. Treble damages received
as a result of Auditor-Controller collection
efforts are deposited in Auditor-Controller
Fund/Agency 100/003, Revenue Source
Code 7670, sub revenue 21.
2.2.4
Relief of Accountability
After all collection efforts have
been exhausted by the Auditor-Controller,
the payee department/agency is notified.
The payee department/agency must request
relief of accountability in accordance
with Government Code Sections 25257
through 25259.5 and CAP #19, Discharge
of Accountability for Collections. The
Auditor-Controller notifies the payee
department/agency when the write-off
has been made.
2.3
Notification to the Public
Departments/agencies are responsible for
providing appropriate signage and notification
to the public of insufficient funds check
service charges. Examples of appropriate notification
are signs placed on counters or statements
printed on invoices or envelopes.
Legal