Under Arkansas law, when can the $30 fee for a bounced check be collected, and does the right to that fee survive if the check is later paid when re-presented to the bank?

Plain-English summary

Senator Jeremy Hutchinson asked AG Dustin McDaniel about A.C.A. § 4-60-103, the Arkansas statute that lets the holder of a bounced check collect a $30 fee from the drawer. The questions: does the fee become owed when the check bounces, or only after a written demand is sent? And what if the check is later paid when re-presented to the bank?

The AG framed the analysis around a distinction the statute itself draws: the holder's rights vs. the drawer's obligations.

The statute reads: "A person who issues a check that is not paid because the check was written on an account with insufficient funds has fifteen (15) days following the date of a written demand mailed or delivered to the drawer of the check ... to pay to the holder of the check ... the amount of the check and a collection fee not to exceed thirty dollars ($30.00), plus the amount of any fees charged to the holder of the check by a financial institution as a result of the check's not being honored."

Question 1: When does the fee become "a valid and due obligation"? Only after the drawer receives a written demand. The statute doesn't require the holder to demand any collection fee at all. The holder has discretion whether to demand a fee, and (within the $30 cap) how much to demand. The drawer can't know whether or how much the holder will demand until the demand letter arrives. So the obligation crystallizes on receipt of the demand letter.

Question 2: If the check is later honored when re-presented, can the holder still demand the fee? Yes. The right to demand and the obligation to pay are different things. The right arose when the check was first dishonored. If the holder never sends a written demand, the drawer's obligation never arises, but the holder's right to send the demand still exists. The 2014 opinion concluded a court would probably hold the right to send a written demand continues even after the check is subsequently honored, for two reasons:

1. The statute imposes no timeline on the exercise of the holder's right to demand payment.
2. The statutory fees are designed to make the holder whole. The collection fee compensates the holder for having to attempt collection, and the holder is also entitled to recover any fees charged by the holder's own bank for the dishonor. Subsequent payment by the drawer's bank addresses only the debt itself, not the costs the holder incurred. Making the holder whole requires that the right to demand continue.

The AG hedged on the question of when the right finally ends. He noted "at some point, the holder's right will be cut off," but declined to say when, since the senator's question was about whether the right persists after the subsequent payment, not about its outer limit.

A repeated caveat: the AG explicitly said this opinion is not provided for the benefit of private parties. Disputes between specific holders and drawers should be referred to private counsel.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

When can a small business charge the $30 bounced-check fee in Arkansas?
At the time of this opinion, the business (as holder of the check) had the right to demand the fee as soon as the check was dishonored, but the drawer was not legally obligated to pay it until the drawer received a written demand. The demand must be mailed or delivered to the drawer at the address on the check or the drawer's last-known address.

Is the bounced-check fee automatic?
No. The statute gives the holder discretion to demand a collection fee (up to $30), but the holder isn't required to do so. The fee isn't automatically tacked onto the bounced check. It has to be specifically demanded in writing.

What if the bank fees were higher than $30?
The collection fee is capped at $30. But the holder can also recover "the amount of any fees charged to the holder of the check by a financial institution as a result of the check's not being honored." So if the holder's bank charged a $35 returned-item fee, the holder could recover that on top of the $30 collection fee, plus the face amount of the check.

Does the drawer have any time to pay after the written demand?
Yes. The drawer has 15 days following the date of the written demand to pay. If the drawer doesn't pay within 15 days, subsection (b) of the statute kicks in (which the 2014 opinion didn't analyze in detail because it wasn't needed for the answers given).

If a bounced check is later paid through the bank, can the merchant still demand the $30 fee?
At the time of this opinion, yes. The right to demand the fee arose when the check first bounced. Subsequent payment of the underlying debt doesn't extinguish the right to recover collection costs the holder incurred.

What documentation does the written demand need to include?
The 2014 opinion didn't go into format specifics. But A.C.A. § 4-60-103(a) describes the demand as "mailed or delivered" to the drawer at the address shown on the check or last-known address, identifies the check, and states the maximum amount that may be demanded (face value + up to $30 + bank fees).

Background and statutory framework

A.C.A. § 4-60-103 is Arkansas's dishonored-check collection statute. It does two things:

• Subsection (a) sets up the initial collection process: written demand, 15-day window to pay, maximum amount that can be demanded (face + $30 + bank fees).
• Subsection (b) addresses what happens if the drawer fails to comply, giving the holder additional remedies. The 2014 opinion didn't analyze subsection (b) in detail.

