Third Substitute H.B. 86

Senator L. Alma Mansell proposes to substitute the following bill:

1 CHECK ABUSE AMENDMENTS
2 1999 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: John E. Swallow
5 AN ACT RELATING TO COLLECTING ON DISHONORED INSTRUMENTS; AMENDING
6 PROVISIONS RELATED TO DISHONORED CHECKS OR OTHER INSTRUMENTS;
7 PROVIDING EXCEPTIONS; AND MAKING TECHNICAL CHANGES.
8 This act affects sections of Utah Code Annotated 1953 as follows:
9 AMENDS:
10 7-15-1, as last amended by Chapter 245, Laws of Utah 1997
11 7-15-2, as last amended by Chapter 245, Laws of Utah 1997
12 35A-4-305, as last amended by Chapter 13, Laws of Utah 1998
13 Be it enacted by the Legislature of the state of Utah:
14 Section 1. Section 7-15-1 is amended to read:
15 7-15-1. Definitions -- Civil liability of issuer -- Notice of action -- Collection costs.
16 (1) As used in this chapter:
17 (a) "Check" means a payment instrument on a depository institution including a:
18 (i) check;
19 (ii) draft;
20 (iii) order; or
21 (iv) other instrument.
22 [(1) Any] (b) "Issuer" means a person who makes, draws, signs, or issues [any] a check[,
23 draft, order, or other instrument upon any depository institution], whether as corporate agent or
24 otherwise, for the purpose of:
25 (i) obtaining from any person[, firm, partnership, or corporation] any money, merchandise,

26 property, or other thing of value; or
27 (ii) paying for any service, wages, salary, or rent.
28 (c) "Mailed" means the day that a notice is properly deposited in the United States mail.
29 (2) (a) An issuer of a check is liable to the holder of the check[, draft, order, or other
30 instrument] if:
31 [(a)] (i) the check[, draft, order, or other instrument]:
32 [(i)] (A) is not honored upon presentment; and
33 [(ii)] (B) is marked "refer to maker"; [or]
34 [(b)] (ii) the account upon which the check[, draft, order, or other instrument has been] is
35 made or drawn:
36 [(i)] (A) does not exist;
37 [(ii)] (B) has been closed; or
38 [(iii)] (C) does not have sufficient funds or sufficient credit for payment in full of the
39 check[, draft, or other instrument.]; or
40 (iii) (A) the check is issued in partial or complete fulfillment of a valid and legally binding
41 obligation; and
42 (B) the issuer stops payment on the check with the intent to:
43 (I) fraudulently defeat a possessory lien; or
44 (II) otherwise defraud the holder of the check.
45 (b) If an issuer of a check is liable under Subsection (2)(a), the issuer is liable for:
46 (i) the check amount; and
47 (ii) a service charge of $20.
48 [(2)] (3) (a) The holder of [the] a check[, draft, order, or other instrument] that has been
49 dishonored may:
50 (i) give written or [verbal] oral notice of dishonor to the [person making, drawing, signing,
51 or issuing] issuer of the check[, draft, order, or other instrument]; and
52 (ii) [impose a] waive all or part of the service charge [that may not exceed $20] imposed
53 under Subsection (2)(b).
54 (b) Notwithstanding Subsection (2)[(a)](b), a holder of a check[, draft, order, or other
55 instrument] that has been dishonored may not [charge] collect and the issuer is not liable for the
56 service charge [permitted] imposed under Subsection (2)[(a)](b) if:

