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Article 4a - Funds Transfers

      (810 ILCS 5/Art. 4A heading)ARTICLE 4A. FUNDS TRANSFERS

      (810 ILCS 5/Art. 4A Pt. 1 heading)PART 1. SUBJECT MATTER AND DEFINITIONS

(810 ILCS 5/4A‑101) (from Ch. 26, par. 4A‑101)     Sec. 4A‑101. Short title. This Article may be cited as Uniform Commercial Code‑Funds Transfers. (Source: P.A. 86‑1291.)

(810 ILCS 5/4A‑102) (from Ch. 26, par. 4A‑102)     Sec. 4A‑102. Subject matter. Except as otherwise provided in Section 4A‑108, this Article applies to funds transfers defined in Section 4A‑104. (Source: P.A. 86‑1291.)

(810 ILCS 5/4A‑103) (from Ch. 26, par. 4A‑103)     Sec. 4A‑103. Payment order; definitions.     (a) In this Article:         (1) "Payment order" means an instruction of a sender

to a receiving bank, transmitted orally, electronically, or in writing, to pay, or to cause another bank to pay, a fixed or determinable amount of money to a beneficiary if:

(i) the instruction does not state a condition

to payment to the beneficiary other than time of payment,

(ii) the receiving bank is to be reimbursed by

debiting an account of, or otherwise receiving payment from, the sender, and

(iii) the instruction is transmitted by the

sender directly to the receiving bank or to an agent, funds transfer system, or communication system for transmittal to the receiving bank.

(2) "Beneficiary" means the person to be paid by the

beneficiary's bank.

(3) "Beneficiary's bank" means the bank identified

in a payment order in which an account of the beneficiary is to be credited pursuant to the order or which otherwise is to make payment to the beneficiary if the order does not provide for payment to an account.

(4) "Receiving bank" means the bank to which the

sender's instruction is addressed.

(5) "Sender" means the person giving the instruction

to the receiving bank.

(b) If an instruction complying with subsection (a)(1) is to make more than one payment to a beneficiary, the instruction is a separate payment order with respect to each payment.     (c) A payment order is issued when it is sent to the receiving bank. (Source: P.A. 86‑1291.)

(810 ILCS 5/4A‑104) (from Ch. 26, par. 4A‑104)     Sec. 4A‑104. Funds transfer; definitions. In this Article:     (a) "Funds transfer" means the series of transactions, beginning with the originator's payment order, made for the purpose of making payment to the beneficiary of the order. The term includes any payment order issued by the originator's bank or an intermediary bank intended to carry out the originator's payment order. A funds transfer is completed by acceptance by the beneficiary's bank of a payment order for the benefit of the beneficiary of the originator's payment order.     (b) "Intermediary bank" means a receiving bank other than the originator's bank or the beneficiary's bank.     (c) "Originator" means the sender of the first payment order in a funds transfer.     (d) "Originator's bank" means (i) the receiving bank to which the payment order of the originator is issued if the originator is not a bank, or (ii) the originator if the originator is a bank. (Source: P.A. 86‑1291.)

    (810 ILCS 5/4A‑105)(from Ch. 26, par. 4A‑105)
    Sec. 4A‑105. Other definitions.
    (a) In this Article:
        (1) "Authorized account" means a deposit account of

a customer in a bank designated by the customer as a source of payment of payment orders issued by the customer to the bank. If a customer does not so designate an account, any account of the customer is an authorized account if payment of a payment order from that account is not inconsistent with a restriction on the use of that account.

(2) "Bank" means a person engaged in the business of

banking and includes a savings bank, savings and loan association, credit union, and trust company. A branch or separate office of a bank is a separate bank for purposes of this Article.

(3) "Customer" means a person, including a bank,

having an account with a bank or from whom a bank has agreed to receive payment orders.

