BILL ANALYSIS
AB 1566
Page 1
Date of Hearing: April 20, 2009
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Pedro Nava, Chair
AB 1566 (Banking & Finance) - As Introduced: March 16, 2009
SUBJECT : Banking: disclosures.
SUMMARY : Extends the sunset date from January 1, 2010 to
January 1, 2015 for the current requirement of banks to provide
account statements to customers and require them to either
return or make available items paid from the account, or provide
sufficient information in the statement to allow the customer to
reasonably identify the items paid, including the item number,
the amount and the date the item was paid.
EXISTING FEDERAL LAW establishes various laws governing checks
including the Federal Reserve Act of 1913, which created a
national check collection infrastructure and related rules; the
Uniform Commercial Code (UCC), which establishes a uniform set
of state laws governing commercial transactions; the Expedited
Funds Availability Act of 1987, which, among other things, set
limits on the length of time banks can withhold access to funds
represented by check deposits; and the Check 21 Act which
creates a legal framework for truncated and substitute checks.
EXISTING STATE LAW :
1)Requires a bank that provides a customer with a statement
showing items paid to return or make available to the customer
the items or provide sufficient information to allow the
customer to reasonably identify the items. Sufficient
information is provided if the item number, amount, and date
of payment are included. If the bank does not return the
items, it shall provide the phone number that the customer may
call to request an item or a legible copy. (Commercial Code,
Section 4406(a)) All further references are to the Commercial
Code.
2)Requires a bank that does not return items to a customer to
keep the items or be able to furnish legible copies for seven
years. Upon customer request, the bank shall provide either
the item or a legible copy in a reasonable time. A bank shall
provide two items or copies upon request and without charge to
the customer, for each statement sent to the customer.
(Section 4406(b))
3)Requires the customer to exercise reasonable promptness in
AB 1566
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examining a statement to determine whether any payment was not
authorized because of an alteration of an item or because a
purported signature by or on behalf of the customer was not
authorized. If, based on the statement or items provided, the
customer should reasonably have discovered the unauthorized
payment, the customer shall promptly notify the bank. (Section
4406(c))
4)Establishes that if the bank proves that the customer failed
to notify the bank that a signature was not authorized, the
customer is precluded from making specified assertions against
the bank. If the customer failed to notify and the bank
failed to exercise ordinary care in paying the item and that
the failure contributed to loss, the loss is allocated between
the customer and the bank as specified. (Sections 4406(d) and
(e))
5)Establishes that after one year after receipt of a statement,
a customer who does not discover and report his or her
unauthorized signature on or any alteration on an item is
precluded from asserting against the bank the unauthorized
signature or alteration. If there is preclusion, the payer
bank may not recover for breach of warranty as specified.
(Section 4406(f))
6)Establishes that the provisions listed above are in effect
until January 1, 2010. After that date, a replacement section
goes into effect that changes the provisions of Section
4406(a) of the Commercial Code (see 1) above). The new
section requires a bank to provide sufficient information to
allow the customer to identify the items rather than to
"reasonably" identify the items. It also does not include the
sentence clarifying that "sufficient information" means the
check number, the amount and the date of payment. In the new
section, no clarification of sufficient information is
provided. (Section 4406(g))
FISCAL EFFECT : None.
COMMENTS :
This bill is sponsored by the California Bankers Association in
order to extend the sunset on a provision of the Commercial Code
that specifies what information about a check must be provided
on a customer's bank statement. Current law requires the
statement to include the item number, amount and date of
payment. This information provided is designed to give a
customer the ability to determine whether payments made on his
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or her account were authorized.
According to the sponsor, "Section 4406 of the Commercial Code
is due to sunset on January 1, 2010. This measure simply
extends the sunset date for another five years to January 1,
2015. Originally enacted in the early 90's, Section 4406
derives from a recommendation of the National Conference of
Commissioners on Uniform State Laws as a means to create
consistency amongst the states through adoption of a Uniform
Commercial Code."
If this provision were allowed to sunset, customers could end up
with even less information about checks or other negotiable
instruments drawn on their accounts.
PREVIOUS LEGISLATION :
AB 2671 (Pacheco, Chapter 131, Statutes of 2004) Extended the
sunset date from January 1, 2005 to January 1, 2010 for the
current requirement of banks to provide account statements to
customers and require them to either return or make available
items paid from the account, or provide sufficient information
in the statement to allow the customer reasonably to identify
the items paid, including the item number, the amount and the
date the item was paid.
REGISTERED SUPPORT / OPPOSITION :
Support
California Bankers Association (CBA) (Sponsor)
Opposition
None on file.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081