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First Substitute H.B. 307

Representative Chad E. Bennion proposes the following substitute bill:


             1     
TREATMENT OF DISHONORED CHECKS

             2     
2002 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Sponsor: Chad E. Bennion

             5      This act modifies the chapter related to dishonored instruments to address an issuer's
             6      liability in a civil action to collect on a dishonored check. This act makes technical changes.
             7      This act affects sections of Utah Code Annotated 1953 as follows:
             8      AMENDS:
             9          7-15-1, as last amended by Chapter 9, Laws of Utah 2001
             10      Be it enacted by the Legislature of the state of Utah:
             11          Section 1. Section 7-15-1 is amended to read:
             12           7-15-1. Definitions -- Civil liability of issuer -- Notice of action -- Collection costs --
             13      Exemptions.
             14          (1) As used in this chapter:
             15          (a) "Check" means a payment instrument on a depository institution including a:
             16          (i) check;
             17          (ii) draft;
             18          (iii) order; or
             19          (iv) other instrument.
             20          (b) "Issuer" means a person who makes, draws, signs, or issues a check, whether as
             21      corporate agent or otherwise, for the purpose of:
             22          (i) obtaining from any person any money, merchandise, property, or other thing of value;
             23      or
             24          (ii) paying for any service, wages, salary, or rent.
             25          (c) "Mailed" means the day that a notice is properly deposited in the United States mail.


             26          (2) (a) An issuer of a check is liable to the holder of the check if:
             27          (i) the check:
             28          (A) is not honored upon presentment; and
             29          (B) is marked "refer to maker";
             30          (ii) the account upon which the check is made or drawn:
             31          (A) does not exist;
             32          (B) has been closed; or
             33          (C) does not have sufficient funds or sufficient credit for payment in full of the check; or
             34          (iii) (A) the check is issued in partial or complete fulfillment of a valid and legally binding
             35      obligation; and
             36          (B) the issuer stops payment on the check with the intent to:
             37          (I) fraudulently defeat a possessory lien; or
             38          (II) otherwise defraud the holder of the check.
             39          (b) If an issuer of a check is liable under Subsection (2)(a), the issuer is liable for:
             40          (i) the check amount; and
             41          (ii) a service charge of $20.
             42          (3) (a) The holder of a check that has been dishonored may:
             43          (i) give written or oral notice of dishonor to the issuer of the check; and
             44          (ii) waive all or part of the service charge imposed under Subsection (2)(b).
             45          (b) Notwithstanding Subsection (2)(b), a holder of a check that has been dishonored may
             46      not collect and the issuer is not liable for the service charge imposed under Subsection (2)(b) if:
             47          (i) the holder redeposits the check; and
             48          (ii) that check is honored.
             49          (4) If the issuer does not pay the amount owed under Subsection (2)(b) within 15 calendar
             50      days from the day on which the notice required under Subsection (5) is mailed, the issuer is liable
             51      for:
             52          (a) the amount owed under Subsection (2)(b); and
             53          (b) collection costs not to exceed $20.
             54          (5) (a) A holder shall provide written notice to an issuer before:
             55          (i) charging collection costs under Subsection (4) in addition to the amount owed under
             56      Subsection (2)(b); or