(4) "Funds transfer business day" of a receiving

bank means the part of a day during which the receiving bank is open for the receipt, processing, and transmittal of payment orders and cancellations and amendments of payment orders.

(5) "Funds transfer system" means a wire transfer

network, automated clearinghouse, or other communication system of a clearing house or other association of banks through which a payment order by a bank may be transmitted to the bank to which the order is addressed.

(6) "Good faith" means honesty in fact and the

observance of reasonable commercial standards of fair dealing.

(7) "Prove" with respect to a fact means to meet the

burden of establishing the fact (Section 1‑201(b)(8)).

(b) Other definitions applying to this Article and the Sections in which they appear are:

"Acceptance" Section 4A‑209     "Beneficiary" Section 4A‑103     "Beneficiary's bank" Section 4A‑103     "Executed" Section 4A‑301     "Execution date" Section 4A‑301     "Funds transfer" Section 4A‑104     "Funds transfer system rule" Section 4A‑501     "Intermediary bank" Section 4A‑104     "Originator" Section 4A‑104     "Originator's bank" Section 4A‑104     "Payment by beneficiary's bank         to beneficiary" Section 4A‑405     "Payment by originator to         beneficiary" Section 4A‑406     "Payment by sender         to receiving bank" Section 4A‑403     "Payment date" Section 4A‑401     "Payment order" Section 4A‑103     "Receiving bank" Section 4A‑103     "Security procedure" Section 4A‑201     "Sender" Section 4A‑103     (c) The following definitions in Article 4 apply to this Article:     "Clearing house" Section 4‑104     "Item" Section 4‑104     "Suspends payments" Section 4‑104

(d) In addition, Article 1 contains general definitions and principles of construction and interpretation applicable throughout this Article. (Source: P.A. 95‑895, eff. 1‑1‑09.)

    (810 ILCS 5/4A‑106)(from Ch. 26, par. 4A‑106)
    Sec. 4A‑106. Time payment order is received.
    (a) The time of receipt of a payment order or communication cancelling or amending a payment order is determined by the rules applicable to receipt of a notice stated in Section 1‑202. A receiving bank may fix a cut‑off time or times on a funds transfer business day for the receipt and processing of payment orders and communications cancelling or amending payment orders. Different cut‑off times may apply to payment orders, cancellations, or amendments, or to different categories of payment orders, cancellations, or amendments. A cut‑off time may apply to senders generally or different cut‑off times may apply to different senders or categories of payment orders. If a payment order or communication cancelling or amending a payment order is received after the close of a funds transfer business day or after the appropriate cut‑off 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.
    (b) If this Article 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 Article.
(Source: P.A. 95‑895, eff. 1‑1‑09.)

(810 ILCS 5/4A‑107) (from Ch. 26, par. 4A‑107)     Sec. 4A‑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 Article to the extent of the inconsistency. (Source: P.A. 86‑1291.)

(810 ILCS 5/4A‑108) (from Ch. 26, par. 4A‑108)     Sec. 4A‑108. Exclusion of consumer transactions governed by federal law. This Article 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. (Source: P.A. 86‑1291.)

      (810 ILCS 5/Art. 4A Pt. 2 heading)PART 2. ISSUE AND ACCEPTANCE OF PAYMENT ORDER

(810 ILCS 5/4A‑201) (from Ch. 26, par. 4A‑201)     Sec. 4A‑201. Security procedure. "Security procedure" means a procedure established by agreement of a customer and a receiving bank for the purpose of (i) verifying that a payment order or communication amending or cancelling a payment order is that of the customer, or (ii) detecting 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. (Source: P.A. 86‑1291.)

