Bounced Check Re-presentment Lawsuits Are Nothing New

St. Louis, MOYou would be forgiven for assuming that check re-presentment is something new, and sinister, and the latest in a string of misdeeds on the part of entities whose only goal, it appears, is to fleece the pockets and accounts of unsuspecting consumers. In truth, check re-presentment is nothing new at all. In fact, a Bounced Check Re-presentment lawsuit was filed in early 2006, alleging fraud against the check re-presentment firm as well as other defendants.

Yes, 2006. Ten years ago…

These actions are often called Bounced Check lawsuits because they basically begin with a bounced check. As Online Legal Media writer Heidi Turner explains, consumers are conditioned to expect an NSF (nonsufficient funds) notification when a check is issued for a product or service when there are insufficient funds in the account to cover the check. The bank or financial institution then issues an NSF charge - which it hopes you have money for - and the whole sad mess remains within the jurisdiction of the bank until it gets resolved. It’s their headache.

With check re-presentment, the NSF check is not dealt with the bank directly, but is in turn passed along to a third party having contracted with the bank to do the grunt work in attempting to make good on the check. As Heidi explains, the third party re-presents the check across several attempts in an effort to have the check clear. In so doing, the check re-presentment company charges a fee, part of which might be shared back with the bank as part of a contractual commitment.

Here’s the problem: while the consumer has the relationship with the bank, there is no such relationship with the third party serving as the check re-presentment entity. The account holder may not even know about them or their relationship with the bank, or the fact they are debiting check re-presentment fees from their bank account without prior knowledge or consent.

This is the point that plaintiff Travis Volden was making in his Bounced Check Ripoff lawsuit of 10 years ago (Travis Volden v. Innovative Financial Systems, Inc., Case numbers 04-3640 and 04-3641 in US Court of Appeals for the Eighth Circuit, March 10, 2006).

According to Volden’s rather complex Bounced Check Re-presentment lawsuit, he had written a series of checks for products and services acquired from two service providers in 2002. Those checks bounced. The credit union at which Volden did his banking sent the checks out for re-presentment, fees for which were charged.

According to the Bounced Check lawsuit, Volden eventually paid the debt and the subsequent charges with his credit card, but then took Innovative Financial Systems (IFS) to court over the fees he was charged.

According to court documents, three of the four dishonored checks were re-presented twice. IFS is described as having submitted a $30 collection fee plus sales tax for each check, with each re-presentment resulting in a $20 charge.

Volden, originally in district court, argued that IFS was acting as a debt collector and, as such, should be subject to the terms and conditions of the Fair Debt Collection Practices Act (FDCPA). He also argued that he had not authorized IFS to electronically collect fees from his accounts.

Under current law, service providers debiting a consumer’s account for any reason must provide proof that the consumer was informed of that possibility and had provided his or her consent. To that end, any debit of charges from a consumer’s account without his or her prior knowledge or consent - or without a specific contractual agreement and obligation - could be seen as circumventing the law.

As it turned out, Volden lost both his initial case and his appeal, with the appellate court affirming the district court’s summary judgment to the defendant. However, laws have been updated since that time. Any check re-presentment entity withdrawing funds from a consumer’s account prior to his or her knowledge and consent could, indeed, be breaking the law.