Clarks' Bank Deposits and Payments Monthly
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October 21, 2016
California Court Confirms Rule Giving Priority To Judgment Creditor As A "Transferee" From The Debtor's Deposit Account
If a debtor has granted a consensual security interest in the funds in its deposit account to a secured lender, does the lender have priority over the claims of a judgment creditor who later levies against the deposit account? In a recent decision from California, the court gives priority to the judgment creditor under the rules of Article 9. The decision is both thoughtful and exhaustive in resolving the priority issue based on the language and policies behind UCC 9-332(b). Yet there's a good argument on the other side.
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October 21, 2016
Supreme Court Agrees To Hear Anti-Surcharge Statute Case
On September 29, the U.S. Supreme Court granted review in Expressions Hair Design v. Schneiderman (Case No. 15-1391), a case out of the Second Circuit testing whether New York’s anti-credit-card surcharge statute runs afoul of the First Amendment’s free speech protections. The Second Circuit is one of three circuit courts to have recently considered the constitutional validity of anti-surcharge laws. The Second Circuit and the Fifth Circuit (analyzing a Texas statute) both determined that the laws before them regulated conduct rather than speech and were readily understandable, not unconstitutionally vague. In contrast, the Eleventh Circuit held that Florida’s anti-surcharge law “directly targets speech to indirectly affect commercial behavior.”
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October 21, 2016
Intended Beneficiary Was Not Entitled To Completion Of A Frozen Wire Transfer
In a notable and well-reasoned decision, a New York court has ruled that the funds in a wire transfer, frozen for 14 years at a New York intermediary bank pursuant to a Presidential executive order, were properly returned to the originator's bank (and the originator) once the freeze was lifted, as though the wire had never occurred. The court rejected the argument of the intended beneficiary that the intermediary bank had an obligation to complete the wire as intended once the funds were unfrozen by the government. The court concluded that the intermediary bank had no obligation, enforceable by the intended beneficiary, to complete the wire transfer by issuing a payment order to the beneficiary's bank to pay the beneficiary. The funds at issue needed to be sent backward, not forward. In reaching this conclusion, the New York court wrestled with a number of interrelated rules under Article 4A of the UCC.
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September 30, 2016
Lender's Security Interest In Credit Card Receivables Was Subject To Terms Of The Underlying Contract And The Account Debtor's Claims And Defenses
Accounts receivable have been called "precarious collateral" because the assignee is subject to all terms of the underlying contract, and the account debtor has a right to refuse payment to the assignor if it has claims or defenses that it may assert. This baseline rule is codified in UCC 9-404. The rule reflects the fact that, in the absence of a waiver, the secured party as assignee of a receivable simply steps into the shoes of the assignor. Receivables are not negotiable instruments, where a holder in due course takes free of claims and defenses. A secured lender learned this lesson the hard way in a recent decision from New York.
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September 30, 2016
Remote Deposit Capture And Multiple Presentment Of Checks: First Reported Judicial Decision Comes Down On This Hot Topic
“Remote deposit capture” is the convenient, innovative process of depositing a check to a deposit account through the digital transmission of an image of a check and other related transaction information to a depository bank by its accountholder. By digitally transmitting this image and information, the accountholder is not required to tender a paper check to a retail banking location or an ATM to facilitate deposit of the check.
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September 30, 2016
Customer Wins Check Fraud Case On Ground That His Bank Failed To "Send" Or "Make Available" His Monthly Statements
At the end of last year, the Comptroller of the Currency issued a revised “Credit Card Lending” booklet for the Comptroller’s Handbook, replacing a 1996 booklet of the same name. The OCC, part of the U.S. Department of the Treasury, is the prudential regulator for all national banks, federal savings associations, and federal branches of agencies of foreign banks. Part of the OCC’s role involves supervising these institutions to ensure their “safety and soundness.” Thus, as with other booklets, the Credit Card Lending booklet “is prepared for use by OCC examiners in connection with their examination and supervision of national banks and federal savings associations.”