Payment Systems Update 2005

it discusses new rules that apply to this article describes transferred to the employees' cards.45 legal remedy.37 org/pcc/index.html. rules. the fdic does not propose to issue special rules rulemaking organization that transactions result in unauthorized withdrawals. consumers these statutes also stored value payment products issued by non-banks under these systems. although 47. see generally consumer payments law, supra note 41, when the check 21 act took effect on october 28, because it was transferred via an electronic image are entitled addition to the ucc. those who engage in telemarketing edirect deposit. even if the frb's final rule on check 21 had investigate businesses subject to many consumer complaints with check 21.18 without justification.48 value cards also may be subject to reg. e. check 21 to two bodies of rules. after markedly, and the use of debit and stored value cards has assuming consumers will not want under that system they do not have to distinguish between brought actions against paypal. several "remotely-created consumer item."51 banks by the occ is beyond the scope of this paper. telephone communication with consumers). with consumers over the phone are subject to a federal law in c. check 21 many financial institutions will not process checks different approaches? becomes insolvent, employees may lose whatever funds the frb and others have identified several types document." the check is merely a source of information about the consumer pays by handing contain risks and costs for employees. one risk is that the answered all the questions raised by the act, and did so in http://www.consumersunion.org/pub/core_financial_ remained on their cards.38 agreement between the employer and the card issuer protects requirements for making a claim.26 the question arose as to a transaction subject to check 21 also appears to capacity to furnish legible copies" for seven years. �4-406(b). the phone, sellers frequently request their checking account amended to create a new type of negotiable instrument and to consumers have not paid their bills and consumers attempt difficulty understanding when the cause of their not receiving conduct are imposed on the merchant. for example, the supplement)(hereafter consumer payments law (2004 consumers are entitled to a recredit up to $2500 if tendering a check. but as in ecc, consumers will not receive here have been many rule requires telemarketers to follow strict requirements for 56643275. the fees are high, the costs may be as great as what employees whether state uniform commercial arising out of the same single original check. multiple debits the situation will become increasingly confusing were provided a substitute check. conference (oct. 19, 2003)("[t]he u.s. government is had the traditional checking account in which they received guide to rules and regulations governing the ach network merchant must destroy the check within fourteen days of the sign posted near the register that tells them the check will the consumer complains that an unauthorized withdrawal supp.), supra note 12, at 11-12. see also state laws governing chain refuse to accept electronic images of checks.19 services/000920.html. and the holder york attorney general found the one authorized withdrawal, but for an amount more than consent judgment against company that processed electronic edirect deposit. class actions have alleged, among that governs some payment that the financial institution verify the identity of customers whichever apply both to consumer and non-consumer drafts that do decisions on what additional 2.1.2. in addition, the merchant must void the check used as see generally norman i. silber, consumer protection and the in the aftermath of check 21, lawmakers may want to systems (2003); barkley clark & barbara clark, the law analysis, see national consumer law center, new check 21 assurance of discontinuance. assurance of discontinuance, consumer goes to a designated location and pays the bill in to recredit the consumer's account, amendments, an approach that is directly counter to the two transactions are processed 16. for example, the consumer has a right to stop payment a source document. id. rule 3.7.1. with `subaccounts' maintained by a depository institution may result in new types of wrongful debits to consumer payroll cards often represent the "bulk of the consumer's another type of ecc occurs when consumers pay amounts of money owed to particular employees." 69 fed. finally, there have 46. the company has been acquired by e-bay. there are not use the card for a certain period of time. there may be a issuers. these laws contain provisions to ensure the safety accounts. check 21 includes very limited consumer safeguards check 21 applies to all checks including those debited if the micr numbers are altered in the transition check that the consumer did not authorize, the loss is on the devices.64 transfers act2 increased substantially.66 employers are increasingly transferring wages from the single original, or multiple substitute checks are undertake major payment system law reform, some in due course status on these instruments as well.59 payment device is used? should payment law instead be those customers who have not agreed to truncation. from of the checks will be exchanged down the collection chain electronic check imaging will further reduce the consumer's identifies the merchant or the location of the transaction. see consumer payments law (2004 supp.), supra note 12, at the frb also pointed out that the salaries paid through payment and demand a copy of the original. to facilitate the apparent similarity between ecc and check 21 transactions, amounts stored on cards later than when due. (2002) (describing various states' laws on stored value cards 70 journal of texas consumer law monthly statement and fail to receive their original check. pay to check cashers. there may be a pos fee every time order. rule 7.4, nacha rules, supra note 9. rules of receivable ach entries. see 2004 ach rules: a complete and unbanked employees. they are a less expensive way for consumer's perspective, the new rules nacha has drafted consumers face other problems regardless of whether participating in direct deposit are protected by reg. e.30 consumer has agreed to truncation, but nevertheless demands future, many new payment devices will be invented and reconsider the continued viability of the ucc process. does can gain access to their wages by using the card at an atm that permit the payor bank to pass liability to another bank 8. 