The statute uses a careful sequence:

1. Person issues check → check bounces for insufficient funds.
2. Holder sends written demand (optional; holder has discretion).
3. Drawer has 15 days from the demand to pay face value + up to $30 collection fee + bank fees.

The "permissive but cumulative" structure is the key to the opinion: the holder has rights immediately, but the drawer only has obligations after notice. This is consistent with general due-process principles: a person can't be on the hook for something they don't know they owe.

The AG also flagged a practical point that affects how the statute is read: the collection fee is meant to compensate the holder for their collection effort, not to penalize the drawer. The remedial purpose argues for letting the holder's right to demand persist even after subsequent payment.

Citations

• A.C.A. § 4-60-103 (dishonored check collection statute)
• A.C.A. § 4-60-103(a) (initial collection process with written demand)
• A.C.A. § 4-60-103(b) (consequences of drawer's failure to comply)

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinion No. 2014-010
May 1, 2014

STATE OF ARKANSAS
THE ATTORNEY GENERAL
DUSTIN McDANIEL

The Honorable Jeremy Hutchinson
Assistant Pro Tempore
Arkansas State Senate
201 East North Street
Benton, Arkansas 72015

Dear Senator Hutchinson:

You have asked for my opinion regarding A.C.A. § 4-60-103, which addresses
certain fees associated with dishonored checks. You give the following
background information:

[M]any small businesses accept personal checks as payment for
goods and services. Some of these checks are dishonored. Arkansas
law provides a process for restitution that includes a statutory fee
above the face value of the check. Questions have arisen as to when
a fee can be claimed on dishonored checks under A.C.A. § 4-60-103.

With this background in mind, you ask two questions:

1. Is the $30 fee an inherent part of the restitution process becoming a
   valid and due obligation only on written demand mailed or delivered
   to the drawer of the check, or is the fee an obligation predicated
   solely on the condition that the check was not paid?

2. If the holder of a dishonored check forgoes the process of restitution
   covered by the statute and presents the check again for payment
   through the bank, whereby it is paid, is a fee still a valid obligation
   because the check was not honored the first time it was presented for
   payment?

RESPONSE

In addressing these questions, it will be helpful to first distinguish the statute's
treatment of the holder's rights and the drawer's obligations. If the check is not
paid due to insufficient funds, then the check's holder immediately acquires the
right to demand, among other things, a collection fee not to exceed $30. But the
drawer's obligation to pay that fee only arises upon receipt of a written demand for
it. Thus, in response to your first question, the drawer's obligation to pay the
collection fee only arises upon receipt of a written demand for it. In response to
your second question, the holder's right to the collection fee arose when the check
was initially dishonored. But the drawer's obligation to pay the fee never arose
because the holder never issued a written demand. So the underlying issue is
whether the holder's right to issue a written demand continues even after the check
was subsequently honored when it was resubmitted to the financial institution. For
reasons explained below, I believe a court would probably hold that, though the
right to issue a written demand does not exist indefinitely, it does continue even
after the subsequent payment.

DISCUSSION

Before addressing your questions, I must make a preliminary note about the scope
of my analysis. Lest I engage in the private practice of law, I will only be
addressing your questions from the perspective of an interpretation of A.C.A. § 4-
60-103. Thus, I will not consider how the statute (or the factual scenario you
provide) relates to federal laws or to any agreement (implied or express) between
the parties. I must also emphasize that this opinion is not provided for the benefit
of private parties, which should consult private counsel for any legal advice.

For purposes of this opinion, we can say that section 4-60-103 has two primary
parts. The first part, contained in subsection -103(a), addresses the initial phase
of the collections process. The second part, contained in subsection -103(b),
addresses what happens if the drawer of the check fails to comply with the
procedures in the first phase. Because the resolution of your questions hinges
mostly on an exposition of the initial phase, I will focus my analysis on it.

Subsection -103(a) states:

A person who issues a check that is not paid because the check was
written on an account with insufficient funds has fifteen (15) days
following the date of a written demand mailed or delivered to the
drawer of the check at the address shown on the check or his or her
last known address to pay to the holder of the check or his or her
agent the amount of the check and a collection fee not to exceed
thirty dollars ($30.00), plus the amount of any fees charged to the
holder of the check by a financial institution as a result of the
check's not being honored.