(810 ILCS 5/4A‑202) (from Ch. 26, par. 4A‑202)     Sec. 4A‑202. Authorized and verified payment orders.     (a) 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.     (b) 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 (i) the security procedure is a commercially reasonable method of providing security against unauthorized payment orders, and (ii) 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. 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.     (c) Commercial reasonableness of a security procedure is a question of law to be determined by considering the wishes of the customer 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 deemed to be commercially reasonable if (i) 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, and (ii) the customer expressly agreed in writing to be bound by any payment order, whether or not authorized, issued in its name and accepted by the bank in compliance with the security procedure chosen by the customer.     (d) The term "sender" in this Article includes the customer in whose name a payment order is issued if the order is the authorized order of the customer under subsection (a), or it is effective as the order of the customer under subsection (b).     (e) This Section applies to amendments and cancellations of payment orders to the same extent it applies to payment orders.     (f) Except as provided in this Section and in Section 4A‑203(a)(1), rights and obligations arising under this Section or Section 4A‑203 may not be varied by agreement. (Source: P.A. 86‑1291.)

(810 ILCS 5/4A‑203) (from Ch. 26, par. 4A‑203)     Sec. 4A‑203. Unenforceability of certain verified payment orders.     (a) If an accepted payment order is not, under Section 4A‑202(a), an authorized order of a customer identified as sender, but is effective as an order of the customer pursuant to Section 4A‑202(b), the following rules apply:         (1) 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.

(2) 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 a person (i) entrusted at any time with duties to act for the customer with respect to payment orders or the security procedure, or (ii) 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.

(b) This Section applies to amendments of payment orders to the same extent it applies to payment orders. (Source: P.A. 86‑1291.)

    (810 ILCS 5/4A‑204)(from Ch. 26, par. 4A‑204)
    Sec. 4A‑204. Refund of payment and duty of customer to report with respect to an unauthorized payment order.
    (a) If a receiving bank accepts a payment order issued in the name of its customer as sender which is (i) not authorized and not effective as the order of the customer under Section 4A‑202, or (ii) not enforceable, in whole or in part, against the customer under Section 4A‑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.
    (b) Reasonable time under subsection (a) may be fixed by agreement as stated in Section 1‑302(b), but the obligation of a receiving bank to refund payment as stated in subsection (a) may not otherwise be varied by agreement.
(Source: P.A. 95‑895, eff. 1‑1‑09.)

(810 ILCS 5/4A‑205) (from Ch. 26, par. 4A‑205)     Sec. 4A‑205. Erroneous payment orders.     (a) If an accepted payment order was transmitted pursuant to a security procedure for the detection of error and the payment order (i) erroneously instructed payment to a beneficiary not intended by the sender, (ii) erroneously instructed payment in an amount greater than the amount intended by the sender, or (iii) was an erroneously transmitted duplicate of a payment order previously sent by the sender, the following rules apply:         (1) If the sender proves that the sender or a person

acting on behalf of the sender pursuant to Section 4A‑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 paragraphs (2) and (3).

(2) If the funds transfer is completed on the basis

of an erroneous payment order described in clause (i) or (iii) of subsection (a), 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.

(3) If the funds transfer is completed on the basis

of a payment order described in clause (ii) of subsection (a), 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.

(b) If (i) the sender of an erroneous payment order described in subsection (a) is not obliged to pay all or part of the order, and (ii) 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.     (c) This Section applies to amendments to payment orders to the same extent it applies to payment orders. (Source: P.A. 86‑1291.)

(810 ILCS 5/4A‑206) (from Ch. 26, par. 4A‑206)     Sec. 4A‑206. Transmission of payment order through funds transfer or other communication system.     (a) If a payment order addressed to a receiving bank is transmitted to a funds transfer system or other third‑party communication system for transmittal to the bank, the system is deemed 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.     (b) This Section applies to cancellations and amendments of payment orders to the same extent it applies to payment orders. (Source: P.A. 86‑1291.)

(810 ILCS 5/4A‑207) (from Ch. 26, par. 4A‑207)     Sec. 4A‑207. Misdescription of beneficiary.     (a) Subject to subsection (b), 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.     (b) 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:         (1) Except as otherwise provided in subsection (c),

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.

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