Compliance Bulletin

Safe Harbor For Periodic Statements Extended to 2015
October 15, 2009

A CBA-sponsored bill, AB 1566, extends the provisions of Commercial Code Section 4406, presently set to expire on January 1, 2010, for five additional years to January 1, 2015. This is the provision of the Commercial Code that requires banks to provide either copies of checks or sufficient information to customers regarding checks and other items paid from an account.

Section 4406(a) specifically states that “the statement of account provides sufficient information if the item is described by item number, amount, and date of payment.” This provision is important to the industry because it establishes a standard that is clear and achievable for what constitutes sufficient information for purposes of triggering customers’ obligations to notify banks of unauthorized activities. Without the extension, a replacement section would have gone into effect that would require banks to provide sufficient information rather than to reasonably identify the items, and without specifying what information is sufficient.

The existing statutory standard has been subject to legislative sunsets because of the prevailing expectation that advances in technology will some day allow the industry to return more information to customers, including payee name. But even with the passage of Check 21 and greater use of check imaging, the provision of payee name (which is still often written in by the maker) is still not practicable. AB 1566 guarantees that, at least until January 1, 2015, banks can continue to provide the check number, amount, and date of payment to comply with Section 4406.

If you have any questions, you may direct them to Kevin Gould, who is the lead lobbyist for this bill.

The information contained in this CBA Regulatory Compliance Bulletin is not intended to constitute, and should not be received as, legal advice. Please consult with your counsel for more detailed information applicable to your institution.

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