12 u.s.c. �5001 et seq. nevertheless do not receive their are processed by automated clearing houses subject to a set of significant recent recredit.28 eelectronic image, multiple electronic images are produced and imposes many new consumer responsibilities. consumers, consumer educators, bankers, and law professors. two baby steps toward protecting transfers for several years and has been increasingly active 64. e.g., arc opt out requirement, notice of consumer pays by check. in the good old days, circa 2000, currently, there is a bright line between stored value cards, prepaid card markets & regulation, 12 (fed'l reserve bank nevertheless continue to be confused. they still will have believing they had the same rights as to because its legal status is uncertain. paypal asserts it is a at 46. a substitute check, it is not clear if the bank must provide well as detailed nacha rules that go well beyond reg. e in set of laws. for example, in fact, check 21 did not go into 21 constructs a formidable barrier by imposing strict the creditor may be reluctant to accept this as proof of continue to be changes in consumer behavior. for example, are subject to more than one be subject only to the ucc, while others will be subject both apply only if the state where the other bank is located has and law enforcement agencies who have or common law contract rules, consumer payments law, supra note 41, at 11 (non uniform other regulators have not rendered definitive rulings on anger and disgust. the prospect of losing 45. see supra text accompanying note 33. than one set of laws. for example, checks are subject to term would not include one-time transfers such as a bonus, or v. the ucc finally acknowledges that consumers it is unclear what set of laws it is subject transactions depending upon whether payment is by check, make it somewhat uniform and guarantee at least a few basic 416, official comment 8, as amended in 2002. see generally necessary to implement imaging. therefore, some of the 28. id. at 47325. withdrawals.39 law 41-48 (national consumer law center, 2004 the frb considers the authorization has been obtained if the national payments system be governed by federal law that and eventual universal adoption of electronic payments.61 a. ecc statement. the ucc's articles 3 and 4 govern these accounts. copyright 2004. this article was originally presented at the even without the confusion engendered by the legend, thereby negating the transferee's ability to claim holder legend that effectively destroys the ability of a transferee to also may be subject to the efta.35 for example, if the card is stolen, the nacha rules embody significant policy decisions. law applies.1 in these transactions. these eccs are subject to reg. e as (1991)(explaining why the ucc drafters decided not to 6. check clearing for the 21st century act, p.l. 108-100, 17 government affiliation, has issued rules governing ach eelectronically into employees' bank accounts through nacha can act faster than governmental bodies in monthly statements. despite if the payroll card is treated as a stored value card, the same way you would use the original check."23 proposed amending reg. e to define the term "account" to consumer payments law (2004 supp.), supra note 12, at 11. it raises questions about what other types of stored value cards as of april 2004, no state had must include substitute checks in the bank statement of cancelled checks with their bank statements. banks prepared float, restrict the opportunity to stop payment, and decrease checks along with their bank statements have become confused to prove payment by showing the creditor a substitute check, issuers even without an explicit reference to prepaid card in august, 2004. paypal settles for $9.25 million, st. the status of a person who obtained an instrument that failed to their payroll checks. system's speed and efficiency, the adoption of widespread devices. nacha? petersburg times, august 2, 2004 available at 2004 wl ucc, a new provision was added to section 3-305 which has the the cost of imaging equipment and the organizational changes that proposal is not adopted, payroll cards would be subject instrument introduced in the 2002 amendments is called a private organization may not see the notice. businesses do not return the checks person. it is subject to the same rules as lock box ecc. association (nacha), continued its efforts to keep up with that they have engaged in unauthorized transfers.56 holder in due course doctrine in cases where they are sued by to have their checks truncated using electronic images, at least for the foreseeable future. was made pursuant to a telephone check. the new negotiable conversion (ecc).9 by mark e. budnitz* substitute checks, the merchant's name and telephone number, the date, 37. the problems described assume nothing in the of those systems, the lawyers change the warranty rules to encourage the consumer's bank business must notify the consumer that the check will be electronic transfers. id. at 55999. cards that deliver child payment vii. conclusion some of their original checks with their bank statements. nacha rules, supra note 9, at r 12 (explaining 2003 rule check and who never agreed to bank customers, both commercial and consumer, bringing are entitled to a little protection entirely federal with model disclosures, notices, and forms?65 act, enacted by congress and the federal reserve, begins at least in the near future, when creditors claim uniform commercial code: substance abuse at ucc drafting instead of the paper checks. they may instead receive a function? how are they regulated? 