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H.B. 218

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CHARGE BY MERCHANT OR SERVICE

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PROVIDER FOR DISHONORED CHECKS

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1997 GENERAL SESSION

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STATE OF UTAH

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Sponsor: Lloyd W. Frandsen

6    AN ACT RELATING TO FINANCIAL INSTITUTIONS; INCREASING THE DISHONORED
7    CHECK SERVICE CHARGE FOR MERCHANTS OR SERVICE PROVIDERS; ALLOWING
8    FOR DAMAGES; AND MAKING TECHNICAL CORRECTIONS.
9    This act affects sections of Utah Code Annotated 1953 as follows:
10    AMENDS:
11         7-15-1, as last amended by Chapters 52 and 128, Laws of Utah 1988
12         7-15-2, as last amended by Chapters 52 and 128, Laws of Utah 1988
13         7-15-3, as enacted by Chapter 52, Laws of Utah 1988
14    Be it enacted by the Legislature of the state of Utah:
15        Section 1. Section 7-15-1 is amended to read:
16         7-15-1. Definitions -- Civil liability of a writer of a check -- Notice of action --
17     Collection costs.
18        (1) [Any] For purposes of this chapter:
19        (a) "check" means any check, draft, order, or other instrument upon any depository
20    institution;
21        (b) "costs of collection " includes reasonable compensation, as approved by the court in
22    a civil action brought under this section, for time expended if the collection is pursued personally
23    by the merchant or service provider as holder of a check and not through an agent;
24        (c) "merchant or service provider" means a holder of a check from a writer of a check; and
25        (d) "writer of a check" means a person who makes, draws, signs, or issues any check,
26    [draft, order, or other instrument upon any depository institution,] whether as corporate agent or
27    otherwise, for the purpose of:


1        (i) obtaining from [any person, firm, partnership, or corporation] a merchant or service
2    provider any money, merchandise, property, or other thing of value; or
3        (ii) paying for any service, wages, salary, or rent.
4        (2) A writer of a check is liable to the [holder of the check, draft, order, or other
5    instrument] merchant or service provider who holds the check if:
6        (a) the check[, draft, order, or other instrument]:
7        (i) is not honored upon presentment; and
8        (ii) is marked "refer to maker"; or
9        (b) the account upon which the check[, draft, order, or other instrument] has been made
10    or drawn:
11        (i) does not exist[,];
12        (ii) has been closed[,]; or
13        (iii) does not have sufficient funds or sufficient credit for payment in full of the check[,
14    draft, or other instrument].
15        [(2)] (3) The [holder of] merchant or service provider who holds the check[, draft, order,
16    or other instrument which] that has been dishonored may:
17        (a) give written or verbal notice of dishonor to the [person making, drawing, signing, or
18    issuing] writer of the check[, draft, order, or other instrument]; and [may]
19        (b) impose a service charge that may not exceed [$15] $25.
20        (4) Prior to filing an action based upon this section, the [holder of a dishonored check,
21    draft, order, or other instrument] merchant or service provider shall give the [person making,
22    drawing, signing, or issuing] writer of the dishonored check[, draft, order, or other instrument]
23    written notice of intent to file civil action, allowing the person seven days from the date on which
24    the notice was mailed to tender payment in full, plus the service charge imposed for the dishonored
25    check[, draft, order, or other instrument].
26        [(3)] (5) In a civil action, the [person making, drawing, signing, or issuing the check, draft,
27    order, or other instrument] writer of the check is liable to the [holder] merchant or service provider
28    who holds the check for:
29        (a) the amount of the check[, draft, order, or other instrument];
30        (b) interest; [and]
31        (c) all costs of collection, including all court costs and reasonable attorneys' fees[.]; and

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1        [(4) As used in this section, "costs of collection" includes reasonable compensation, as
2    approved by the court, for time expended if the collection is pursued personally by the holder and
3    not through an agent.]
4        (d) damages that are the lesser:
5        (i) of $500; and
6        (ii) the greater of:
7        (A) three times the amount of the check; and
8        (B) $100.
9        Section 2. Section 7-15-2 is amended to read:
10         7-15-2. Notice -- Form.
11        (1) (a) ["Notice"] For purposes of this chapter, "notice" means notice given to the [person
12    making, drawing, or issuing the] writer of a check[, draft, order, or other instrument] either in
13    person or in writing.
14        (b) A written notice is conclusively presumed to have been given when the notice is:
15        (i) properly deposited in the United States mails, postage prepaid, by certified or registered
16    mail, return receipt requested[,]; and
17        (ii) addressed to the [signer] writer of the check at [his]:
18        (A) the writer of the check's address as it appears on the check[, draft, order, or other
19    instrument]; or
20        (B) at [his] the writer of the check's last-known address.
21        (2) Written notice as applied in Subsection 7-15-1[(2)](4) shall take substantially the
22    following form:
23        Date: ____
24        To: _____
25        You are hereby notified that the check(s) described below issued by you has (have) been
26    returned to us unpaid:
27        [Instrument] Check date: ____
28        [Instrument] Check number: ____
29        Originating institution: ____
30        Amount: ____
31        Reason for dishonor (marked on [instrument] check): ____

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1        [This instrument] The check(s), together with a service charge of [$15] $25 must be paid
2    to the undersigned within seven days from the date of this notice in accordance with Section
3    7-15-1, Utah Code Annotated 1953, or appropriate civil legal action may be filed against you for
4    the amount due and owing together with service charges, interest, court costs, attorneys' fees, [and]
5    actual costs of collection, and damages as provided by law.
6        In addition, the criminal code provides in Section 76-6-505, Utah Code Annotated 1953,
7    that any person who issues or passes a check for the payment of money, for the purpose of
8    obtaining from any person, firm, partnership, or corporation, any money, property, or other thing
9    of value or paying for any services, wages, salary, labor, or rent, knowing it will not be paid by the
10    drawee and payment is refused by the drawee, is guilty of issuing a bad check.
11        The civil action referred to in this notice does not preclude the right to prosecute under the
12    criminal code of the state of Utah.
13        (Signed)     _____________________________________________________________
14        Name of Holder:     _______________________________________________________
15        Address of Holder:     _____________________________________________________
16        Telephone Number:     ____________________________________________________
17        Section 3. Section 7-15-3 is amended to read:
18         7-15-3. Liability of financial institution upon wrongful dishonor.
19        If a person is liable to a [holder] merchant or service provider under Section 7-15-1, and
20    the liability is proximately caused by a financial institution's wrongful dishonor under Section
21    70A-4-402, any award against the financial institution under Section 70A-4-402 shall include, but
22    not be limited to, all amounts awarded against the person to the [holder] merchant or service
23    provider under Section 7-15-1.




Legislative Review Note
    as of 1-2-97 11:52 AM


A limited legal review of this bill raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


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