Checks are commonly used as a payment tool in business transactions. Accepted based on the mutual trust between parties, checks are often written with a future date and given to the other party in the commercial relationship. Unfortunately, some individuals exploit this by benefiting from goods and services received in exchange for the check while delaying payment. On the payment date, if the funds are insufficient the check cannot be honored. Consequently, the bank marks the check as "bounced." This article will explore what does it mean for a check to be bounce in Turkey, its legal basis, enforcement procedures, bounced check penalty, the liability of endorsers of bounced checks, and a roadmap for victims, along with answers to frequently asked questions.
What is a Bounced Check?
A bounced check is a check that cannot be cashed because there are not enough funds in the issuer's bank account at the time the check is presented. This situation affects the check's legal validity and prevents the holder from receiving payment.
Due to the negative economic impacts of bounced checks, lawmakers have imposed strict regulations. These regulations include special procedures for the collection of bounced checks, additional claims beyond the check amount, and severe penalties for those issuing bad checks to protect the victims.
Legal Basis for Bounced Checks
Regulations concerning checks are outlined in the Turkish Commercial Code (Law No. 6102) and the Check Law (Law No. 5941). According to Article 796 of the Turkish Commercial Code, a check must be presented for payment within ten days if payable in the same location where it was issued, within one month if payable in a different location within the same continent, and within three months if issued on different continents. However, checks issued in one European country and payable in another with a Mediterranean coast are considered to be within the same continent according to check regulations in Turkey. If a check presented within these periods is not paid, it is marked as "bounced," and the holder can pursue legal action.
What Happens if a Check Bounces in Turkey?
A check is a negotiable instrument and can be subject to specific collection procedures. To do this, the check must be presented to the bank on time and marked as "bounced." A check not presented to the bank cannot be subjected to special enforcement for negotiable instruments since the bank must verify whether there are sufficient funds. Therefore, the check must be presented to the bank within the appropriate timeframe and marked as bounced to retain its status as a negotiable instrument. Otherwise, the check loses its negotiable status, and the holder cannot benefit from the special rights and advantages associated with negotiable instruments.
Through bounced check enforcement, the creditor can demand not only the unpaid check amount but also 10% of the unpaid portion as compensation, a commission limited to 0.3% of the check amount, and interest from the date of presentation.
Under Turkish law, the statute of limitations for initiating enforcement proceedings for dishonored checks is 3 years from the expiration of the presentment period. If enforcement proceedings specific to negotiable instruments are not initiated within the period, claims related to the check cannot be pursued through the special proceedings.
To initiate such proceedings, a request for enforcement must be submitted to the enforcement office along with the original check(s). The enforcement office will apply the provisions of the Enforcement and Bankruptcy Law. According to this law, upon receiving the original check and the request for enforcement, the enforcement officer will issue a payment order to the debtor, demanding payment of the debt within 10 days. The debtor is also given a 5-day period to file an objection.
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Objections to Bounced Check Enforcement
The debtor can object to the payment order within five days, claiming the check is not a negotiable instrument, the signature is not valid, they are not liable for the debt, or the debt has been paid or deferred.
Signature Objections
If there is an objection to the signature, the enforcement court will initially review the debtor's objection. If the court deems the objection serious, it may temporarily halt the enforcement without notifying the creditor until a decision is made. If the court finds that the signature does not belong to the debtor, the objection will be upheld, and the enforcement will stop. However, if the signature is determined to belong to the debtor, the objection will be rejected, and the debtor may face a bounced check penalty.
Objections Based on Non-Existence or Delay of Debt
The enforcement court calls both parties for a hearing within thirty days. If the debtor proves that the debt does not exist, has been paid, or deferred with official or acknowledged documents, the objection will be accepted.If the creditor fails to appear for the hearing despite being called, the judge will suspend the execution for the objected portion of the receivable. Thereupon, the creditor may request a hearing before the execution court within six months at the latest, and by proving that the signature under the receipt does not belong to the creditor, the enforcement proceedings may be continued. If the court decides that the signature does not belong to the creditor, it sentences the debtor to a fine of ten percent of the value or amount of the said document.
Objections to the Nature of the Check
The debtor may argue that the check is not a negotiable instrument. The court will examine whether the check has the characteristics of a negotiable instrument and if the creditor has the right to enforce it under negotiable instrument laws in Turkey.
If the court accepts the debtor's objection, the enforcement halts. However, the creditor can file a lawsuit in civil courts under general provisions. If the creditor files a lawsuit in a general jurisdiction court, the enforcement of any damages for denial of signature or monetary penalties imposed due to the acceptance of the objection is postponed until the conclusion of the lawsuit.
If the court accepts the objection, and finds that the creditor has acted in bad faith or with gross negligence in initiating enforcement based on the negotiable instrument, it shall order the creditor to pay compensation of no less than twenty percent of the claim based on the instrument, and a fine equivalent to ten percent of the claim.
Bounced Check Penalty in Turkey
Issuing a bounced check incurs criminal liability as well. Under the Check Law (Law No. 5941), the person who issues a bounced check may face fines or imprisonment. If the check is presented within the legal period and marked as "bounced," the issuer may be fined up to 1,500 days' worth of judicial fines. If the fine is not paid, it is converted into imprisonment. The imprisonment ends if the debt is paid, providing an incentive for the debtor to settle the amount due.
