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Who’s on the hook for a bad check?

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Depositing a bad check could leave you in a sticky situation.

A Kansas-based bank knows this all too well. In August, a Landmark National Bank customer deposited checks worth $10.3 million that bounced.

The checks were made out to the customer by a third party. When Landmark brought the checks to the third party’s financial institution for payment, they were returned “due to uncollected funds related to the third party,” according to a recent filing with the Securities and Exchange Commission.

The customer’s account overdrafted because Landmark apparently allowed the customer to withdraw the money before the checks cleared. The bank declined to say whether the customer faces any accountability in the incident, but Landmark’s holding company reported in its filing it could lose about $5.4 million after taxes. Landmark has recovered about $1.7 million from the third party’s financial institution.

Most consumers don’t have to worry about bounced checks costing them millions of dollars. But in case you receive a bad check, it helps to know who’s at fault and whether you’ll need room in your budget for penalties and fees.

What to do if you get a bad check

If you deposit a bad check, you’re on the hook for it.

“You’re responsible for the checks that you deposit,” says Susan Grant, director of consumer protection and privacy at the Consumer Federation of America. “And if they’re bad, you’re gonna be responsible for paying the bank back any of the money that you’ve withdrawn.”

If you intentionally deposit a bad check, you could be subject to both civil and criminal penalties, says Chip MacDonald, an Atlanta-based bank regulatory lawyer at a firm called Jones Day. Consequences may vary depending on your state and the size of the check.

Deposited a bad check by accident? Contact whoever wrote the check and ask for the money you’re owed.

If the check writer won’t cooperate, you can fight back. Consider getting a lawyer involved, particularly if you’re dealing with a large amount of money. Go to the state prosecutor’s office in the county in which the transaction took place, says Eric Boehmer, founder and owner of Boehmer Law, a firm based in St. Charles, Missouri.

If you unknowingly deposit a bad check and spending those funds results in an overdraft, be prepared for your bank to hold you accountable.

“Not only can the bank hold you responsible for the funds but it can close your account for account abuse,” Grant says. “You may never be able to get another checking account anywhere because banks share that information about account abuse through a specialized reporting bureau such as ChexSystems.”

Use checks wisely

Banks may have their own policies, but under federal law, funds from many types of check deposits must be available within one business day. Technically, banks can honor checks before knowing whether there are existing funds to cover them.

“The safest thing is to wait until the check clears and if you are not sure, don’t ask your bank if the funds are available,” says Cathy Lesser Mansfield, a professor at Drake University Law School in Des Moines, Iowa. “Ask your bank if the check has been fully paid.”

As an alternative, Mansfield suggests requesting a certified check, a personal check that a bank must confirm is good. But, she warns, wait until those checks clear, too. Scammers can create fake certified checks.

The average insufficient funds fee is around $33.04, according to a recent Bankrate survey. So spending money before checks have cleared can add up if you overdraw your account. Besides knowing the bank’s rates on auto loans and savings accounts, you should know how much it charges for fees.

Watch out for fraudsters

Check fraud remains common. In 2016, more than 16 percent of complaints received by (a project of the National Consumers League) were about fake check scams, up from 13.75 percent in 2015.

To protect yourself from these schemes look out for red flags, Grant says, such as someone asking you to wire money after you receive a check. Be cautious when depositing checks from strangers.

“The fraudsters are wily and they know how to manipulate,” says Nessa Feddis, senior vice president and deputy chief counsel for consumer protection and payments at the American Bankers Association. “But it’s really important for people to question any check from a stranger.”