10-11 (fed'l reserve a non-uniform amendment that is similar to statutes that other things, that paypal freezes acceptability of the substitute check, all such checks must bear be in locations convenient to the employee. employees have been largely protective of their interests. nevertheless, secrecy act. bank unless it can recover from the wrongdoer. amended to obtain a replacement card. checks all across the country.20 presents to the consumer's bank, resulting in the withdrawal of payment processor barred from helping telemarketers, novel payment processing systems 71journal of texas consumer law transaction.13 the picture that emerges from this brief survey (reporting on a 2003 global concepts study). marked void. the retailer uses the information from the collection far speedier and more efficient than the current prohibited. however. the consumer's bank may prefer held in individual employee accounts or in a pooled account, instead, if a bank does not agree to accept those images, it obtaining the consumer's "verifiable authorization." the code (ucc) and federal law, industry develops more novel systems and although the efaa and reg. cc intruded upon a requirements, nacha rules, at r 12, supra note 9 the final rule, however, it appears this is required.27 miller & alvin c. harrell, the law of modern payment uses a non-bank payroll card company. if that company the employee when the problems described in the text arise. millions of persons use the on-line payment system proposal, but some want the provision to apply to all drafts, province of the ucc. then, the federal government became cumbersome? federal law and the ucc adopt fundamentally non-salary types of payments such as travel reimbursements. remotely-created items, 61. andrea s. klein, putting all payment data in one they will continue to process them the traditional way, given the authorization of payment instruments in telemarketing rule 3.7.3, nacha rules, supra note 9. there are specific unauthorized ach telephone transfers, in 2003 nacha their new warranty rights against depositary there is great variation in the less common than they were even a generation ago."). payment 9. the financial services industry also calls this system arc 16 c.f.r. � 310.3(a)(3). consumer payments law (2004 funds from the consumer's account. that draft is referred to as trillion versus $1.45 trillion). on the one hand, this is a positive development. their original paper check along with their monthly bank withdrawals when they authorized only one, or obtain only developments can be predicted with confidence. in the as an electronic transfer and the consumer completes the consumer payments law used to be solely the as payroll card vendors are at risk if the vendor goes out of articles 3 and 4, however, include special warranty rules for settlement date. id. rules 2.9.3.3 & 2.9.3.4. to foster the transition to a completely electronic payment 66. mastercard predicts the use of stored value cards will transactions. but it does so only insofar as it does not conflict business. stored value cards, while most states do nothing.67 21. check 21 � 12(a)(1). be processed electronically. it is unlikely those who do see it the confusion felt by these consumers is the frb noted that congress intended the term "account" (or by a third party) that enable a determination of the systems and the law governing 68. professor mann's recent casebook relegates negotiable law will not protect employees if they encounter problems.32 best.41 in addition, there are sections on warranties, several types of payment devices are subject to more telemarketers, in violation of the telemarketing sales rule). 20. check collection was severely disrupted in the days more willing to recredit the consumer's account if it can avoid not solely to consumer drafts. the frb announced it would new set of substantially different rights and obligations under 4 to ensure there was no conflict. when enacted, the efta c. effectuating the ftc holder rule electronic systems will become more pervasive. there will these, however, have been resolved in the frb's final rule. check 21 transactions appear largely the same to consumers. 33. the federal reserve board has proposed amending reg. house transfers, the national automated clearing house iv. payment devices subject to more than one those transactions. to make matters even more complex, reg. e apply instead.) if the consumer pays by means of an employers are increasingly transferring wages have passed "demand draft" statutes that are like the ucc's payroll card for contractors and government employees, because they no longer receive some of their original checks processing rpt., july 1, 2004, available in 2004 wl 61716541 but some consumers pay with credit cards or debit cards; the that state wants to protect consumers, it should do so in other laws. including payroll cards, and debit cards. a pending frb on a recurring basis. 69 fed. reg. 55996, 55998 (2004). the the events of the recent past, however, will have a paying employees by check is expensive for order to benefit from the indemnity section, the consumer 2. 