Chapter 410

410.105(3)(b) (b) “Item” — s. 404.104 (1) (i).

410.105(3)(c) (c) “Suspends payments” — s. 404.104 (1) (L).

410.105(4) (4) In addition ch. 401 contains general definitions and principles of construction and interpretation applicable throughout this chapter.

410.105 History History: 1991 a. 304; 1995 a. 449.

410.106 410.106 Time payment order is received.

410.106(1) (1) The time of receipt of a payment order or communication canceling or amending a payment order is determined by the rules applicable to receipt of a notice stated in s. 401.202 (6). A receiving bank may fix a cutoff time or times on a funds-transfer business day for the receipt and processing of payment orders and communications canceling or amending payment orders. Different cutoff times may apply to payment orders, cancellations, or amendments, or to different categories of payment orders, cancellations, or amendments. A cutoff time may apply to senders generally or different cutoff times may apply to different senders or categories of payment orders. If a payment order or communication canceling or amending a payment order is received after the close of a funds-transfer business day or after the appropriate cutoff time on a funds-transfer business day, the receiving bank may treat the payment order or communication as received at the opening of the next funds-transfer business day.

410.106(2) (2) If this chapter refers to an execution date or payment date or states a day on which a receiving bank is required to take action, and the date or day does not fall on a funds-transfer business day, the next day that is a funds-transfer business day is treated as the date or day stated, unless the contrary is stated in this chapter.

410.106 History History: 1991 a. 304; 2003 a. 321; 2009 a. 320.

410.107 410.107 Federal reserve regulations and operating circulars. Regulations of the board of governors of the federal reserve system and operating circulars of the federal reserve banks supersede any inconsistent provision of this chapter to the extent of the inconsistency.

410.107 History History: 1991 a. 304.

410.108 410.108 Relationship to Electronic Fund Transfer Act.

410.108(1) (1) Except as provided in sub. (2), this chapter does not apply to a funds transfer any part of which is governed by the electronic fund transfer act, 15 USC 1693 to 1693r.

410.108(2) (2) This chapter applies to a funds transfer that is a remittance transfer, as defined in 15 USC 1693o-1, unless the remittance transfer is an electronic fund transfer, as defined in 15 USC 1693a.

410.108(3) (3) 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.

410.108 History History: 1991 a. 304; 2013 a. 33.

subch. II of ch. 410 SUBCHAPTER II

ISSUE AND ACCEPTANCE OF PAYMENT ORDER

410.201 410.201 Security procedure. “Security procedure” means a procedure established by agreement of a customer and a receiving bank to verify that a payment order or communication amending or canceling a payment order is that of the customer or to detect error in the transmission or the content of the payment order or communication. A security procedure may require the use of algorithms or other codes, identifying words or numbers, encryption, callback procedures, or similar security devices. Comparison of a signature on a payment order or communication with an authorized specimen signature of the customer is not by itself a security procedure.

410.201 History History: 1991 a. 304.

410.202 410.202 Authorized and verified payment orders.

410.202(1) (1) A payment order received by the receiving bank is the authorized order of the person identified as sender if that person authorized the order or is otherwise bound by it under the law of agency.

410.202(2) (2) 

410.202(2)(a) (a) If a bank and its customer have agreed that the authenticity of payment orders issued to the bank in the name of the customer as sender will be verified pursuant to a security procedure, a payment order received by the receiving bank is effective as the order of the customer, whether or not authorized, if all of the following apply:

410.202(2)(a)1. 1. The security procedure is a commercially reasonable method of providing security against unauthorized payment orders.

410.202(2)(a)2. 2. The bank proves that it accepted the payment order in good faith and in compliance with the security procedure and any written agreement or instruction of the customer restricting acceptance of payment orders issued in the name of the customer.

410.202(2)(b) (b) The bank is not required to follow an instruction that violates a written agreement with the customer or notice of which is not received at a time and in a manner affording the bank a reasonable opportunity to act on it before the payment order is accepted.

