Increases from twenty dollars to thirty dollars the processing fee that holders of dishonored checks may charge

1 Co-sponsor

• William J. Larkin Jr.

Title of bill

An act to amend the general obligations law, in relation to processing fees charged by holders of dishonored checks

Purpose

To bring the amount which can be charged by the holder of a dishonored check more in line with today's costs

Summary of specific provisions

Paragraph (a) of subdivision 2 of Section 5-328 of the general obligations law currently sets the amount which can be charged by the holder of a dishonored check issued for a consumer credit transaction to the greater of the amount agreed upon or twenty dollars. This proposal would increase this limit to the greater of the amount agreed upon or thirty dollars.

Subsection 3 of Section 5-328 of the general obligations law is amended to increase the amount which can be charged by a person who is issued a dishonored check for a transaction other than a consumer transaction from twenty to thirty dollars.

Justification

Banks have significantly increased and broadened their account fees and dishonored check charges since the time when the twenty dollar limit was set in 1991. In many consumer and non-consumer related transactions individuals who have been tendered a bad check often unknowingly submit the check for deposit. When the check is subsequently dishonored, the holder is then subjected to additional account fees from their banking institution. In many instances these additional fees for depositing an invalid check are now over and above the twenty dollar limit which was set some 15 years ago. This results in the inequitable situation where a holder of a dishonored instrument may not only be unable to recoup the original amount owed, but is also unable to recover the full costs associated with accepting the check. Since the holder has no way of knowing whether a check is good when tendered, the current situation could lead to a policy of discouraging check acceptance for both consumer and non-consumer transactions. Raising the limit which can be recouped by the check holder to an amount more in line with inflation will alleviate this scenario.

Legislative history

A10411, Bill Died in judiciary committee. A6570 2008, Referred to Judiciary Committee

Fiscal implications

None.

Effective date

This act shall take effect immediately.