15 u.s.c. � 902 et seq. for check 21, but what about their customers? item discontinuance, attorney general of the state of n.y. (efta), together banks. responding to new market developments. moreover, from the set of laws and a payment system in the and soundness of money transmitters. see furletti, supra amendment authorizing investigation of businesses with bank. instead, the bank may refuse do not have bank accounts. as a result, many employers which checks fall into the consumer category. the american the ucc as that statute takes and nacha rules. most consumers will realize it is not 19. see consumer payments law (2004 supp.), supra note originals will be returned with their statement. but it is not many believed this was the result of the check 21 act they've employees may have to pay a monthly fee. if a telephone check. many consumers have alleged that phone as payroll cards illustrate, 7. "floaters" of checks are sunk. banks' new digital facsimiles payroll cards are subject to federal law may depend on how 69. id. at 443 (stating that holder in due course does not study in process and scope, 42 ala. l. rev. 405, 412-16 under that act. see part ii, supra. the frb requested to the ucc and check 21. are set up. for example, whether and the bank has not resolved the complaint within 45 days, systems recognize that consumers should receive protection in the less need to teach negotiable instruments law68 by mailing a check. this is called "lockbox ecc."15 many others, including almost all credit union customers, checks were not returned to them.10 checks also are subject to state the recredit right is a necessary safeguard for update legal regime that previously had been governed exclusively by in addition, the fdic see consumer payments law (2004 supp.), supra note 12, at legal twilight zone a few states will enact laws to plug availability act4 to the private agreements between employers and employees apply to payroll cards may conversion & check 21 comparable to that in the efta. 34 different law applies. the law in the absence of federal regulation). cashers, however, may disagree. they often rely on the and systems for processing payments and the increasingly checks." for example, when consumers order goods over to fund payments to unbanked (frb) regulation e3 the states through the ucc, they apply only to checks and if bank of philadelphia june 2-3 2004)(hereafter how do they (explaining 2003 rule amendment authorizing investigation checking accounts took basically two forms. some consumers about check 21. the law doesn't apply to transactions done those using credit cards when in fact (2004 supp.), supra note 12, at 81-82. congress enacted check 21 at the frb's urging in order does not require drawers or banks to accept electronic images. checks are subject both to the new-fangled products electronic terminals, and other eft services as traditional with the federal reserve board's while increasing the check articles 3 and 4, except minnesota. that state consumers who are subject to multiple debits, but check not agreed to truncation, these consumers expect that the amendment would impose. under check 21, banks will become far more challenging. teachers have to make difficult commercial code, despite its title, allows for non-uniform type of negotiable instrument; and (2) holder in due course have different rules for consumer liability for unauthorized consumers who did not agree to truncation are entitled cards are plastic cards that are issued to employees. employees if the bank does not provide the substitute check, and electronic check imaging issue a proposal later in 2004. final rule, 69 fed. reg. at from an original check, to a digital image, to a substitute cashier. it may keep the check or return it to the consumer employers to pay their unbanked workers. employees avoid eelectronically into employees' bank accounts through transactions. e.g., 9 vt. stat. ann. 2464, noted in ucc � 3- check and their bank cannot resolve the complaint within articles 3 and 4 because of the alleged operational difficulties recovering them from whoever stole it. problems may arise if 65. the issue of federal pre-emption of state law for national teachers will have to make difficult payment systems and rules that come into play when a to check truncation nevertheless do not receive some of expedited funds availability act (efaa) together with reg. legal complexity. this complexity recredit rights.21 along with their bank statements. starting early in 2004, will zap lag time between writing and processing checks. should consider include the following: does it make sense to as a general rule, if the consumer's bank pays a employee can recover the funds loaded onto the card only by electronically. it is subject to the efta and reg. e. the frb the holes left in federal statutes, such as the failure to regulate difficulty by making relatively minor adjustments to article stat. 1177 (2003)(hereafter check 21). recredited. check 21 � 7(c)(b)(ii). this common element, the include a payroll card account that is directly or indirectly 58. 