Consumer Law

Debt Collectors Can't Add Interest to Dishonored Check Debts

By Kemnitzer, Anderson, Barron, Ogilvie & Brewer

Merchants sometimes contract with check guaranty services that pay the merchant for dishonored checks. These services then attempt to collect the face value of the dishonored check. California Civil Code 1719 allows collectors to add a $25 service fee for the first check dishonored and treble the amount of the check if the check writer does not pay within 30 days after notice. Certain collectors add prejudgment interest to the debt. However, the California Supreme Court has decided these debt collectors have no right to add interest. Any debt collectors that have been adding interest to bounced check claims are vulnerable to class action lawsuits. The case is Imperial Merchant Services v Hunt, No. S163577.

Full post as published by California Credit Law Blog on August 12, 2009 (boomark / email).