This statute establishes three clear steps in the collection process. First, a person,
who is later called the "drawer," must have issued a check that was not paid due
to "insufficient funds." The second step is obscured by the provision's syntax: "A
person who issues a check that is not paid because ... [of] insufficient funds has
fifteen (15) days following the date of a written demand ... to pay the holder of the
check...." The emphasized language contains the second step:
a written demand must be sent to the drawer. The provision goes on to describe
where the letter must be sent (if mailed) and the maximum amount that may be
demanded. The maximum demand is the sum of the check's original amount, plus
a collection fee "not to exceed" $30, plus any fees charged to the check's holder
by a financial institution "as a result of" the check being dishonored. Third, upon
receiving such a letter, the drawer has 15 days to pay the required amount.

With this brief exposition in mind, we can now turn to your two questions.

Question 1: Is the $30 fee an inherent part of the restitution process becoming a
valid and due obligation only on written demand mailed or delivered to the
drawer of the check, or is the fee an obligation predicated solely on the
condition that the check was not paid?

I understand this question to be asking about what triggers the drawer's obligation
to pay the $30 fee: the check being dishonored or the receipt of the demand letter
issued in compliance with section 4-60-103(a). As noted above, the demand for
the collection fee, which cannot exceed $30, is conveyed by the written
demand. There is nothing in the statute that requires the holder to demand any
collection fee at all. Section 4-60-103 leaves the holder with the discretion
whether to demand a collection fee and, if so, the fee's amount (though it cannot
exceed $30). It is only at the point of receiving the demand letter that the drawer
knows whether and how much the holder will demand for the collection fee.
Accordingly, the answer to your question (as I understand it) is that the collection
fee becomes "a valid and due obligation" only upon receipt of a written demand
letter from the holder.

Question 2: If the holder of a dishonored check forgoes the process of
restitution covered by the statute and presents the check again for payment
through the bank, whereby it is paid, is a fee still a valid obligation because the
check was not honored the first time it was presented for payment?

The response to this question will be clearest if we distinguish between the
holder's rights and the drawer's obligations. As soon as the check is dishonored,
the holder has a right (by virtue of section 4-60-103) to demand payment of the
check's face value, a collection fee not to exceed $30, and any fees charged to the
holder by the holder's bank for the check's nonpayment. But the drawer's
obligation (under section 4-60-103) to pay these fees does not arise until the
drawer receives the written demand for them.

Under the question you pose, when the check was initially dishonored, the holder
had a right to send the written demand discussed above. When you say that the
holder decided to "forgo[] the process of restitution," I assume you mean that the
holder never sent a written demand. As noted above, the drawer's obligation to
pay the collection fee only arises upon receipt of the written demand. Therefore,
the drawer's obligation to pay the fee never arose in the first place. In order for the
collection fee to become a "valid obligation," the holder would have to issue a
written demand in compliance with section 4-60-103.

Thus, the answer to your question turns on whether the holder still has a right to
send a written demand for the fees after the check was subsequently honored.
While section 4-60-103 does not expressly address this issue, I think a court would
probably draw several inferences from the text of section 4-60-103 to conclude
that the holder's right to issue the written demand does continue to exist.

First, the statute does not fix any timeline on the exercise of the holder's right to
demand payment. Second, the purpose of the statutory fees appears to be designed
to make the holder whole. The collection fee is designed to compensate the holder
for having to attempt to secure payment. And the holder is entitled to be
compensated for "the amount of any fees charged to the holder of the check by a
financial institution as a result of the check's not being honored." The fact that the
check was subsequently honored by the financial institution only addresses the
payment of the debt, not the payment of the restitution reflected in statutory fees.
Thus, the fact of subsequent payment alone does not make the holder whole,
which seems to indicate that the holder's right to be made whole persists. I hasten
to add that, at some point, the holder's right will be cut off. Because the only issue
here is whether the holder's right continues after the subsequent payment, I will
not address when it might end.

I must close by reiterating that this opinion is not provided for the benefit of
private parties and should not be relied upon for that purpose. Any private parties
interested in resolving a dispute arising under section 4-60-103 should consult
private counsel for any needed legal service.

Assistant Attorney General Ryan Owsley prepared the foregoing opinion, which I
hereby approve.

DUSTIN McDANIEL
Attorney General

DM:RO/cyh