16 c.f.r. part 433. proposed rule, 69 fed. reg. 1470, 1496-97, 1499 (2004). original cancelled checks, http://www.consumerlaw.org.http://www.consumerlaw.org. strange and entirely new type of payment instrument, the as long as this is done in time for the bank to have a goods. inactivity fees may be imposed if an employee does substitute checks, payroll cards and 12, at 41-48. bank. instead, the consumer likely will equivalent of the original check and describing the consumer's receive their original checks with their bank statements will course as well. supra note 46. transaction. and it is subject to very different law: reg. e professors still devote most of the course to basic negotiable operated by paypal.46 in due course doctrine is not very important.69 are governed by the ftc's telemarketing rule.54 understand its legal significance. the great majority of eccs 67. see consumer banking law (2004 supp.), supra note 12, they submit a claim that they suffered a loss due to an error a result of that status is of crucial importance to consumers written both by consumers who never consented to have colorado, hawaii, idaho, nebraska, new hampshire, north recently, however, the ucc has been amended to provide banking rep., april 19, 2004, at 703 (ftc filed proposed perhaps paypal is a unique case credit card, debit card, or stored value card? should the right reserve payments system development committee 2003 42. checks are subject to check 21 as well as the expedited recently issued a proposal under which fdic insurance would along different routes and very users will be confused and have 39. how do they function, supra note 31, at 11. b. ecc + check 21 = confusion banks favor the demand draft approach because new laws and their complexity, teaching payments law has 29. check 21 � 6(a). system. currently, tens of millions of drawers (the persons little used.63 phone cards, likely means new forms of stored value cards will authorization requirements do not apply to them. (reg. z and the ucc was able to accommodate the federal rules without 27. final rule, 69 fed. reg. at 47322. consumer payment 15. a third variation is called "drop box" ecc, in which the the use of electronics in both its payments and collections."). the checks must either keep the original or "maintain the cards generally, and payroll cards are subject to the general in some other states believe their laws apply to prepaid card been important amendments limited protection for consumers in two situations: (1) a new vi. new legal regimes imposed by the feds and a instead of having payroll cards issued by a bank, the employer consumers often deal with telemarketers, debt "play a significant role in the checking system."). check also are subject to the usa patriot act and the bank 50. see fred h. miller, u.c.c. articles 3, 4 and 4a: a consumers who had always received their original 62. there have been many non-uniform amendments material to include in courses development of payments law.57 state law, while others are subject only to state law.44 in matters where the new payments dispute rights.49 47306 (2004). iii. a new payment device: the payroll card instruments and holders in due course to the end of his book, "telephone checks" are subject to a federal regulation and 53-56. 38. sixteen or more states have amended their money (the payor bank) to recredit the consumer's account when cc) and the check 21 act.6 indemnities, and damages. unfortunately, there are many 1. up-to-date sources on payments law include fred h. 43. the principal state statute governing checks is the york state alone. in the matter of paypal, assurance of will have to stay abreast of many purporting to be the signature of the drawer [the consumer]." support payments often share these characteristics. cards act effective oct. 28, 2004: banks will no longer return far more pronounced effect. check 21 represents a dramatic have to differentiate between consumer and non-consumer supp.)). if a 3. 12 c.f.r. part 205. the federal reserve board has note 33, at 15. consumers in states that do not have laws through the automated clearing house network.") transmitter laws to include prepaid card issuers. regulators system that depends on planes and trucks transporting paper consumer accounts for long periods this brief description of the patchwork of rules consumer pay by an electronic fund transfer instead of a check, further complicating matters, some who do business 52. states with demand draft statutes include california, yet adopted any of the 2002 amendments to such as electronic check imaging rules for obtaining the consumer's authorization. id. rule 26. id. at � 7(b). not be enough to motivate banks to exercise and other discussing many other matters. the consumer, therefore, 25. if the amount of the substitute check is more than $2500 telephone checks that enable the consumer's bank to push the burden and expense of suing their an ordinary check transaction only when they receive their is not required to take advantage of the new warranty rules. funds only from a limited number of atms that may not actively working on new technologies and services to increase involved in a limited way with passage of the efta and the both electronic check conversion decisions about what to include and what to eliminate, or at include a `reciprocity provision.' the favorable warranty rules * professor of law, georgia state university college of law. consumer law conference," held in may of 2004. who advise them, and for those providing consumer protection.16 72 journal of texas consumer law the task of customer education falls to the lawyers, even 23. check 21 � 4(b)(2). many creditors will read the legend and accept the substitute the expectation, however, is that the consumer's bank will be a manner that protects consumers, consumers who do not to be defined broadly. 69 fed. reg., 55996, 55998 (2004). consumer and non-consumer checks, which they claim is ecc at the point of sale.12 reciprocated by also adopting the special warranty rules. consumers. and the private 67journal of texas consumer law com/news/712822.asp?cp1=1. a settlement was announced who write the checks) and many banks in the check collection today, there are new systems and new rules. check as proof of payment. 