REPORT TITLE:
Uniform Commercial Code


DESCRIPTION:
Requires banks to notify customers immediately upon receiving
payment made upon check deposited into customer's account.
Establishes fine for noncompliance.  Requires that commissioner
of financial institutions approve all check hold and fund
availability procedures. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           875
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO THE UNIFORM COMMERCIAL CODE.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  In order for Hawaii to become a state that
 
 2 supports business growth, we must remove barriers installed by
 
 3 financial institutions that may be unreasonable.  One glaring
 
 4 policy instituted by financial institutions is the long check
 
 5 hold policy.  Considering this age of instant verification, many
 
 6 check hold policies are unreasonable.  More importantly, this
 
 7 practice prevents business from continuing without interruption.
 
 8      The purpose of this Act is to require financial institutions
 
 9 that elect to employ these long check hold policies to obtain the
 
10 concurrence of the commissioner of financial institutions and to
 
11 comply with notification requirements that are enforced by
 
12 financial penalties.
 
13      SECTION 2.  Section 490:4-215, Hawaii Revised Statutes, is
 
14 amended to read as follows:
 
15      "�490:4-215  Final payment of item by payor bank; when
 
16 provisional debits and credits become final; when certain credits
 
17 become available for withdrawal[.]; availability of funds
 
18 deposited by check.  (a)  An item is finally paid by a payor bank
 
19 when the bank has first done any of the following:
 

 
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 1      (1)  Paid the item in cash;
 
 2      (2)  Settled for the item without having a right to revoke
 
 3           the settlement under statute, clearing-house rule, or
 
 4           agreement; or
 
 5      (3)  Made a provisional settlement for the item and failed
 
 6           to revoke the settlement in the time and manner
 
 7           permitted by statute, clearing-house rule, or
 
 8           agreement.
 
 9      (b)  If provisional settlement for an item does not become
 
10 final, the item is not finally paid.
 
11      (c)  If provisional settlement for an item between the
 
12 presenting and payor banks is made through a clearing-house or by
 
13 debits or credits in an account between them, then to the extent
 
14 that provisional debits or credits for the item are entered in
 
15 accounts between the presenting and payor banks or between the
 
16 presenting and successive prior collecting banks seriatim, they
 
17 become final upon final payment of the item by the payor bank.
 
18      (d)  If a collecting bank receives a settlement for an item
 
19 which is or becomes final, the bank is accountable to its
 
20 customer for the amount of the item and any provisional credit
 
21 given for the item in an account with its customer becomes final.
 
22      (e)  Subject to (i) applicable law stating a time for
 
23 availability of funds and (ii) any right of the bank to apply the
 

 
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                                     S.B. NO.           875
                                                        
                                                        

 
 1 credit to an obligation of the customer, credit given by a bank
 
 2 for an item in a customer's account becomes available for
 
 3 withdrawal as of right:
 
 4      (1)  If the bank has received a provisional settlement for
 
 5           the item, when the settlement becomes final and the
 
 6           bank has had a reasonable time to receive return of the
 
 7           item and the item has not been received within that
 
 8           time;
 
 9      (2)  If the bank is both the depositary bank and the payor
 
10           bank, and the item is finally paid, at the opening of
 
11           the bank's second banking day following receipt of the
 
12           item.
 
13      Each depositary bank shall provide written notice of its
 
14 check hold policy and fund availability with respect to local,
 
15 out-of-state, and foreign checks drawn on United States financial
 
16 institutions:
 
17           (i)  When a checking account is opened; or
 
18          (ii)  When there is a change in bank policy.
 
19      The commissioner of financial institutions [may establish by
 
20 rules reasonable periods for] shall approve all bank policies and
 
21 procedures regarding check hold and fund availability with
 
22 respect to local, out-of-state, and foreign checks drawn on
 
23 United States financial institutions.  
 

 
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 1      (f)  Subject to applicable law stating a time for
 
 2 availability of funds and any right of a bank to apply a deposit
 
 3 to an obligation of the depositor, a deposit of money becomes
 
 4 available for withdrawal as of right at the opening of the bank's
 
 5 next banking day after receipt of the deposit. 
 
 6      (g)  In the case of funds deposited into an account by
 
 7 check, the depositary bank, upon receipt of the funds from the
 
 8 payor bank, shall immediately record the funds' receipt, notify
 
 9 the customer, and make the funds available for withdrawal.  Any
 
10 bank that fails to comply with the requirements of this
 
11 subsection shall be subject to a fine of $150, or an amount equal
 
12 to one tenth of one per cent of the funds deposited, whichever
 
13 amount is greater."
 
14      SECTION 3.  Statutory material to be repealed is bracketed.
 
15 New statutory material is underscored.  
 
16      SECTION 4.  This Act shall take effect upon its approval.
 
17 
 
18                           INTRODUCED BY:  _______________________