South Carolina General Assembly
120th Session, 2013-2014

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A42, R49, S221

STATUS INFORMATION

General Bill
Sponsors: Senator Hayes
Document Path: l:\council\bills\nbd\11016vr13.docx

Introduced in the Senate on January 15, 2013
Introduced in the House on February 27, 2013
Passed by the General Assembly on May 22, 2013
Governor's Action: June 7, 2013, Signed

Summary: Commercial Code-funds transfers

HISTORY OF LEGISLATIVE ACTIONS

     Date      Body   Action Description with journal page number
-------------------------------------------------------------------------------
   1/15/2013  Senate  Introduced and read first time (Senate Journal-page 5)
   1/15/2013  Senate  Referred to Committee on Judiciary 
                        (Senate Journal-page 5)
   1/28/2013  Senate  Referred to Subcommittee: Gregory (ch), Allen, Bennett, 
                        Johnson, Turner
   2/20/2013  Senate  Committee report: Favorable Judiciary 
                        (Senate Journal-page 280)
   2/21/2013  Senate  Read second time (Senate Journal-page 11)
   2/21/2013  Senate  Roll call Ayes-39  Nays-0 (Senate Journal-page 11)
   2/26/2013  Senate  Read third time and sent to House 
                        (Senate Journal-page 12)
   2/27/2013  House   Introduced and read first time (House Journal-page 5)
   2/27/2013  House   Referred to Committee on Labor, Commerce and Industry 
                        (House Journal-page 5)
   2/28/2013  House   Recalled from Committee on Labor, Commerce and Industry 
                        (House Journal-page 44)
   2/28/2013  House   Referred to Committee on Judiciary 
                        (House Journal-page 44)
   5/15/2013  House   Committee report: Favorable Judiciary 
                        (House Journal-page 4)
   5/21/2013  House   Read second time (House Journal-page 29)
   5/21/2013  House   Roll call Yeas-107  Nays-0 (House Journal-page 29)
   5/22/2013  House   Read third time and enrolled (House Journal-page 17)
    6/4/2013          Ratified R 49
    6/7/2013          Signed By Governor
   6/18/2013          Effective date 06/07/13
   6/18/2013          Act No. 42

View the latest legislative information at the LPITS web site

VERSIONS OF THIS BILL

1/15/2013
2/20/2013
5/15/2013


(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)

(A42, R49, S221)

AN ACT TO AMEND SECTION 36-4A-108, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO UNIFORM COMMERCIAL CODE-FUNDS TRANSFERS, SO AS TO MAKE THE CHAPTER APPLICABLE TO REMITTANCE TRANSFERS, UNLESS THE REMITTANCE TRANSFER IS AN ELECTRONIC FUND TRANSFER, AND TO PROVIDE THAT, IN THE EVENT THERE IS AN INCONSISTENCY BETWEEN THE APPLICABLE PROVISION OF THE CHAPTER AND THE APPLICABLE PROVISION OF THE ELECTRONIC FUND TRANSFER ACT, THE PROVISION OF THE ELECTRONIC FUND TRANSFER ACT GOVERNS.

Be it enacted by the General Assembly of the State of South Carolina:

Remittance funds transfers, applicability of UCC funds transfers law

SECTION    1.    Section 36-4A-108 of the 1976 Code is amended to read:

"Section 36-4A-108.    (a)    Except as provided in subsection (b), this chapter does not apply to a funds transfer any part of which is governed by the Electronic Fund Transfer Act of 1978 (Title XX, Public Law 95-630, 92 Stat. 3728, 15 U.S.C. Section 1693, et seq.) as amended from time to time.

(b)    This chapter applies to a funds transfer that is a remittance transfer as defined in the Electronic Fund Transfer Act (15 U.S.C. Section 1693o-l) as amended from time to time, unless the remittance transfer is an electronic fund transfer as defined in the Electronic Fund Transfer Act (15 U.S.C. Section 1693a) as amended from time to time.

(c)    In a funds transfer to which this chapter applies, in the event of an inconsistency between an applicable provision of this chapter and an applicable provision of the Electronic Fund Transfer Act, the provision of the Electronic Fund Transfer Act governs to the extent of the inconsistency."

OFFICIAL COMMENT

1.    The Electronic Fund Transfer Act (EFTA), implemented by Regulation E, 12 C.F.R. Part 1005, is a federal statute that covers aspects of electronic fund transfers involving consumers. EFTA also governs remittance transfers, defined in 15 U.S.C. Section 1693o-1, which involve transfers of funds through electronic means by consumers to recipients in another country through persons or financial institutions that provide such transfers in the normal course of their business. Not all "remittance transfers" as defined in EFTA, however, qualify as "electronic fund transfers" as defined under the EFTA, 15 U.S.C. Section 1693a(7). While Section 36-4A-108(a) broadly states that Chapter 4A does not apply to any funds transfer that is governed in any part by EFTA, subsection (b) provides an exception. The purpose of Section 36-4A-108(b) is to allow this chapter to apply to a funds transfer as defined in Section 36-4A-104(a) (see Section 36-4A-102) that also is a remittance transfer as defined in EFTA, so long as that remittance transfer is not an electronic fund transfer as defined in EFTA. If the resulting application of this chapter to an EFTA-defined "remittance transfer" that is not an EFTA-defined "electronic fund transfer" creates an inconsistency between an applicable provision of this chapter and an applicable provision of EFTA, as a matter of federal supremacy, the provision of EFTA governs to the extent of the inconsistency. Section 36-4A-108(c). Of course, applicable choice of law principles or enforceable choice of law provisions in an applicable agreement also will affect whether Chapter 4A will apply to all or part of any funds transfer, including a remittance transfer. See Section 36-4A-507. The following examples assume that choice of law principles or an enforceable choice of law provision will lead a court to examine the applicability of Chapter 4A to the funds transfer.