14-25. i. introduction 56280286 ("surveys show lots of confusion already exists of recent developments in payments law raises profound reg. 20558 (2004). the proposed rule applies to stored value to the consumer protections of the efta and reg. e. 33 themselves ill-equipped. because of the sheer volume of original checks along with their including the expedited funds 2004, matters became much more confusing.17 magnetic stripes, erroneous amounts stored on cards, and 69journal of texas consumer law accounts because consumers are accorded special protections the ucc as amended in must have received a substitute check.29 transactions banking and payments law (2nd 59. ucc � 3-305(e) and official comment 6. is entitled to a paper instrument called a "substitute check." were still quite new and little used. telephone-initiated entry reporting requirements, and their checks instead see consumers union, payroll cards: issues for employers, referred to as "prepaid cards." see generally mark furletti, point of purchase ach entries; arc stands for accounts a few low profit consumer accounts may the federal-state patchwork still make sense or should our business notifies the consumer that the check will be processed 1990 permitted this as long as the customer's bank statement it will be processed the same as any other check. if they have processed as a check. the check instead is treated as a "source in addition to check 21, the ucc also governs these of bank deposits, collections and credit cards (2004). be developed in the near future.40 of philadelphia feb. 2004), available at http:///www.phil.frb. authorized. id. at 55999. paypal's status. paypal's status and the law applicable to it as university of houston center for consumer law's "teaching or at the point of sale. payroll cards benefit both employers 68 journal of texas consumer law 63. w.a. lee, visa debit card volume tops credit worldwide, a payroll card. in the future, these and other types of stored in the past few years payment by check has decreased the payee and the date of the check, but the ucc does not 48. lisa napoli, paypal sued over frozen funds, http://msnbc. at 398 (stating that negotiable instruments are "considerably must provide the consumer with a receipt that contains it identifies significant features of ii. the not so identical twins: electronic check requires the retailer to obtain the consumer's authorization. governs most automated clearing new statutes, regulations, and cases. imposition of federal power upon check transactions. it was a payor bank and does not bear a handwritten signature comment on whether to incorporate the ucc amendments the payroll card is treated as a stored value card or a card consumers also would normally want to know the name of the trend is toward increasing 60. 12 c.f.r. part 229. systems law, raising questions of federal pre-emption.43 telephone checks. consumers). instruments law under the ucc. others believe there is far were processed through a system known as electronic check one. if the bank, however, provides a substitute check, even 54. telemarketing sales rule, 68 fed. reg. 4580 (2003); in both types of transactions, consumers who have not agreed subject to more than one body of law. soon expand tremendously. furletti, supra note 33, at 9 consumer's checks will never be converted to images and will consumers who do not receive the original rule applies to consumers who pay with telephone checks. 44. see part v, infra, for an explanation of the law of the consumer fill out the check or hand a blank check to the agreed to have their checks "truncated." their original different from ordinary checks and consumers have a whole b. non-ucc law governing telephone reg. 55996, 55999 (2004). if the employer opens a separate contrast, no federal law, and very 40. recent irs rulings have facilitated the use of flexible various devices and systems such as workers. some payment devices 10. an estimated 41% of banking customers receive their 14. for example, under the nacha rules the merchant adopting rules to govern new consumer payment systems and 56. unauthorized telephone-initiated entry reporting consumer payments law). see model stored value card 17. the text contains a brief discussion of only a few of the card volume worldwide exceeded credit card volume, $1.48 state.ny.us/press/2004/mar/mar8a_04_attach.pdf. are now paying wages to unbanked workers through "payroll be an ordinary check transaction because consumers pay by to an error resolution procedure depend upon what type of function?)(describing features of payroll cards). consumer protections. questions lawmakers and regulators important matters to a private law-making body, for the note 33, at 9. the federal government is implementing a approach a teacher takes, there will be major gaps in their 18. check 21 � 13. to respond to this problem, in 2002 the ucc was to consumer telephone checks so banks have to determine finally appears in article 3 of money transmitter, not a bank. if regulators agree, it is subject pay by tendering a check, but it is not processed as a check ten days.25 international announced that, for the first time, in 2003 debit developments in electronic fund transfers by adding new rules. 49. the attorney general and paypal entered into an the entire payments system toward elimination of checks 11. ucc � 4-406(a). comment 1 acknowledges that 35. in justifying its proposal to extend reg. e to payroll cards, when consumers have never authorized any, obtain multiple most consumers probably do not see the small information. the seller may use that data to prepare a draft it instituted a new procedure allowing the association to ed., 2002) at 170 (hereafter both ecc and 5. 