             57          (ii) filing an action based upon this section.
             58          (b) The written notice required under Subsection (5)(a) shall notify the issuer of the
             59      dishonored check that:
             60          (i) if the amount owed under Subsection (2)(b) is not paid within 15 calendar days from
             61      the day on which the notice is mailed, the issuer is liable for:
             62          (A) the amount owed under Subsection (2)(b); and
             63          (B) collection costs under Subsection (4); and
             64          (ii) the holder may file civil action if the issuer does not pay to the holder the amount owed
             65      under Subsection (4) within 30 calendar days from the day on which the notice is mailed.
             66          (6) (a) If the issuer has not paid the holder the amounts owed under Subsection (4) within
             67      30 calendar days from the day on which the notice required by Subsection (5) is mailed, the holder
             68      may offer to not file civil action under this section if the issuer pays the holder:
             69          (i) the amount owed under Subsection (2)(b);
             70          (ii) the collection costs under Subsection (4);
             71          (iii) an amount that:
             72          (A) is equal to the greater of:
             73          (I) $50; or
             74          (II) triple the check amount; and
             75          (B) does not exceed the check amount plus $250; and
             76          (iv) if the holder retains an attorney to recover on the dishonored check, reasonable
             77      attorney's fees not to exceed $50.
             78          (b) (i) Notwithstanding Subsection (6)(a), all amounts charged or collected under
             79      Subsection (6)(a)(iii) shall be paid to and be the property of the original payee of the check.
             80          (ii) A person who is not the original payee may not retain any amounts charged or
             81      collected under Subsection (6)(a)(iii).
             82          (iii) The original payee of a check may not contract for a person to retain any amounts
             83      charged or collected under Subsection (6)(a)(iii).
             84          (7) (a) A civil action may not be filed under this section unless the issuer fails to pay the
             85      amounts owed:
             86          (i) under Subsection (4); and
             87          (ii) within 30 calendar days from the day on which the notice required by Subsection (5)


             88      is mailed.
             89          (b) [In] Subject to Subsection (7)(c) and (d) in a civil action[,] the issuer of the check is
             90      liable to the holder for:
             91          (i) the h [ check ] h amount h OWED UNDER SUBSECTION h [ (2)(a)] (2)(b) h h ;    
             91a           h (ii) THE COLLECTION COSTS UNDER SUBSECTION (4);
             92           [ (ii) ] (iii) h interest;
             93           h [ (iii) all costs of collection, including all ] (iv) h court costs h [ and ] ;
             93a          (v) h reasonable attorneys' fees; and
             94           h [ (iv) ] (vi) h damages:
             95          (A) equal to the greater of:
             96          (I) $100; or
             97          (II) triple the check amount; and
             98          (B) not to exceed the check amount plus $500.
             99          (c) If an issuer is held liable under Subsection (7)(b), notwithstanding Subsection (7)(b),
             100      a court may waive [all or part of the amounts] any amount owed under Subsections h [ (7)(b)(ii) ]
             100a      (7)(b)(iii) h
             101      through h [ (iv) ] (vi) [ :
             102          (i)
] h
upon a finding of good cause h [ [ ] . [ ] ] [ ; and
             103          (ii) only to the extent that the sum of the amounts owed under Subsections (7)(b)(ii)
             104      through (iv) exceeds $40.
] h

             105          (d) If a holder of a check violates this section by filing a civil action under this section
             106      before 31 calendar days from the day on which the notice required by Subsection (5) is mailed, an
             107      issuer may not be held liable for an amount in excess of the check amount.
             108          [(d)] (e) (i) Notwithstanding Subsection (7)(b), all amounts charged or collected under
             109      Subsection h [ (7)(b)(iv) ] (7)(b)(vi) h shall be paid to and be the property of the original payee of the
             109a      check.
             110          (ii) A person who is not the original payee may not retain any amounts charged or
             111      collected under Subsection h [ (7)(b)(iv) ] (7)(b)(vi) h .
             112          (iii) The original payee of a check may not contract for a person to retain any amounts
             113      charged or collected under Subsection h [ (7)(b)(iv) ] (7)(b)(vi) h .
             114          (8) This section may not be construed to prohibit the holder of the check from seeking
             115      relief under any other applicable statute or cause of action.
             116          (9) (a) Notwithstanding the other provisions of this section, a holder of a check is exempt
             117      from this section if:
             118          (i) the holder:


             119          (A) is a depository institution; or
             120          (B) a person that receives a payment on behalf of a depository institution;
             121          (ii) the check is a payment on a loan that originated at the depository institution that:
             122          (A) is the holder; or
             123          (B) on behalf of which the holder received the payment; and
             124          (iii) the loan contract states a specific service charge for dishonor.
             125          (b) A holder exempt under Subsection (9)(a) may contract with an issuer for the collection
             126      of fees or charges for the dishonor of a check.


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