2.    The following examples illustrate the relationship between EFTA and this chapter pursuant to Section 36-4A-108.

Example 1.    A commercial customer of Bank A sends a payment order to Bank A, instructing Bank A to transfer funds from its account at Bank A to the account of a consumer at Bank B. The funds transfer is executed by a payment order from Bank A to an intermediary bank and is executed by the intermediary bank by means of a clearinghouse credit entry to the consumer's account at Bank B (the beneficiary's bank). The transfer into the consumer's account is an electronic fund transfer as defined in 15 U.S.C. Section 1693a(7). Pursuant to Section 36-4A-108(a), Chapter 4A does not apply to any part of the funds transfer because EFTA governs part of the funds transfer. The funds transfer is not a remittance transfer as defined in 15 U.S.C. Section 1693o-1 because the originator is not a consumer customer. Thus Section 36-4A-108(b) does not apply.

A court might, however, apply appropriate principles from Chapter 4A by analogy in analyzing any part of the funds transfer that is not subject to the provisions of EFTA or other law, such as the obligation of the intermediary bank to execute the payment order of the originator's bank.

Example 2.    A consumer originates a payment order that is a remittance transfer as defined in 15 U.S.C. Section 1693o-1 by providing the remittance transfer provider (Bank A) with cash in the amount of the transfer plus any relevant fees. The funds transfer is routed through an intermediary bank for final credit to the designated recipient's account at Bank B. Bank A's payment order identifies the designated recipient by both name and account number in Bank B, but the name and number provided identify different persons. This remittance transfer is not an electronic fund transfer as defined in 15 U.S.C. Section 1693a(7) because it is not initiated by electronic means from a consumer's account, but does qualify as a funds transfer as defined in Section 36-4A-104. Both Chapter 4A and EFTA apply to the funds transfer. Sections 36-4A-102, 36-4A-108(a), and (b). Chapter 4A's provision on mistakes in identifying the designated beneficiary, Section 36-4A-207, would apply as long as not inconsistent with the governing EFTA provisions. Section 36-4A-108(c).

Example 3.    A consumer originates a payment order from the consumer's account at Bank A to the designated recipient's account at Bank B located outside the United States. Bank A uses the CHIPS system to execute that payment order. The funds transfer is a remittance transfer as defined in 15 U.S.C. Section 1693o-1. This transfer is not an electronic fund transfer as defined in 15 U.S.C. Section 1693a(7) because of the exclusion for such types of transfers in 15 U.S.C. Section 1693a(7)(B), but qualifies as a funds transfer as defined in Section 36-4A-104. Under Sections 36-4A-102 and 36-4A-108(b), both Chapter 4A and EFTA apply to the funds transfer. The EFTA will prevail to the extent of any inconsistency between EFTA and Chapter 4A. Section 36-4A-108(c). For example, suppose the consumer subsequently exercised the right to cancel the remittance transfer under the right given under EFTA and obtain a refund. Bank A would be required to comply with the EFTA rule concerning cancellation even if Chapter 4A prevents Bank A from canceling or reversing its payment order it sent to its receiving bank. Section 36-4A-211.

Example 4.    A person fraudulently originates an unauthorized payment order from a consumer's account through use of an online banking interface. This transaction is an electronic fund transfer as defined in 15 U.S.C. Section 1693a(7) and would be governed by EFTA and not Chapter 4A. Section 36-4A-108(a). Whether the funds transfer also qualifies as a remittance transfer under 15 U.S.C. Section 1693o-1 does not matter to the application of Chapter 4A.

Example 5.    A person fraudulently originates an unauthorized payment order from a consumer's account at Bank A through forging written documents that are provided in person to an employee of Bank A. This funds transfer is not an electronic fund transfer as defined in 15 U.S.C. Section 1693a(7) because the fund transfer from the consumer's account is not initiated by electronic means, but the funds transfer qualifies as a funds transfer as defined in Section 36-4A-104. Chapter 4A will apply to this funds transfer regardless of whether the funds transfer also qualifies as a remittance transfer under 15 U.S.C. Section 1693o-1. If the funds transfer is not a remittance transfer, the provisions of Section 36-4A-108 are not implicated because the funds transfer does not fall under EFTA, and the general scope provision of Chapter 4A governs. Section 36-4A-102. If the funds transfer is a remittance transfer, and thus governed by EFTA, Section 36-4A-108(b) provides that Chapter 4A also applies. The provisions of Chapter 4A will allocate the loss arising from the unauthorized payment order as long as those provisions are not inconsistent with the provisions of the EFTA applicable to remittance transfers. Section 36-4A-108(c).

3.    Regulation J, 12 C.F.R. Part 210, of the Federal Reserve Board addresses the application of that regulation and EFTA to fund transfers made through Fedwire. Fedwire transfers are further described in Official Comments 1 and 2 to Section 36-4A-107. In addition, funds transfer system rules may be applicable pursuant to Section 36-4A-501.

Time effective

SECTION    2.    This act takes effect upon approval by the Governor.

Ratified the 4th day of June, 2013.

Approved the 7th day of June, 2013.

__________


This web page was last updated on Friday, August 16, 2013 at 12:14 P.M.