You received payment from your customer for less than the full amount due and you are wondering if you can pursue a New York commercial debt collection claim against them. The customer clearly intends for the “on account” payment to represent “payment or settlement in full.” Can you accept the “on account” payment earmarked settlement in full and still pursue the customer for the balance?
According to New York State law, accepting payment which is in some way marked “payment in full” has the possibility of becoming an “accord and satisfaction,” full resolution of the outstanding balance. You must make clear, that payment is being applied as a payment and NOT as a “payment in full” as follows:
When Payment Received Via Check: A check marked “paid in full” can be accepted “on account” if specific language is added to the back of the check prior to endorsing it. On the back of the check before signing, add the words “Accepted under protest and with full preservation of all rights.” By adding this language you are able to accept the payment “on account” and pursue the customer for the balance. Should you fail to include the restrictive endorsement there will be an “accord and satisfaction” and you will not be permitted to pursue your customer in a New York commercial debt collection effort for the balance due.
When Payment Received by Other Means: If payment is not made by check, and is made by credit card, wire transfer, EFTPS, etc. the answer may not be as clear. Since there isn’t a physical check to write on, the payer will include a written statement indicating that payment will represent “payment in full.” In these situations you must respond and state that you will not accept the payment as “payment in full” and that you will accept it only as payment “on account.” You must allow the payer an opportunity to withdraw the payment. If you fail to provide the customer with notice and an opportunity to withdraw/reverse payment you will not be permitted to pursue the customer for the balance.
It is important to protect your rights as a creditor. For further information about pursuing a balance owed to you, or to submit a claim, please call this New York City commercial debt collection attorney at (212) 686-0100 or email jnager@ffgnesqs.com.