57 (i) the holder redeposits the check[, draft, order, or other instrument]; and
58 (ii) that check[, draft, order, or other instrument] is honored.
59 (4) If the issuer does not pay the amount owed under Subsection (2)(b) within 15 calendar
60 days from the day on which the notice required under Subsection (5) is mailed, the issuer is liable
61 for:
62 (a) the amount owed under Subsection (2)(b); and
63 (b) collection costs not to exceed $20.
64 [(3)] (5) (a) [Prior to] A holder shall provide written notice to an issuer before:
65 (i) charging collection costs under Subsection (4) in addition to the amount owed under
66 Subsection (2)(b); or
67 (ii) filing an action based upon this section[, the holder of a dishonored check, draft, order,
68 or other instrument].
69 (b) The written notice required under Subsection (5)(a) shall [give the person making,
70 drawing, signing, or issuing] notify the issuer of the dishonored check[, draft, order, or other
71 instrument written notice of intent to] that:
72 (i) if the amount owed under Subsection (2)(b) is not paid within 15 calendar days from
73 the day on which the notice is mailed, the issuer is liable for:
74 (A) the amount owed under Subsection (2)(b); and
75 (B) collection costs under Subsection (4); and
76 (ii) the holder may file civil action[, allowing] if the [person seven] issuer does not pay to
77 the holder the amount owed under Subsection (4) within 30 calendar days from the [date] day on
78 which the notice [was] is mailed [to tender payment in full, plus the service charge imposed for
79 the dishonored check, draft, order, or other instrument].
80 (6) (a) If the issuer has not paid the holder the amounts owed under Subsection (4) within
81 30 calendar days from the day on which the notice required by Subsection (5) is mailed, the holder
82 may offer to not file civil action under this section if the issuer pays the holder:
83 (i) the amount owed under Subsection (2)(b);
84 (ii) the collection costs under Subsection (4);
85 (iii) an amount that:
86 (A) is equal to the greater of:
87 (I) $50; or

88 (II) triple the check amount; and
89 (B) does not exceed the check amount plus $250; and
90 (iv) if the holder retains an attorney to recover on the dishonored check, reasonable
91 attorney's fees not to exceed $50.
92 (b) (i) Notwithstanding Subsection (6)(a), all amounts charged or collected under
93 Subsection (6)(a)(iii) shall be paid to and be the property of the original payee of the check.
94 (ii) A person who is not the original payee may not retain any amounts charged or
95 collected under Subsection (6)(a)(iii).
96 (iii) The original payee of a check may not contract for a person to retain any amounts
97 charged or collected under Subsection (6)(a)(iii).
98 [(4)] (7) (a) A civil action may not be filed under this section unless the issuer fails to pay
99 the amounts owed under Subsection (4) within 30 calendar days from the day on which the notice
100 required by Subsection (5) is mailed.
101 (b) In a civil action, the [person making, drawing, signing, or issuing] issuer of the check[,
102 draft, order, or other instrument] is liable to the holder for:
103 [(a)] (i) the check amount [of the check, draft, order, or other instrument];
104 [(b)] (ii) interest; [and]
105 [(c)] (iii) all costs of collection, including all court costs and reasonable attorneys' fees;
106 and
107 (iv) damages:
108 (A) equal to the greater of:
109 (I) $100; or
110 (II) triple the check amount; and
111 (B) not to exceed the check amount plus $500.
112 [(5) As used in this section, "costs of collection" includes reasonable compensation, as
113 approved by the court, for time expended if the collection is pursued personally by the holder and
114 not through an agent.]
115 (c) If an issuer is held liable under Subsection (7)(b), notwithstanding Subsection (7)(b),
116 a court may waive all or part of the amounts owed under Subsections (7)(b)(ii) through (iv) upon
117 a finding of good cause.
118 (d) (i) Notwithstanding Subsection (7)(b), all amounts charged or collected under