12 c.f.r. part 210. place, am. banker, april 23, 2004, at 11 ("the check 21 in electronic fund transfer other than a debit card, however, the few state statutes, govern stored to provide the substitute check can frustrate the consumer's consideration of payment systems. policy issues. given the plethora of new payment devices am. banker, april 20, 2004, at 11 (reporting that visa liability back to the depositary bank. the consumer's bank in addition, funds availability act and reg. cc. checking accounts payment update nevertheless, as described below, payroll cards also 24. see e.g., final rule, 69 fed. reg. at 47323-24; check 21, after sept. 11, 2001 when all non-military air transport was depend on what type of bank developments, it is safe to say that and state law that does not contain consumer protection numerous consumer complaints of unauthorized transfers via 73journal of texas consumer law starting on page 397. ronald j. mann, payment systems income" and the cards use the same types of access devices, conference summary, prepaid cards: how do they those who have taken courses in payment systems may find because of the large numbers of consumers complaining about employers and runs the risk of lost, stolen, and forged check transactions to be subject to laws that take two very employees use the card in connection with the purchase of that deliver insurance payments to disaster victims may serve micr line at the bottom of the check to process the check to them, legislators might consider simplifying the law to designed specifically for payroll cards. house network and is subject to the nacha rules. those engaging in electronic check conversion to permit consumers 36. definition of "deposit"; "stored value cards," 69 fed. of errors that could occur when substitute checks are used.24 account the employer establishes the trend toward increased legal complexity in the current sessions, 75 wash, 75 wash, 75 w . u. l. q. 225 (1997). not contain the drawer's signature.52 53. it is unclear how much of a burden the telephone check their originals was check 21 or ecc. electronic transfers are no longer new and relatively consumers have warranty rights regardless of whether they bankers association has opposed adoption of amended nacha, a private organization with no features of and issues raised by check 21. for a more detailed collectors, and others in ways that result in "telephone the transfer of electronic images, and thereby make check these include multiple debits to the consumer's account approximately 2 � million paypal account holders in new consumer drawers. see consumer banking law, supra note and electronic check conversion. the remainder of the amount of the substitute check must be systems 57. see part iv, supra, for further illustrations of payments they will not receive these checks because electronic images complain that sellers and debt collectors obtain withdrawals the telephone check provision requires.53 are increasingly transferring wages electronically into 51. ucc � 3-103(a)(16). it is an item "not created by of a payment system that seems to fall to a notice explaining that a substitute check is the legal checks, "padded payroll" (where a thief adds non-employees understandable and probably shared by their lawyers. ucc. federal one-size-fits-all approach.62 a bank that refuses although this is unclear. one of the act's requirements is affecting consumer check payment transactions. see, e.g., akron beacon j., july 18, 2004, available at 2004 wl $0.5 trillion in consumer payments). authorization requirements apply. 41. see mark budnitz & margot saunders, consumer check. devices depends upon how they fee every time new funds are loaded onto the card. if a card is not to get into a fight with the depositary it is a harbinger of things to come as the poses serious challenges for users (mastercard estimates stored value cards may account for exchange consumers who paid by the ensuring the financial soundness of prepaid card issuers such applied only to electronic payment devices and systems that withdraw a portion of their wages or after a limited number of they had fewer chargeback and billing be obtained from the micr line. the entity retaining (reg. together with the following. some systems appear and other financial transactions 397-447 (2003). see id. for example, it is not clear in the statute whether a bank provisions on remotely-created consumer items except they liability by passing it on to another bank. 21 and reg. cc render the federal-state arrangement too contain the required legend. in the 2002 amendments to the ucc for transactions involving negotiable instruments.50 instead, the position of the ucc's sponsors has been that if a have been enacted in several other states. these jurisdictions into reg. cc. commenters overwhelmingly supported the 13. reg. e official staff interpretation � 205.3(b)-3. a function just as crucial to a person's financial well-being as that expectation may not be met very often, than the rules imposed by bank regulation.47 what is the proper role for private rulemaking bodies such as between the regulatory cracks. or perhaps lost, stolen, or defective, the employee may have to pay a fee to a substitute check with their monthly statement.22 the employer sets up the accounts from which the money is least spend much less time discussing. for example, some law there is no federal regulation and state regulation is spotty at can occur if the original check is processed along with the from a jurisprudential perspective, it is troubling that state congress and the frb hope that check 21 will facilitate including the military. id. payroll if the proposal is adopted, and pop, acronyms used by nacha. pop stands for 66 journal of texas consumer law generally remarks by chairman alan greenspan, fed'l proposed rule would blur that line by subjecting payroll cards the process of moving to a paperless environment."). see instruments used in certain consumer transactions contain a for whom it has opened an account. see mark furletti, not at all alike. for example, in consumers and their bank accounts. the retailer may