Restrictions on Check Issuing and Account Opening
A court may also prohibit the person who issued a bounced check from issuing new checks or opening check accounts for a certain period. This restriction aims to maintain the trustworthiness of checks as a payment tool in commerce. After the judgment, the person must return all unused checks to the bank and cannot open new check accounts.
This prohibition applies to individuals and legal entities that issued the check and company executives if the check was issued on behalf of a company. Those under this prohibition cannot serve on the boards of capital companies during the prohibition period, though current executives can continue until their term ends.
Legal Proceedings
Cases related to issuing bounced checks in Turkey are handled in enforcement courts, following the procedures outlined in the Enforcement and Bankruptcy Law. These cases are heard where the check was presented, the check account was opened, or where the check holder or complainant resides.
For postdated checks, bounced check penalty only applies if the check is presented within the legal presentation period and found without sufficient funds.
Timeframe for Complaints about Bounced Checks
Victims of bounced checks must file complaints within six months from the date of presentation. Failing to do so within this period can result in losing the right to claim penalties, making it difficult for victims to recover their losses. Therefore, it is crucial for the check holder to track these deadlines and take necessary legal steps promptly.
Liability of Endorsers for Bounced Checks
A check that is explicitly made payable "to order" or payable to a specific person without this phrase can be transferred by endorsement and delivery. A check made payable to a specific person can only be transferred through the assignment of the claim. This transfer produces the legal effects of the assignment of the claim. The responsibility of the endorser of a dishonored check arises from the transfer of the check. A check can be transferred to another person through an endorsement, and the person to whom it is endorsed becomes the bearer of the check. If the bearer presents the check to the bank and it is returned unpaid, both the drawer of the check and the previous endorsers may be held liable for this situation. However, the endorser does not have criminal liability because the crime of issuing a dishonored check can only be committed by the person who originally drew the check.
According to Article 808 of the Turkish Commercial Code, if it is established that a check, presented in due time, has not been paid, the bearer has the right to seek recourse against the endorsers, the drawer, and other check debtors. The protest must be made at the latest by the end of the presentation period, or if the check was presented on the last day, on the next business day. The bearer's right to seek recourse against the endorsers, the drawer, and other check debtors is subject to a statute of limitations of three years from the end of the presentation period. Therefore, these time limits should be observed, and procedural actions must be properly conducted.
Endorsing a check provides a certain assurance for the person receiving the check because the endorser, by transferring the check, creates the perception that the check is valid and has obtained some benefit in return for the check. Therefore, in the event the check is not paid, the bearer can also demand payment from the person or persons who endorsed the check.
Roadmap for Victims of Bounced Checks in Turkey
Victims of bounced checks in Turkey are defined as individuals or entities who do not receive payment because a check has not been honored due to insufficient funds. To protect rights, the following steps are recommended:
- Presenting the Check to the Bank: Even if it is known that the check will bounce, it should still be presented to the bank within the presentation period. This step is necessary to formally establish that the check is unpaid and to be eligible to claim the check leaf value from the bank.
- Drawing a Protest: In the event of a bounced check, obtain a written statement from the bank confirming that the check is unpaid, or draw a protest through a notary to notify the endorsers (those who have previously transferred the check).
- Legal Consultation: Victims of bounced checks should seek legal advice from an attorney from the outset of the process to discuss the legal avenues available and the steps to be taken. To initiate the legal action and use your rights you may contact us here.
- Filing Legal Actions: To recover losses incurred due to the bounced check, victims should promptly file the necessary legal and criminal complaints.
- Initiating Debt Collection: A legal process can be started to collect the amount of the check. This process can help the victim to recover the check amount along with interest and associated costs.
Frequently Asked Questions
How to write a check in Turkey?
To write a valid check, the following details must be included: - The amount to be paid, both in figures and in words. - The issuer's name. - The date of issue, is crucial for determining the presentation period. - The issuer's signature. - The place of payment, which can be a bank branch or a specified location. - The place of issue, if applicable. Any errors or omissions can invalidate the check or complicate the legal process if the check bounces.
What is the penalty for a bounced cheque in Turkey?
A check drawer is responsible for having sufficient funds in the bank account within the presentation period of the check. Failure to do so, causes the issuer to have criminal and legal liabilities for each bounced check. Endorsers also have legal liability for bounced checks as they create trust by using such checks.
Can you get in trouble for a returned check in Turkey?
Yes, the check issuer has both criminal and civil liability.
What happens if someone writes you a bad check?
Immediately contact a law firm in Turkey and promptly pursue legal and criminal actions.
Conclusion
Bounced checks pose significant challenges to the trust and stability of the commercial environment. Both issuers and endorsers of such checks bear serious responsibilities. The penalties for issuing bounced checks aim to protect commercial trust and economic order. Timely and appropriate legal action is essential for victims to recover their dues. Working with corporate lawyers in Turkey and seeking legal support can help prevent delays and ensure the proper handling of claims, thus maintaining the smooth flow of business operations and protecting against further instances of bounced checks.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.