BILL ANALYSIS
SENATE COMMITTEE ON BANKING, FINANCE,
AND INSURANCE
Senator Ronald Calderon, Chair
AB 1566 (Committee on Banking and Finance) Hearing Date: June
17, 2009
As Introduced March 16, 2009
Fiscal: No
Urgency: No
SUMMARY Would extend the sunset date on a provision of law
which describes the information a depository institution is
required to provide a customer, in lieu of a cancelled check, to
allow that customer to reasonably identify the items paid from
that customer's account.
DIGEST
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, which establishes a uniform set of
state laws governing commercial transactions; the Expedited
Funds Availability Act of 1987, which sets limits on the length
of time that banks can withhold access to money deposited by
check; and the Check 21 Act, which created a legal framework for
truncated and substitute checks.
Existing law
1. Defines a "bank" for purposes of the provisions of the
Commercial Code relating to bank deposits and collections as a
person engaged in the business of banking, including a savings
bank, savings and loan association, credit union, or trust
company (Commercial Code Section 4105);
2. Until January 1, 2010, requires a bank, which sends an account
statement to a customer or otherwise makes that statement
available to the customer, to either return or make available to
the customer the items paid from the account, or provide
information in the statement sufficient to allow the customer to
reasonably identify the items paid (Commercial Code Section
AB
1566 (Comm. On B. & F.), Page 2
4406; all further provisions of existing law are also found in
Section 4406). The word "reasonably" is deleted from this
provision, as of January 1, 2010);
3. Until January 1, 2010, clarifies that the account statement
provides sufficient information to satisfy the conditions in
Number 1 above, if the item is described by item number, amount,
and date of payment (this provision is deleted, as of January 1,
2010);
4. States that, if a bank does not return items to the customer,
it must provide in its account statement a telephone number that
the customer may call to request an item, a substitute check, or
a legible copy of an item of substitute check. Banks must
retain either the items or the capacity to furnish legible
copies of the items for at least seven years after receiving the
items, and must provide at least two items, or copies of those
items, to a customer, upon request, and without charge, for each
account statement sent to a customer;
5. Requires customers to exercise reasonable promptness in
examining their statements, to determine whether any payment was
not authorized, and requires customers to promptly notify the
bank of the relevant facts, upon a discovery that one or more
items listed in the customer's account statement was
unauthorized. Gives customers up to one year in which to assert
a claim, before they lose the right to recover losses resulting
from payment of the unauthorized items, as specified;
6. Describes the extent to which customers are entitled to
reimbursement for losses incurred as a result of the
unauthorized payment of items from the customer's account, based
on the length of time a customer takes to notify a bank, the
extent to which the bank exercised ordinary care in paying the
item, and the extent to which the bank failed to pay the item in
good faith, as specified.
This bill
1. Would extend the sunset date on Existing Law Numbers 2 and
3, above, by five years, to January 1, 2015.
COMMENTS
1. Purpose of the bill To extend the sunset date on a
AB
1566 (Comm. On B. & F.), Page 3
provision of law that specifies what information about a
check must be provided on a customer's bank statement, in
order to allow the customer to reasonably identify the
item(s) paid from his or her account, and, in doing so,
allow the customer to determine whether payments made
against his or her account were authorized.
2. Background The provision of law whose sunset date is being
extended was added to the codes in 1992. Its sunset date
has been periodically extended since that time. The
inclusion of a sunset, and the periodic extension of that
sunset, was intended to keep the policy discussion open,
regarding exactly what information customers should receive
about paid checks on their bank statements. Consumers Union
(CU) has historically believed, and continues to believe,
that customers should receive more information about paid
items than is required under Section 4406. However, because
the technology necessary to generate that information has
not been readily available, the California Bankers
Association (CBA) and CU have previously agreed to defer the
discussion, by extending the sunset date.
In request to an inquiry from Committee staff, CU is requesting
that the sunset date be extended one more time (to 2015), to
provide more time in which to evaluate the capabilities of
technology that could provide more information to customers.
The California Bankers Association (CBA), sponsors of AB
1566, agrees that an extension of the sunset date is
appropriate at the present time, and is committed to working
with CU on a compromise that will eventually allow the
sunset date to be stricken from law.
3. Support . CBA is sponsoring AB 1566, to continue providing
banks with the clarity they need, regarding the information
they must provide to customers about paid checks on their
bank statements.
4. Opposition None received.
5. Prior Legislation
a. AB 2671 (Pacheco), Chapter 131, Statutes of
2005: Extended the sunset date from January 1, 2005
to January 1, 2010;
b. SB 1466 (Leslie), Chapter 122, Statutes of
AB
1566 (Comm. On B. & F.), Page 4
2000: Extended the sunset date from January 1, 2001
to January 1, 2005;
c. AB 758 (Morrow), Chapter 442, Statutes of
1997: Extended the sunset date from January 1, 1998
to January 1, 2001;
d. SB 833, Chapter 914, Statutes of 1992: Added
the existing law section whose sunset date has been
periodically extended.
POSITIONS
Support
California Bankers Association (sponsor)
Oppose
None received
Consultant: Eileen Newhall (916) 651-4102