have 2005 teaching courses that include a effect of treating the instrument as if it did contain the required when a business in a phone transaction has the state `money transmitter' licensing laws, 58 bus. law. 317 at 82 (describing state laws regulating stored value cards). processed as an electronic transfer, but often the notice is systems remotely created consumer items. stored value cards pose many risks for consumers. moreover, new payment devices such as cc.60 amendments to � 4-406). a few years ago wal-mart and other retailers adopted payroll cards rules issued by nacha. these rules impose requirements on several states if not required to do so, the consumer has the right to a reasonable opportunity to act on the consumer's stop payment t consumer's bank. in addition, the wrong account may be and federal governments have, in effect, delegated such cover the funds accessed with certain types of payroll cards. 36 � 4-101, official comment 3; � 4-406, official comment 3. the same to the consumer, but are to state money transmitter laws which are far less stringent several separate federal laws.42 have ruled that it does not qualify as a money transmitter. (2004)(hereafter final rule). so their students will be able to the ucc drafters have steadfastly refused to subject to reg. e. the employee may be permitted to access the federal electronic fund a legend: "this is a legal copy of your check. you can use it in may have to pay a fee every time they use an atm to 31. stored value cards, including payroll cards also are employees' bank accounts through direct deposit. consumers 2004)(describing 2004 amendment requiring businesses and responsibilities. their lawyers interpretive difficulties applying these sections. some of the ftc holder rule requires that negotiable 30. reg. e, 12 c.f.r. � 205.3(b)(3). transfers pursuant to telephone transactions.55 claim holder in due course status.58 does it make sense for reflects national policy? does the application of both check produced from the electronic images and presented to the that consumers were mislead into adequately represent future clients read about in the papers.7 difficult operationally. amended articles 3 and 4 apply only e to include payroll card accounts "whether the funds are uniform rules. it truly is a uniform code. the uniform protection act, id. at 397-99. see consumer payments law trouble understanding their rights adopted the amendments, but refused to enact the governing payment for transactions over the phone illustrates payroll cards have come into wide use within a short an "item" is an instrument handled by a bank for collection time. their success, together with the popularity of gift and internet bureau (feb. 2004). available at http://www.oag. 55. rules 2.1.5 and 13.1.58, nacha rules, supra note 9. debit to consumer accounts on behalf of fraudulent their original checks with their statements. an ecc appears dakota, oregon, tennessee, texas, utah, and west virginia. complex patchwork of laws and private rules applicable 32. problems include torn cards, cards with defective or payment. � 4-104(a)(9). gift cards. contained the check number, amount, and payment date.11 established by an employer to transfer wages electronically unauthorized transfers via telephone communication with certain businesses, such as credit card and insurance companies, include consumer protection in articles 3 and 4); see ucc hopefully, buried within a dense paragraph in the monthly statement enacted in order to further implement national policy to push to consumers to be a check transaction because consumers spending and health reimbursement cards. furletti, supra the retailer a check. it is likely that most consumers believe the new different approaches. federal law establishes one set of account for employees the usa patriot act also might apply, value devices such as phone and cards." some payroll cards are a type of debit card, while amendment to the 2004 ach rules (april 6, rules contain several specific requirements for electronic merchants far beyond anything in reg. e.14 a. "telephone checks" require this information on the statement because it cannot some so-called 4. 12 u.s.c. � 4001 et seq. the act itself is complex and raises many questions. to the payroll), altered checks, etc. employers, therefore, the consumer does not have a recredit right. moreover, in developments in the transfer usually is sent through the automated clearing new challenges to those educating them. to the extent that "substitute check." the substitute check has features very 50 years, the word "consumer" of businesses with numerous consumer complaints of 22. check 21, final rule, 69 fed. reg. 47290, 47322 students' knowledge unless their school offers an advanced to opt out of electronic check conversion); unauthorized direct deposit, however, is not possible for employees who (reg. e) effort to take advantage of the indemnity. in contrast, status. 41, at 22. interest earned on deposits. in addition, electronic imaging others are designed as a type of stored value card. 31 the expense of going to check cashers to obtain funds from in a transaction in which they are provided a substitute their checks truncated and to those who did consent. those terminate her account with that bank in this confusion is caused by the many different the frb's regulation cc5 34. see generally judith rinearson, regulation of electronic 12. see mark budnitz, consumer banking and payments the amount, the check serial number, and a number that provision on telephone checks. instead it adopted effect until october 28, 2004,8 the employee may experience problems with no satisfactory consequently, the act presents a formidable challenge to (2004)(hereafter nacha rules). while it is uncertain whether lawmakers will