Texas check cashing laws allow financial institutions and individuals to file criminal charges and assess fees against people who write bad or fraudulent checks. Criminal charges could, however, be affected if the person has filed bankruptcy. Texas also regulates some activities of check cashing/payday loan businesses. As of September 2010, there are no Texas laws in place pertaining to banks charging non-customer fees to cash checks, despite the state's attempt to regulate such fees.
Check Cashing Laws and Fraud
The state of Texas can prosecute people who knowingly cash bad checks. Generally, cashing or paying by a check with insufficient funds isn't considered criminal unless it is done to pay for a COD order, or if the person wrote the check on a bank account they knew held an insufficient amount to cover the checks. Checks that don't typically fall under the category of illegally-written checks are post-dated, third-party, payroll or hold checks as well as checks that are payments on debts. For someone found criminally guilty of passing bad checks in Texas, punishments include serving from 30 days to 10 years in jail, depending on the severity of the charge, paying a fine of $1,000, or both.
To assist banks and other financial institutions in catching those guilty of writing and cashing bad or fraudulent checks, the Texas Banking Association manages a Web site, Fraud-Net.com. Banks use this site to track bad check writers and alert against fraudulent checks. The TBA also provides banks with tools for stopping identity theft through thumbprint signature and identity recovery programs that help banks in locating and prosecuting offenders.
Bad Check Fees
Banks and other parties who are victims of bad check writers can charge a reasonable fee to the check writer, but the fee can't exceed $30. If the person has filed bankruptcy, however, the bank or individual will need to contact the bankruptcy court about being included as a creditor in the person's case in order to recover any money related to the bad check.
If the transaction involving the bad check meets Texas criteria for "theft by check" charges, however, the bankruptcy doesn't protect the person; the bank or individual may file a criminal claim against the check writer in the appropriate court.
Check Cashing Businesses Offering Payday Loans
Businesses specializing in cashing checks for the purpose of providing what are known as "payday loans" exist all across the country and are thriving in Texas. The Texas Attorney General's Office keeps a close watch on these businesses, filing lawsuits against those that are abusive to their customers. In fact, the state won a lawsuit against two of these businesses that resulted in new regulations that include protection for consumers against outrageous interest rates for check cashing loans and false or misleading acts by payday lenders. Texas law now also caps interest rates on short-term loans by unlicensed businesses at 10 percent.
Non-Customer Check Cashing Fees
Banks in Texas are legally allowed to charge a fee to non-customers who want to cash a check, despite efforts by the Texas legislature to make such fees illegal via an amendment to SB 314, the Sunset Banking Bill. Five of the state's largest banks successfully blocked the law by winning an injunction that stopped the law from taking effect. The court deemed such a law was outside the state's jurisdiction.
Most banks do recognize account holders within a bank chain and don't require you to bank at a specific branch to cash checks free of charge. People cashing checks at a bank where they do not have an account, however, can be charged a check cashing fee of any amount the bank chooses to assess.