410.202(3) (3) Commercial reasonableness of a security procedure is a question of law to be determined by considering the wishes of the customer that are expressed to the bank, the circumstances of the customer known to the bank, including the size, type, and frequency of payment orders normally issued by the customer to the bank, alternative security procedures offered to the customer, and security procedures in general use by customers and receiving banks similarly situated. A security procedure is considered to be commercially reasonable if all of the following apply:

410.202(3)(a) (a) The security procedure was chosen by the customer after the bank offered, and the customer refused, a security procedure that was commercially reasonable for that customer.

410.202(3)(b) (b) The customer expressly agreed in writing to be bound by any payment order, whether or not authorized, issued in the customer’s name and accepted by the bank in compliance with the security procedure chosen by the customer.

410.202(4) (4) In this chapter, “sender” includes the customer in whose name a payment order is issued if the order is the authorized order of the customer under sub. (1), or it is effective as the order of the customer under sub. (2).

410.202(5) (5) This section applies to amendments and cancellations of payment orders to the same extent that it applies to payment orders.

410.202(6) (6) Except as provided in this section and in s. 410.203 (1) (a), rights and obligations arising under this section or s. 410.203 may not be varied by agreement.

410.202 History History: 1991 a. 304.

410.203 410.203 Unenforceability of certain verified payment orders.

410.203(1) (1) If an accepted payment order is not, under s. 410.202 (1), an authorized order of a customer identified as sender, but is effective as an order of the customer pursuant to s. 410.202 (2), the following rules apply:

410.203(1)(a) (a) By express written agreement, the receiving bank may limit the extent to which it is entitled to enforce or retain payment of the payment order.

410.203(1)(b) (b) The receiving bank is not entitled to enforce or retain payment of the payment order if the customer proves that the order was not caused, directly or indirectly, by any of the following:

410.203(1)(b)1. 1. A person entrusted at any time with duties to act for the customer with respect to payment orders or the security procedure.

410.203(1)(b)2. 2. A person who obtained access to transmitting facilities of the customer or who obtained, from a source controlled by the customer and without authority of the receiving bank, information facilitating breach of the security procedure, regardless of how the information was obtained or whether the customer was at fault. Information includes any access device, computer software, or the like.

410.203(2) (2) This section applies to amendments of payment orders to the same extent that it applies to payment orders.

410.203 History History: 1991 a. 304.

410.203 Annotation A bank that received an electronic transfer of funds, with incomplete instructions, and deposited the funds into an account in which the account owner had granted a security interest to a creditor who had a rightful claim to the funds was liable to the secured creditor for the amount of the transfer when the bank subsequently transferred the funds to another account of the account owner who absconded with the funds. General Electric Capital Corp. v. Central Bank, 49 F.3d 280 (1995).

410.204 410.204 Refund of payment and duty of customer to report with respect to unauthorized payment order.

410.204(1) (1) If a receiving bank accepts a payment order issued in the name of its customer as sender that is not authorized and not effective as the order of the customer under s. 410.202, or that is not enforceable, in whole or in part, against the customer under s. 410.203, the bank shall refund any payment of the payment order received from the customer to the extent the bank is not entitled to enforce payment and shall pay interest on the refundable amount calculated from the date the bank received payment to the date of the refund. However, the customer is not entitled to interest from the bank on the amount to be refunded if the customer fails to exercise ordinary care to determine that the order was not authorized by the customer and to notify the bank of the relevant facts within a reasonable time not exceeding 90 days after the date the customer received notification from the bank that the order was accepted or that the customer’s account was debited with respect to the order. The bank is not entitled to any recovery from the customer on account of a failure by the customer to give notification as stated in this section.

410.204(2) (2) Reasonable time under sub. (1) may be fixed by agreement as stated in s. 401.302 (1), but the obligation of a receiving bank to refund payment as stated in sub. (1) may not otherwise be varied by agreement.

410.204 History History: 1991 a. 304; 2009 a. 320.

410.205 410.205 Erroneous payment orders.