119 Subsection (7)(b)(iv) shall be paid to and be the property of the original payee of the check.
120 (ii) A person who is not the original payee may not retain any amounts charged or
121 collected under Subsection (7)(b)(iv).
122 (iii) The original payee of a check may not contract for a person to retain any amounts
123 charged or collected under Subsection (7)(b)(iv).
124 (8) This section may not be construed to prohibit the holder of the check from seeking
125 relief under any other applicable statute or cause of action.
126 Section 2. Section 7-15-2 is amended to read:
127 7-15-2. Notice -- Form.
128 (1) (a) "Notice" means notice given to the [person making, drawing, or issuing the] issuer
129 of a check[, draft, order, or other instrument] either [in person] orally or in writing.
130 (b) [A] Written notice may be given by United States mail that is:
131 (i) first class; and
132 (ii) postage prepaid.
133 (c) Notwithstanding Subsection (1)(b), written notice is conclusively presumed to have
134 been given when the notice is:
135 (i) properly deposited in the United States [mails,] mail;
136 (ii) postage prepaid[, by];
137 (iii) certified or registered mail[,];
138 (iv) return receipt requested[,]; and
139 (v) addressed to the signer at the signer's:
140 (A) address as it appears on the check[, draft, order, or other instrument]; or [at the
141 signer's]
142 (B) last-known address.
143 (2) Written notice [as applied in] under Subsection 7-15-1 [(3)] (5) shall take substantially
144 the following form:
145 Date: ____
146 To: _____
147 You are hereby notified that the check(s) described below issued by you has (have) been
148 returned to us unpaid:
149 [Instrument] Check date: ____

150 [Instrument] Check number: ____
151 Originating institution: ____
152 Amount: ____
153 Reason for dishonor (marked on [instrument] check): ____
154 [This instrument,] In accordance with Section 7-15-1 , Utah Code Annotated, you are liable
155 for this check together with a service charge of $20, which must be paid to the undersigned [within
156 seven days from the date of this notice].
157 If you do not pay the check amount and the $20 service charge within 15 calendar days
158 from the day on which this notice was mailed, you are required to pay within 30 calendar days
159 from the day on which this notice is mailed:
160 (1) the check amount;
161 (2) the $20 service charge; and
162 (3) collection costs not to exceed $20.
163 If you do not pay the check amount, the $20 service charge, and the collection costs within
164 30 calendar days from the day on which this notice is mailed, in accordance with Section 7-15-1 ,
165 Utah Code Annotated, [or] an appropriate civil legal action may be filed against you for:
166 (1) the check amount [due and owing together with];
167 (2) interest[,];
168 (3) court costs[,];
169 (4) attorneys' fees[, and];
170 (5) actual costs of collection as provided by law; and
171 (6) damages in an amount equal to the greater of $100 or triple the check amount, except
172 that damages recovered under this Subsection (6) may not exceed the check amount by more than
173 $500.
174 In addition, the criminal code provides in Section 76-6-505 , Utah Code Annotated, that any
175 person who issues or passes a check for the payment of money, for the purpose of obtaining from
176 any person, firm, partnership, or corporation, any money, property, or other thing of value or
177 paying for any services, wages, salary, labor, or rent, knowing it will not be paid by the drawee and
178 payment is refused by the drawee, is guilty of issuing a bad check.
179 The civil action referred to in this notice does not preclude the right to prosecute under the
180 criminal code of the state of Utah.

181 (Signed) _____________________________________________________________
182 Name of Holder: _______________________________________________________
183 Address of Holder: _____________________________________________________
184 Telephone Number: ____________________________________________________
185 Section 3. Section 35A-4-305 is amended to read:
186 35A-4-305. Collection of contributions -- Unpaid contributions to bear interest.
187 (1) (a) Contributions unpaid on the date on which they are due and payable, as prescribed
188 by the division, shall bear interest at the rate of 1% per month from and after that date until
189 payment plus accrued interest is received by the division.
190 (b) (i) Contribution reports not made and filed by the date on which they are due as
191 prescribed by the division shall be subject to a penalty to be assessed and collected in the same
192 manner as contributions due under this section equal to 5% of the contribution due if the failure
193 to file on time was not more than 15 days, with an additional 5% for each additional 15 days or
194 fraction thereof during which the failure continued, but not to exceed 25% in the aggregate and not
195 less than $25 with respect to each reporting period.
196 (ii) If a report is filed after such time and it is shown to the satisfaction of the division or
197 its authorized representative that the failure to file was due to a reasonable cause and not to willful
198 neglect, no addition shall be made to the contribution.
199 (c) (i) If contributions are unpaid after ten days from the date of the mailing or personal
200 delivery by the division or its authorized representative, of a written demand for payment, there
201 shall attach to the contribution, to be assessed and collected in the same manner as contributions
202 due under this section, a penalty equal to 5% of the contribution due.
203 (ii) A penalty may not attach if within ten days after the mailing or personal delivery,
204 arrangements for payment have been made with the division, or its authorized representative, and
205 payment is made in accordance with those arrangements.
206 (d) The division shall assess as a penalty a service charge, in addition to any other penalties
207 that may apply, in an amount not to exceed the [maximum] service charge [allowed] imposed by
208 [Subsection] Section 7-15-1 [(2)] for dishonored instruments if:
209 (i) any amount due the division for contributions, interest, other penalties or benefit
210 overpayments is paid by check, draft, order, or other instrument; and
211 (ii) the instrument is dishonored or not paid by the institution against which it is drawn.

