Rubber Check

What Is a Rubber Check?

Rubber check is an everyday term used to portray a written check that doesn't have the funds accessible to be cashed by the beneficiary. It is likewise usually known as a bounced check.

The two justifications for why a rubber check won't be cashable are either that a) the shipper doesn't have adequate funds in that frame of mind on which the check is drawn, or b) the source placed a stop-payment or cancellation order on the check in the wake of giving it as payment.

How Rubber Checks Work

In the United States, it's anything but a crime to coincidentally compose a check that can't be handled due to insufficient funds or a subsequent stop-payment order. In any case, these occurrences can bring about fines and punishments, for example, the overdraft fees sporadically charged by banks. To help moderate against this risk, banks frequently offer overdraft protection policies which permits customers to keep away from these fees in the event that they unintentionally issue a rubber check.

At times, it very well may be feasible for the beneficiary of a rubber check to levy punishments on the source. This is especially true in the event that the transaction happens between businesses with a pre-existing contractual relationship. A few contracts will contain statements that rebuff either party for delivering a rubber check, for example, by qualifying the beneficiary for a discount on the services delivered. Different methodologies, for example, accruing interest on the sums unpaid, are additionally utilized.

While unintentional rubber checks are generally left unpunished, systems are in place to identify hardheaded or repeat guilty parties. Through information bases, for example, TeleCheck and ChexSystems, banks and other financial service suppliers can monitor the frequency with which a given person or company issues rubber checks. Subsequently, those hailed as suspicious through these systems might find that shippers and payment processors start to turn down their checks.

At the point when the size or frequency included turns out to be adequately large, people who regularly compose rubber checks might end up faced with criminal charges. In the United States, doing so purposely can be seen as a form of fraud, which in certain states is classified as a crime offense.

Real World Example of a Rubber Check

Steve is the manager of a wholesale distribution company which offers to different retail outlets all through his neighborhood community. One of his standard customers is ABC Retailers, which as of late encountered a change of ownership. Since their sale, ABC's new owners have started paying their solicitations with a money order rather than electronically. Steve awards his customers 30 days to pay their bills, after which he starts charging interest on the unpaid balance.

As a politeness to his long-term customer, Steve chooses to stand by 30 days before cashing ABC's checks, since commonly they would have required around 30 days to electronically pay his solicitations. To his surprise, nonetheless, Steve finds that the checks given to him by ABC were really rubber checks. Each time he attempts to cash them, the checks fail either for lack of funds or in light of the fact that stop-payment orders were placed by ABC after the checks were delivered.

Initially, Steve suspects that the rubber checks were given unintentionally. In any case, after numerous successive checks faced similar issues, he realizes that ABC might be giving rubber checks intentionally. In response, Steve enlists a business legal counselor to prompt him on a possible claim against ABC. Meanwhile, he suspends business with ABC and solicitations interest from ABC for its unpaid balances.

Features

• A rubber check is a check that can't be cashed in light of lacking funds or a stop-payment order made by the source.
• Rubber checks are frequently unintentional and generally face not many or minor punishments.
• At times, nonetheless, a repeat issuer of rubber checks might be found at fault for fraud.