410.205(1) (1) 

410.205(1)(a) (a) The rules in pars. (am) to (c) apply if an accepted payment order was transmitted pursuant to a security procedure for the detection of error and any of the following occurs:

410.205(1)(a)1. 1. The payment order erroneously instructed payment to a beneficiary not intended by the sender.

410.205(1)(a)2. 2. The payment order erroneously instructed payment in an amount greater than the amount intended by the sender.

410.205(1)(a)3. 3. The payment order was an erroneously transmitted duplicate of a payment order previously sent by the sender.

410.205(1)(am) (am) If the sender proves that the sender or a person acting on behalf of the sender pursuant to s. 410.206 complied with the security procedure and that the error would have been detected if the receiving bank had also complied, the sender is not obliged to pay the order to the extent stated in pars. (b) and (c).

410.205(1)(b) (b) If the funds transfer is completed on the basis of an erroneous payment order described in par. (a) 1. or 3., the sender is not obliged to pay the order and the receiving bank is entitled to recover from the beneficiary any amount paid to the beneficiary to the extent allowed by the law governing mistake and restitution.

410.205(1)(c) (c) If the funds transfer is completed on the basis of a payment order described in par. (a) 2., the sender is not obliged to pay the order to the extent the amount received by the beneficiary is greater than the amount intended by the sender. In that case, the receiving bank is entitled to recover from the beneficiary the excess amount received to the extent allowed by the law governing mistake and restitution.

410.205(2) (2) If the sender of an erroneous payment order described in sub. (1) (a) is not obliged to pay all or part of the order and the sender receives notification from the receiving bank that the order was accepted by the bank or that the sender’s account was debited with respect to the order, the sender has a duty to exercise ordinary care, on the basis of information available to the sender, to discover the error with respect to the order and to advise the bank of the relevant facts within a reasonable time, not exceeding 90 days, after the bank’s notification was received by the sender. If the bank proves that the sender failed to perform that duty, the sender is liable to the bank for the loss the bank proves it incurred as a result of the failure, but the liability of the sender may not exceed the amount of the sender’s order.

410.205(3) (3) This section applies to amendments to payment orders to the same extent that it applies to payment orders.

410.205 History History: 1991 a. 304.

410.206 410.206 Transmission of payment order through funds-transfer or other communication system.

410.206(1) (1) If a payment order addressed to a receiving bank is transmitted to a funds-transfer system or other 3rd-party communication system for transmittal to the bank, the system is considered to be an agent of the sender for the purpose of transmitting the payment order to the bank. If there is a discrepancy between the terms of the payment order transmitted to the system and the terms of the payment order transmitted by the system to the bank, the terms of the payment order of the sender are those transmitted by the system. This section does not apply to a funds-transfer system of the federal reserve banks.

410.206(2) (2) This section applies to cancellations and amendments of payment orders to the same extent that it applies to payment orders.

410.206 History History: 1991 a. 304.

410.207 410.207 Misdescription of beneficiary.

410.207(1) (1) Subject to sub. (2), if, in a payment order received by the beneficiary’s bank, the name, bank account number, or other identification of the beneficiary refers to a nonexistent or unidentifiable person or account, no person has rights as a beneficiary of the order and acceptance of the order cannot occur.

410.207(2) (2) If a payment order received by the beneficiary’s bank identifies the beneficiary both by name and by an identifying or bank account number and the name and number identify different persons, the following rules apply:

410.207(2)(a) (a) Except as otherwise provided in sub. (3), if the beneficiary’s bank does not know that the name and number refer to different persons, it may rely on the number as the proper identification of the beneficiary of the order. The beneficiary’s bank need not determine whether the name and number refer to the same person.

410.207(2)(b) (b) If the beneficiary’s bank pays the person identified by name or knows that the name and number identify different persons, no person has rights as beneficiary except the person paid by the beneficiary’s bank if that person was entitled to receive payment from the originator of the funds transfer. If no person has rights as beneficiary, acceptance of the order cannot occur.

