Did Your Tenant Write You A Worthless Check? Consider New Restitution Program

One of my earliest blog posts, back when I had just started Tristan's Landlord-Tenant Law Blog, was about the fact that the City of Milwaukee Police Department had a policy in place where they refused to investigate crimes in which a tenant made their rent payment with a worthless check or stopped payment on the check. Shortly thereafter I wrote about a new diversion program that was being created to assist landlords in such a situation.

I was attending the February monthly meeting for Milwaukee RING (Real Estate Investors Networking Group) this past Monday and they had a speaker from the company that is now running this new program. Mr. Rufus McNealy of Financial Crimes Services, LLC (FCS) spoke to us about the diversion/accountability program that is now in full effect.

Mr. McNealy handed out a very informative guide outlining the program and including the necessary applications to enter into the program.

With the current recession the District Attorney's Office says that they are receiving more and more complaints of people passing worthless checks. Due to limited funding, the DA's office cannot afford to prosecute all of these these crimes. So the DA's office and FCS partnered to try to get some of that money back for the victims -- and this includes landlords.

The goals of the program are:

1. Increase the amount of restitution returned to victims of bad checks.

2. Increase the accountability of all worthless check writers (regardless of the amount of the check).

3. Educate local merchants about more effective check acceptance procedures.

4. Reduce the risk of repeat worthless check activity through training.

There is no cost to any landlord that wishes to try this diversion program. All costs of the program are born by the worthless check writer.

The program will handle the following kinds of checks: NSF, Account Closed, Stop Payment, Refer to Maker, Business to Business, RENT checks, debit card charge backs, ACH (Automatic Clearing House) charge backs, ACH NSF's and electronic checks received in Milwaukee County that do not exceed $2,500.

The following types of checks will not be handled by the program: second-party checks, payroll checks, checks that are currently in collections with a collection agency or attorney, and promissory notes or any other situation in which there has been agreement to hold the check for deposit or credit extension.

The final two pages of the PDF that I have linked to above are the "Memorandum of Understanding" which the landlord would review, sign and return to FCS, and a Preliminary Worthless Check Report which the landlord should complete and send to the Milwaukee County DA Program. Hold on to these two pages . . . just in case you find yourself in a situation where this program can help you.

Once FCS receives the above info from the landlord the company will attempt to contact the person that passed the bad check. The criminal will then have the option of (1) entering into the program and paying restitution to the victim or (2) refuse to enter into the program in which case the matter will be sent for potential prosecution.

It is my understanding that FCS is also partnering with Racine County and Kenosha County in addition to Milwaukee County. FCS is not currently working with Waukesha County.

Those of you that are interested in learning more about this program may contact Mr. McNealy at (414) 393-9385 or visit his company's website at www.financialcrimes.net

The AASEW has also schedule Mr. McNealy to speak about this program at its May meeting.

Worthless Check Diversion Program: An Opportunity To Collect On "Bad Checks"

The Miwaukee County District Attorneys Office has adopted a new program that will hopefully allow landlords to collect on bad checks that were passed by their tenants. The goal of the program is to get the bad-check writers to pay back the money owed in exchange for not being charged with a crime or referred to collections.

This program, entitled the Worthless Check Diversion Program, is a positive step for landlords because currently the Milwaukee Police Department will not prosecute tenants that write bad rent checks. See my earlier blog post on this topic entitled "Passing of Worthless Checks Will Not Be Prosecuted in City of Milwaukee."

Assistant District Attorney Ron Dague spearheaded this new program for the DA's Office and even spoke at an AASEW membership meeting about the program back in January of this year. The goal was for the program to be up and running by April. According to a recent Journal Sentinel article entitled "Program Allows Writers of Bad Checks To Pay Up, Avoid Charges" written by Tom Kertscher, the program has been operating for the past few months, however the Milwaukee Police Department is not yet participating.

The program will be run by a company called Financial Crime Services. To participate a landlord that has received a bad check from a tenant must contact Financial Crime Services and provide them with the necessary information. The company will then send a letter to the bad-check writer. If the bad-check writer is willing to participate in the program, which they will have to pay for themselves, they must attend an educational based program to teach them about budgeting, finances and bank fees. Upon completion of the program (which includes paying restitution) the bad-check writer will receive a letter advising them that they will not be criminally prosecuted for committing the crime.

There are no fees to the landlord for participating in this program. If and when restitution is collected, 100% of the money is returned to the landlord. Financial Crime Services will not charge a processing fee or take a percentage of the money collected.

If a tenant (who is now hopefully an ex-tenant) wrote you a bad check that you haven't been able to collect on, this program might be something to look into.

PASSING OF WORTHLESS CHECKS WILL NOT BE PROSECTED IN CITY OF MILWAUKEE

Issuing a worthless check is a crime in Wisconsin. Accordingly, when a tenant pays his/her rent or security deposit with a worthless check I typically advise my landlord clients to do two things: (1) serve the tenant with the proper notice terminating tenancy for failure to pay rent so that an eviction action can be commenced against the tenant, and (2) report the crime to the local police so that a potential criminal action could be initiated against the tenant. Unfortunately, this second piece of advice is no longer valid -- at least for clients who own or manage rental property in the City of Milwaukee.

The Milwaukee Police Department have in place a written policy statement containing 20 exceptions to its normal prosecution of "worthless check" complaints, and one of those policy exceptions directly affects landlords and/or their agents: Policy Exception 17 states that "checks issued pursuant to any contractual agreement, including the payment of rent or security deposits for rental property," will not be pursued. The Milwaukee Police Department does not provide an explanation or rationale for this policy exception. And upon reading the entire list of policy exceptions, I am hard pressed to come up with any situation involving the issuance of a worthless check which wouldn't fall under one of the twenty exceptions. Apparently, the Milwaukee Police Department is not interested in pursuing individuals who pass worthless checks in general and, specifically, the MPD will not pursue tenants who pass them to their landlords.

This means that it is more important than ever that City of Milwaukee landlords and/or property managers do thorough and legal background checks on all prospective tenants in order to increase their odds of obtaining trustworthy and responsible tenants. Secondly, landlords may want to consider adding language to their standard rental agreements stating that any and all rental payments and security deposit payments must be made via certified funds (i.e., certified check/cashier's check or money order). Third, City of Milwaukee landlords now have another reason not to allow tenants who have fallen behind with their rent payments to continue to reside in the their properties.

In order to protect yourself and your properties, landlords or their managers should consider commencing an eviction against a tenant as soon as the tenant is late in paying even one month's rent. If landlords continue to allow tenants to get further behind in rent payments and continue to accept promises of future payments from such tenants, landlords will increase the chances that the promised past due rent payments will be made via worthless checks -- and now landlords will receive absolutely no assistance from the Milwaukee Police Department when trying to recover these funds from their tenants.