212 (e) Except for benefit overpayments under Subsection 35A-4-405 (5), benefit overpayments,
213 contributions, interest, penalties, and assessed costs, uncollected three years after they become due,
214 may be charged as uncollectable and removed from the records of the division if:
215 (i) no assets belonging to the liable person and subject to attachment can be found; and
216 (ii) in the opinion of the division there is no likelihood of collection at a future date.
217 (f) Interest and penalties collected in accordance with this section shall be paid into the
218 Special Administrative Expense Fund.
219 (g) Action required for the collection of sums due under this chapter is subject to the
220 applicable limitations of actions under Title 78, Chapter 12, Limitation of Actions.
221 (2) (a) If an employer fails to file a report when prescribed by the division for the purpose
222 of determining the amount of the employer's contribution due under this chapter, or if the report
223 when filed is incorrect or insufficient or is not satisfactory to the division, the division may
224 determine the amount of wages paid for employment during the period or periods with respect to
225 which the reports were or should have been made and the amount of contribution due from the
226 employer on the basis of such information as it may be able to obtain.
227 (b) The division shall give written notice of the determination to the employer.
228 (c) The determination is considered correct unless:
229 (i) the employer, within ten days after mailing or personal delivery of notice of the
230 determination, applies to the division for a review of the determination as provided in Section
231 35A-4-508 ; or
232 (ii) unless the division or its authorized representative of its own motion reviews the
233 determination.
234 (d) The amount of contribution so determined shall be subject to penalties and interest as
235 provided in Subsection (1).
236 (3) (a) If, after due notice, any employer defaults in any payment of contributions, interest,
237 or penalties on the contributions, or any claimant defaults in any repayment of benefit
238 overpayments and penalties on the overpayments, the amount due shall be collectible by civil
239 action in the name of the division, and the employer adjudged in default shall pay the costs of the
240 action.
241 (b) Civil actions brought under this section to collect contributions, interest or penalties
242 from an employer, or benefit overpayments and penalties from a claimant shall be:

243 (i) heard by the court at the earliest possible date; and
244 (ii) entitled to preference upon the calendar of the court over all other civil actions except:
245 (A) petitions for judicial review under this chapter; and
246 (B) cases arising under the workers' compensation law of this state.
247 (c) (i) To collect contributions, interest or penalties, or benefit overpayments and penalties
248 due from employers or claimants located outside Utah the division may employ private collectors
249 providing debt collection services outside Utah. Accounts may be placed with private collectors
250 only after the employer or claimant has been given a final notice that the division intends to place
251 the account with a private collector for further collection action. The notice shall advise the
252 employer or claimant of the employer's or claimant's rights under this chapter and the rules
253 applicable of the department.
254 (ii) A private collector may receive as compensation up to, but no more than, 25% of the
255 lesser of the amount collected or the amount due, plus the costs and fees of any civil action or
256 post-judgment remedy instituted by the private collector with the approval of the division. The
257 employer or claimant shall be liable to pay the compensation of the collector, costs, and fees in
258 addition to the original amount due.
259 (iii) A private collector is subject to the federal Fair Debt Collection Practices Act, 15
260 U.S.C. Sec. 1692 et seq.
261 (iv) A civil action may not be maintained by any private collector without specific prior
262 written approval of the division. When division approval is given for civil action against an
263 employer or claimant, the division may cooperate with the private collector to the extent necessary
264 to effect the civil action.
265 (d) (i) Notwithstanding Section 35A-4-312 , the division may disclose the contribution,
266 interest, penalties or benefit overpayments and penalties, costs due, the name of the employer or
267 claimant, and the employer's or claimant's address and telephone number when any collection
268 matter is referred to a private collector under Subsection (3)(c).
269 (ii) A private collector is subject to the confidentiality requirements and penalty provisions
270 provided in Section 35A-4-312 and Subsection 35A-4-104 (4), except to the extent disclosure is
271 necessary in any civil action to enforce collection of the amounts due.
272 (e) An action taken by the division under this section may not be construed to be an
273 election to forego other collection procedures by the division.