410.207(3) (3) If a payment order described in sub. (2) (intro.) is accepted, the originator’s payment order described the beneficiary inconsistently by name and number and the beneficiary’s bank pays the person identified by number as permitted under sub. (2) (a), the following rules apply:

410.207(3)(a) (a) If the originator is a bank, the originator is obliged to pay its order.

410.207(3)(b) (b) If the originator is not a bank and proves that the person identified by number was not entitled to receive payment from the originator, the originator is not obliged to pay its order unless the originator’s bank proves that the originator, before acceptance of the originator’s order, had notice that payment of a payment order issued by the originator might be made by the beneficiary’s bank on the basis of an identifying or bank account number even if it identifies a person different from the named beneficiary. Proof of notice may be made by any admissible evidence. The originator’s bank satisfies the burden of proof if it proves that the originator, before the payment order was accepted, signed a writing stating the information to which the notice relates.

410.207(4) (4) In a case governed by sub. (2) (a), if the beneficiary’s bank rightfully pays the person identified by number and that person was not entitled to receive payment from the originator, the amount paid may be recovered from that person to the extent allowed by the law governing mistake and restitution as follows:

410.207(4)(a) (a) If the originator is obliged to pay its payment order as stated in sub. (3), the originator has the right to recover.

410.207(4)(b) (b) If the originator is not a bank and is not obliged to pay its payment order, the originator’s bank has the right to recover.

410.207 History History: 1991 a. 304.

410.208 410.208 Misdescription of intermediary bank or beneficiary’s bank.

410.208(1) (1) 

410.208(1)(a) (a) This subsection applies to a payment order identifying an intermediary bank or the beneficiary’s bank only by an identifying number.

410.208(1)(am) (am) The receiving bank may rely on the number as the proper identification of the intermediary bank or the beneficiary’s bank and need not determine whether the number identifies a bank.

410.208(1)(b) (b) The sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute the order.

410.208(2) (2) 

410.208(2)(a) (a) This subsection applies to a payment order identifying an intermediary bank or the beneficiary’s bank both by name and an identifying number if the name and number identify different persons.

410.208(2)(am) (am) If the sender is a bank, the receiving bank may rely on the number as the proper identification of the intermediary bank or the beneficiary’s bank if the receiving bank, when it executes the sender’s order, does not know that the name and number identify different persons. The receiving bank need not determine whether the name and number refer to the same person or whether the number refers to a bank. The sender is obliged to compensate the receiving bank for any loss and expenses incurred by the receiving bank as a result of its reliance on the number in executing or attempting to execute the order.

410.208(2)(b) (b) If the sender is not a bank and the receiving bank proves that the sender, before the payment order was accepted, had notice that the receiving bank might rely on the number as the proper identification of the intermediary bank or the beneficiary’s bank even if it identifies a person different from the bank identified by name, the rights and obligations of the sender and the receiving bank are governed by sub. (2) (am), as though the sender were a bank. Proof of notice may be made by any admissible evidence. The receiving bank satisfies the burden of proof if it proves that the sender, before the payment order was accepted, signed a writing stating the information to which the notice relates.

410.208(2)(c) (c) Regardless of whether the sender is a bank, the receiving bank may rely on the name as the proper identification of the intermediary bank or the beneficiary’s bank if the receiving bank, at the time it executes the sender’s order, does not know that the name and number identify different persons. The receiving bank need not determine whether the name and number refer to the same person.

410.208(2)(d) (d) If the receiving bank knows that the name and number identify different persons, reliance on either the name or the number in executing the sender’s payment order is a breach of the obligation stated in s. 410.302 (1) (a).

410.208 History History: 1991 a. 304.

410.209 410.209 Acceptance of payment order.

410.209(1) (1) Subject to sub. (4), a receiving bank other than the beneficiary’s bank accepts a payment order when it executes the order.

410.209(2) (2) Subject to subs. (3) and (4), a beneficiary’s bank accepts a payment order at the earliest of the following times: