Answer: I am unaware of any specific California law that prohibits this practice, but I there are cases in other states where the merchant has been held liable for invasion of privacy under similar circumstances. I have seen this type of display before and I doubt that merchants have really gained much besides the satisfaction of revenge.
The check will contain the account number and address of the check writer. In this day and age, it is very possible the a court could find the merchant liable if the display of a dishonored check lead to identity theft or some other financial loss to the person who wrote the bad check.
If the debtor files for bankruptcy, continuing to display the check could be considered an effort to collect the debt and a violation of the automatic stay or the discharge order.
California Civil Code Section 1719 allows a merchant to collect treble damages on a bounced check of up to $1500. Filing a small claims lawsuit and obtaining judgment against the bad check writer will place the judgment on their credit and this will be far more effective in helping you get your money than trying to publicly shame the debtor.
About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.