274 (4) (a) In the event of any distribution of an employer's assets under an order of any court
275 under the laws of Utah, including any receivership, assignment for benefits of creditors,
276 adjudicated insolvency, composition, or similar proceedings, contributions then or thereafter due
277 shall be paid in full prior to all other claims except taxes and claims for wages of not more than
278 $400 to each claimant, earned within five months of the commencement of the proceeding.
279 (b) If an employer commences a proceeding in the Federal Bankruptcy Court under any
280 chapter of the Bankruptcy Reform Act of 1978, 11 U.S.C. 101 et seq., as amended, contributions,
281 interest, and penalties then or thereafter due shall be entitled to the priority provided for taxes,
282 interest, and penalties in the Bankruptcy Reform Act of 1978.
283 (5) (a) In addition and as an alternative to any other remedy provided by this chapter and
284 provided that no appeal or other proceeding for review provided by this chapter is then pending
285 and the time for taking it has expired, the division may issue a warrant in duplicate, under its
286 official seal, directed to the sheriff of any county of the state, commanding the sheriff to levy upon
287 and sell the real and personal property of a delinquent employer or claimant found within the
288 sheriff's county for the payment of the contributions due thereon, with the added penalties, interest,
289 or benefit overpayment and penalties, and costs, and to return the warrant to the division and pay
290 into the fund the money collected by virtue of the warrant by a time to be therein specified, not
291 more than 60 days from the date of the warrant.
292 (b) Immediately upon receipt of the warrant in duplicate, the sheriff shall file the duplicate
293 with the clerk of the district court in the sheriff's county. The clerk shall enter in the judgment
294 docket, in the column for judgment debtors, the name of the delinquent employer or claimant
295 mentioned in the warrant, and in appropriate columns the amount of the contribution, penalties,
296 interest, or benefit overpayment and penalties, and costs, for which the warrant is issued and the
297 date when the duplicate is filed.
298 (c) The amount of the warrant so docketed shall:
299 (i) have the force and effect of an execution against all personal property of the delinquent
300 employer; and
301 (ii) become a lien upon the real property of the delinquent employer or claimant in the
302 same manner and to the same extent as a judgment duly rendered by any district court and
303 docketed in the office of the clerk.
304 (d) After docketing, the sheriff shall:

305 (i) proceed in the same manner as is prescribed by law with respect to execution issued
306 against property upon judgments of a court of record; and
307 (ii) be entitled to the same fees for the sheriff's services in executing the warrant, to be
308 collected in the same manner.
309 (6) (a) Contributions imposed by this chapter are a lien upon the property of any employer
310 liable for the contribution required to be collected under this section who shall sell out the
311 employer's business or stock of goods or shall quit business, if the employer fails to make a final
312 report and payment on the date subsequent to the date of selling or quitting business on which they
313 are due and payable as prescribed by rule.
314 (b) An employer's successor, successors, or assigns, if any, shall be required to withhold
315 sufficient of the purchase money to cover the amount of the contributions and interest or penalties
316 due and payable until such time as the former owner shall produce a receipt from the division
317 showing that they have been paid or a certificate stating that no amount is due. If the purchaser
318 of a business or stock of goods fails to withhold sufficient purchase money, the purchaser shall be
319 personally liable for the payment of the amount of the contributions required to be paid by the
320 former owner, interest and penalties accrued and unpaid by the former owner, owners, or assignors.
321 (7) (a) If any employer is delinquent in the payment of any contribution, the division may
322 give notice of the amount of the delinquency by registered mail to all persons having in their
323 possession or under their control, any credits or other personal property belonging to the employer,
324 or owing any debts to the employer at the time of the receipt by them of the notice.
325 (b) Any persons notified under Subsection (7)(a) shall neither transfer nor make any other
326 disposition of the credits, other personal property, or debts until:
327 (i) the division has consented to a transfer or disposition; or
328 (ii) 20 days after the receipt of the notice.
329 (c) All persons notified under Subsection (7)(a) shall within five days after receipt of the
330 notice, advise the division of credits, other personal property, or other debts in their possession,
331 under their control or owing by them, as the case may be.
332 (8) (a) Each employer shall furnish the division necessary information for the proper
333 administration of this chapter and shall include wage information for each employee, for each
334 calendar quarter beginning October 1, 1984. The information shall be furnished at a time, in the
335 form, and to those individuals as the department may by rule require.

