New Law Protects New Jersey Businesses From Bad Electronic Transfers

While paper checks have been replaced by electronic funds transfers for many commercial transactions, New Jersey businesses still have to contend with rejected payments. Earlier this month, Gov. Chris Christie signed two measures into law that will help New Jersey businesses address bad electronic funds transfers.

The first new law, Assembly Bill 1162, amends New Jersey’s existing law concerning the issuing or passing of bad checks. The new law makes it clear that electronic funds transfers are included within the scope of the statute.

The existing New Jersey law applies to checks, drafts, and orders of withdrawals that are dishonored for lack of funds or because the maker does not have an account with the drawee. It provides a process for the payee to send the maker a demand for payment using a specific form, which indicates the amount owed. If the maker fails to pay the amount within 35 days of the date of the mailing of the demand for payment, the maker is subject to monetary damages, which may not exceed the amount of the check, draft, order, or electronic funds transfer by more than $500. Businesses can enforce their rights by filing a civil action in a court of competent jurisdiction. The same process now also applies to electronic funds transfers.

Individuals who knowingly make bad electronic transfers now also face criminal penalties. The second law, Assembly Bill 1153, amends New Jersey’s criminal statute (N.J.S.A.2C:21-5) that governs criminal liability for the issuance or passage of bad checks to clarify that electronic funds transfer are included within the scope of covered offenses.

Under the prior statue, a person violates the law if he issues or passes a check knowing that it will not be honored by the drawee. The amendment makes it clear that a person also commits an offense under this section if he authorizes an electronic funds transfer knowing that it will not be honored by the drawee. The amount of the check or electronic fund transfer determines the grading of the offense, which can range from a disorderly persons offense to a second-degree crime.

For specific tips to help your New Jersey business get paid, please check out our prior post.