13-4: Returned checks and debit card chargebacks

Effective: July 1, 1998
Revised: July 2, 2026
References: Utah Code 7-15, Utah Code 7-15-2(2), Return check notice template, 6-8: Write-offs and allowances

Purpose

This policy explains and outlines the procedures for handling and recording returned checks and debit card chargebacks. This policy was written to comply with Utah Code 7-15.

Agencies that use an approved accounts receivable subsystem instead of Vantage Financial must follow state finance policy 6-4: Accounts receivable subsystems for how to implement these requirements.

Definitions

Agency – Any agency, board, bureau, commission, office, department, or other administrative subunit of the executive and judicial branches of state government.

Chargeback – A credit or debit card payment that is disputed by the cardholder, resulting in a debit (payment is reversed) to the agency’s bank account.

Check – Any paper check, draft, order, or other negotiable instrument drawn on a financial institution or any electronic funds transfers authorized via the internet, mobile app, telephone, including debit cards and e-checks.

Collection costs – A fee of $35 or less authorized in statute that is charged to the issuer of a returned check if the issuer didn’t pay the amount owed within 15 calendar days from the date the agency’s returned check notice was mailed.

CR – Cash receipt transaction in Vantage Financial.

Financial institution – An organization that handles financial transactions like deposits, loans, and investments. Examples include traditional banks, investment banks, credit unions, brokerage firms, and insurance companies.

Issuer – A person or entity who makes, draws, signs, or issues a check.

Non-sufficient funds (NSF) check – A check that has been returned by a financial institution because the account it was drawn on does not have enough funds to cover the payment.

OSDC – The Office of State Debt Collection.

RE – Receivable transaction in Vantage Financial.

Returned check – A check that a financial institution won’t pay or process due to NSF, closed account, stop payment order, or technical errors.

Service charge – A $20 fee authorized in statute that is charged to the issuer of a returned check.

State finance – The Department of Government Operations Division of Finance.

Policy

A – Agencies must handle debit card chargebacks like returned checks

1 – Agencies must handle and record debit card chargebacks according to this policy. This is because debit card chargebacks are considered returned checks.

2 – Credit card chargebacks are not considered returned checks, so this policy isn’t applicable. See state finance policy 13-5: Credit and debit card payments.

B – Agencies must record returned checks

1 – Agencies must record returned checks in Vantage Financial within 5 business days of receiving a financial institution notice of a returned check or bank statement if a notice wasn’t received. See the recording procedures chart after 4a.

2 – If the original CR referenced an RE and the payment type was “check”, agencies must:

reduce the dollar amount in the original CR’s accounting line(s) by the amount of the returned check; and
select “NSFCHECK” in the reason field.

2a – Agencies must complete the procedures in B2 so that Vantage Financial can reopen the RE and automatically add a service charge of $20 to the RE.

3 – If the original CR referenced an RE and the payment type was not “check”, agencies must:

reduce the dollar amount in the original CR’s accounting line(s) by the amount of the returned check;
select “NSFCHECK” in the reason field; and
add a service charge of $20 to the dollar amount in the original RE’s accounting line(s).

3a – See section C1 for instructions on coding the service charge.

4 – If the original CR didn’t reference an RE, agencies must:

reduce the dollar amount in the original CR’s accounting line(s) by the amount of the returned check;
select “NSFCHECK” in the reason field;
record an RE for the amount of the returned check; and
add a service charge of $20 to the RE unless the returned check was for goods or services that could be cancelled.

4a – See section C1 for instructions on coding the service charge.

Did the accounting line(s) for the check in the original CR reference an RE?	Was the payment type in the header of the original CR set to “check?”	CR Procedure	RE Procedure
Yes	Yes	Modify the accounting line(s) in the original CR to reduce the dollar amount by the amount of the returned check and select “NSFCHECK” in the reason field.	No RE transaction is needed. The CR procedure will reopen the RE and automatically add a service charge to the RE.
Yes	No		Modify the original RE to add a service charge. See section C1 for how to code the service charge.
No	n/a		Record an RE for the amount of the returned check plus a service charge. See section C1 for how to code the service charge.

5 – Agencies must attach the following documentation to the RE transaction in Vantage Financial when returned checks are recorded:

a copy of the returned check notice mailed by the agency to the issuer unless immediately referred to OSDC;
documentation of the date the notice was mailed by the agency unless immediately referred to OSDC; and
documentation of the receivable, like invoices, court orders, etc. that justifies the receivable and aids OSDC in collecting the receivable.

6 – If agencies receive a check for $50,000 or less before July 1 and it’s returned after June 30, agencies must modify the original CR in the new year.

7 – If agencies receive a check exceeding $50,000 before July 1 and it’s returned after June 30, agencies must contact the assistant state comptroller for instructions on recording it in Vantage Financial.

C– Agencies must record service charges and collection fees

1 – Service charges and collection costs must be added to the RE in Vantage Financial and recorded to specific OSDC account coding:

Department 150
Fund 2105
Unit 5021
Revenue 2971 for service charges or revenue 2969 for collection costs
Appropriation Unit 2105

2 – Agencies and OSDC must only add service charges and collection costs for returned checks according to state finance policy.

D– Agencies may choose the handling of returned checks

1 – Agencies may pursue the collection of REs resulting from returned checks (see section E), or they may immediately refer them to OSDC for collection (see section F).

2 – If agencies choose to write off a returned check, they must create the RE if it wasn’t already created and then write off the RE following state finance policy 6-8: Write-offs and allowances.

E – Agencies may pursue collection efforts

1 – If agencies pursue collection efforts on the RE, they must mail the issuer a written returned check notice according to the requirements in Utah Code 7-15-2(2) within 12 business days of receiving the returned check.

1a – Agencies may use this Returned check notice template to ensure correct verbiage and notice.

2 – Agencies must follow the recording procedures in section B.

3 – Agencies may add up to $35 of collection costs to the RE if payment isn’t received within 15 calendar days of mailing the returned check notice to the issuer. See section C1 for instructions on coding these costs.

3a – Agencies don’t have to add the collection costs if they refer the receivable to OSDC before or soon after 15 calendar days of mailing the returned check notice to the issuer. This is because OSDC’s system will add the collection fees if they weren’t previously added.

4 – If agencies don’t collect the check amount, service charge, and collection costs within 30 calendar days of mailing the returned check notice to the issuer, they must refer the receivable to OSDC by updating the reason code on all affected accounting lines of the RE to “OSDC-NSF” in Vantage Financial. They must ensure the required documentation detailed in section B2 is attached to the RE.

4a – Agencies may keep the RE if OSDC gives them permission to continue collection efforts or the agency has an active, satisfactory payment plan with the issuer of the check.

F – Agencies may immediately refer the returned check to OSDC for collection

1 – If agencies don’t want to pursue collection efforts on the RE, they must immediately refer the receivable to OSDC for collection.

1a – Agencies may decide to refer the RE to OSDC any time before the 30 days noted in section E4 by following the procedures documented in this section.

2 – Agencies must update the reason code on all affected accounting lines of the RE to “OSDC-LTR.”

3 – If agencies refer the RE for collections, OSDC’s system will add service charges and collection fees if they weren’t already included in the RE. OSDC will also send the returned check notice if it wasn’t already sent.