336 (b) Each employer shall furnish each individual worker who is separated that information
337 as the department may by rule require, and shall furnish within 48 hours of the receipt of a request
338 from the division a report of the earnings of any individual during the individual's base-period.
339 The report shall be on a form prescribed by the division and contain all information prescribed by
340 the division.
341 (c) For each failure by an employer to conform to this Subsection (8) the division shall,
342 unless good cause is shown to the satisfaction of the division for the failure, assess a $50 penalty
343 to be collected in the same manner as contributions due under this chapter.
344 (9) If any person liable to pay any contribution or benefit overpayment imposed by this
345 chapter neglects or refuses to pay the same after demand, the amount, including any interest,
346 additional amount, addition to contributions, or assessable penalty, together with any additional
347 accruable costs, shall be a lien in favor of the division upon all property and rights to property,
348 whether real or personal belonging to the person.
349 (10) (a) The lien imposed by Subsection (9) arises at the time the assessment, as defined
350 in the department rules, is made and continues until the liability for the amount so assessed, or a
351 judgment against the taxpayer arising out of the liability, is satisfied.
352 (b) The lien imposed by Subsection (9) is not valid as against any purchaser, holder of a
353 security interest, mechanics lien holder, or judgment lien creditor until a warrant which meets the
354 requirements of Subsection (5) has been filed with the clerk of the district court. For the purposes
355 of Subsection (10)(b):
356 (i) "Judgment lien creditor" means a person who obtains a valid judgment of a court of
357 record for recovery of specific property or a sum certain of money, and who in the case of a
358 recovery of money, has a perfected lien under the judgment on the property involved. A judgment
359 lien does not include inchoate liens such as attachment or garnishment liens until they ripen into
360 a judgment. A judgment lien does not include the determination or assessment of a quasi-judicial
361 authority, such as a state or federal taxing authority.
362 (ii) "Mechanics lien holder" means any person who has a lien on real property, or on the
363 proceeds of a contract relating to real property, for services, labor, or materials furnished in
364 connection with the construction or improvement of the property. A person has a lien on the
365 earliest date the lien becomes valid against subsequent purchasers without actual notice, but not
366 before the person begins to furnish the services, labor, or materials.

367 (iii) "Person" means:
368 (A) an individual;
369 (B) a trust;
370 (C) an estate;
371 (D) a partnership;
372 (E) an association;
373 (F) a company;
374 (G) a limited liability company;
375 (H) a limited liability partnership; or
376 (I) a corporation.
377 (iv) "Purchaser" means a person who, for adequate and full consideration in money or
378 money's worth, acquires an interest, other than a lien or security interest, in property which is valid
379 under state law against subsequent purchasers without actual notice.
380 (v) "Security interest" means any interest in property acquired by contract for the purpose
381 of securing payment or performance of an obligation or indemnifying against loss or liability. A
382 security interest exists at any time:
383 (A) the property is in existence and the interest has become protected under the law against
384 a subsequent judgment lien arising out of an unsecured obligation; and
385 (B) to the extent that, at that time, the holder has parted with money or money's worth.