| Assuming it is executed properly and valid by a | | | | action and reporting it to the credit bureaus. In a |
| state's laws, a restrictively endorsed check can be | | | | case where you have good grounds for your |
| employed in some situations with a likelihood of | | | | bona fide dispute and can substantiate it, the |
| good results. | | | | restrictively endorsed check may prove |
| In the case of bodywork performed on a car, for | | | | somewhat useful. |
| example, the value of the work relative to the | | | | If you can demonstrate a bona fide contract |
| dollar amount charged might be called into | | | | dispute over anything that involves goods or |
| question, and this is where a bona fide dispute is | | | | services, such as auto repair, contract work, |
| far more palpable. Was the work actually | | | | medical bills, or faulty goods, and the other party |
| completed? Did the work performed actually | | | | has actually cashed your restrictively endorsed |
| cause a reduction in value of the car? Did the car | | | | check, you've just added weight to any legal case |
| sit in the shop for an unreasonable period? Did the | | | | that may develop (assuming you've properly |
| other party breach the contract in some way? | | | | employed such a check under the law). In fact, |
| Complicating things even further, in some states, | | | | with the canceled check in hand you could file suit |
| such as Ohio, there's a rule called "substantial | | | | requesting a declaratory judgment and provide all |
| performance," where if a contractor's | | | | of the supporting evidence, including the original |
| performance departs from the contract in only | | | | contract, receipts for any payments you've |
| minor respects, then the contractor is still entitled | | | | made, correspondence showing a bona fide |
| to get paid. | | | | dispute, and a copy of the canceled check. This |
| If you purchased a dealer-financed auto and then | | | | way, you've either preempted collection action or |
| the auto failed to perform within reasonable | | | | stopped it, and possibly prevented a lawsuit from |
| expectations, compounded by the dealer's refusal | | | | showing up on your credit report. |
| to properly repair it, you may have a case of | | | | It's clear that using restrictively endorsed checks |
| questionable value with the dealer-creditor. And | | | | after collection action has occurred is probably not |
| remember seller-related defenses? Even if the | | | | a good idea. Yet, the safest and most effective |
| auto was financed by a third party that had a | | | | way to employ such a check is when a new |
| special relationship with the dealer (e.g., one the | | | | dispute exists with another party over the goods |
| dealer steered you to), the lender is still liable for | | | | or services rendered and it is being used in an |
| the defective automobile. Could you send a valid | | | | effort to prevent collection activity or legal action |
| restrictively endorsed check to the lender? | | | | in the first place. When disputes first occur, the |
| Probably. But it's likely that the lender would cash | | | | receiver of the check is not likely to be an |
| it and continue to bill you unless you were to take | | | | attorney or collection agency and won't have the |
| legal action against it. | | | | wherewithal to question the legalities of such a |
| Taking another scenario, let's say you send the | | | | check and will likely simply accept it at face value. |
| restrictively endorsed check to the party with | | | | Furthermore, proper employment early on can |
| whom you have a contract dispute and the other | | | | also prevent adverse information from showing |
| party cashes it yet still continues taking collection | | | | up on your credit report. |