LRB-4808/1
RJM:rs&jld:pg
2001 - 2002 LEGISLATURE
February 7, 2002 - Introduced by Representatives Jeskewitz, La Fave, Kestell,
Sinicki, M. Lehman, J. Fitzgerald, Musser, Townsend, Krawczyk, Hahn, J.
Lehman, Rhoades, McCormick, Richards, Albers, Plale, Olsen, Shilling,
Lassa, Balow
and Miller, cosponsored by Senators Erpenbach, Robson,
Burke, Kanavas, S. Fitzgerald
and Plache. Referred to Committee on
Financial Institutions.
AB784,1,4 1An Act to amend 403.104 (6); and to create 403.103 (2) (hr), 403.104 (11),
2403.416 (1) (f), 403.417 (1) (d), 404.104 (3) (fe), 404.207 (1) (f) and 404.208 (1)
3(d) of the statutes; relating to: regulating the negotiation and collection of
4demand drafts.
Analysis by the Legislative Reference Bureau
This bill regulates the negotiation and collection of demand drafts. A demand
draft is generally an instrument, similar to a check, which is created by a third party,
often a merchant, under the purported authority of another person for the purpose
of charging that person's account at a bank, savings and loan, credit union, or other
banking institution (bank). Like a check, a demand draft contains the routing and
account numbers necessary to route the demand draft through a bank's check
clearing system. Unlike a check, though, a demand draft does not contain the
signature of the account holder. Rather, it typically contains a statement such as "No
signature required" or "Authorization on file."
Under Articles 3 and 4 of the Uniform Commercial Code (UCC), as enacted in
this state, a demand draft is treated like a check. Thus, in order to be effective, a
demand draft generally must be authenticated by the account holder, through the
use of a signature or any other word, mark, or symbol executed or adopted by the
account holder. The UCC imposes certain warranties with regard to this
authentication. For example, when the third party that created the demand draft
deposits it with his or her bank, the third party warrants that all signatures, words,
marks, or symbols used to authenticate the demand draft are authentic and

authorized. The same warranty applies to any bank that subsequently handles the
demand draft for collection, other than the account holder's bank. When the account
holder's bank pays or accepts the demand draft, the person obtaining payment or
acceptance warrants to the bank that the person has no knowledge that the
signature of the account holder is unauthorized. The UCC permits the account
holder's bank to charge the amount of a demand draft against the relevant account
if, among other things, the demand draft is authorized by the account holder. In
addition, the UCC requires the account holder to examine its bank statements in
order to determine whether any payment by the bank was improper as a result of an
unauthorized authentication.
This bill incorporates into the UCC additional warranties that apply
specifically to demand drafts. Under this bill, a person who transfers a demand draft
for consideration or who obtains payment for a demand draft from the account
holder's bank warrants that the account holder authorized the creation of the
demand draft according to the terms on its face. In addition, under the bill, when the
third party that created the demand draft deposits it with his or her bank, the third
party warrants that the account holder authorized the creation of the demand draft
according to the terms on its face. The same warranty applies to any bank that
subsequently handles the demand draft for collection, other than the account
holder's bank.
The acceptance of demand drafts by certain telemarketers is currently
regulated under federal law and rules of the department of agriculture, trade and
consumer protection. This bill has no effect on those regulations and rules.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB784, s. 1 1Section 1. 403.103 (2) (hr) of the statutes is created to read:
AB784,2,22 403.103 (2) (hr) "Demand draft" --- s. 403.104 (11).
AB784, s. 2 3Section 2. 403.104 (6) of the statutes is amended to read:
AB784,2,74 403.104 (6) "Check" means a draft, other than a documentary draft, payable
5on demand and drawn on a bank or means a cashier's check or , teller's check, or
6demand draft
. An instrument may be a check even though it is described on its face
7by another term, such as money order.
AB784, s. 3 8Section 3. 403.104 (11) of the statutes is created to read:
AB784,3,39 403.104 (11) (a) Except as provided under par. (b), "demand draft" means a
10writing that is not signed by a customer, as defined in s. 404.104 (1) (e), that is created

1by a 3rd party under the purported authority of the customer for the purpose of
2charging the customer's account with a bank, that contains the account number of
3that account, and that contains at least one of the following:
AB784,3,44 1. The customer's name.
AB784,3,55 2. A notation that the customer authorized the demand draft.
AB784,3,76 3. The statement "No signature required," "Authorization on file," or
7"Signature on file," or words to that effect.
AB784,3,98 (b) "Demand draft" does not include a check drawn by a fiduciary, as defined
9in s. 403.307 (1) (a).
AB784, s. 4 10Section 4. 403.416 (1) (f) of the statutes is created to read:
AB784,3,1311 403.416 (1) (f) If the instrument is a demand draft, the creation of the
12instrument according to the terms on its face was authorized by the person identified
13as the drawer.
AB784, s. 5 14Section 5. 403.417 (1) (d) of the statutes is created to read:
AB784,3,1715 403.417 (1) (d) If the instrument is a demand draft, the creation of the
16instrument according to the terms on its face was authorized by the person identified
17as the drawer.
AB784, s. 6 18Section 6. 404.104 (3) (fe) of the statutes is created to read:
AB784,3,1919 404.104 (3) (fe) "Demand draft" --- s. 403.104 (11).
AB784, s. 7 20Section 7. 404.207 (1) (f) of the statutes is created to read:
AB784,3,2221 404.207 (1) (f) If the item is a demand draft, the creation of the item according
22to the terms on its face was authorized by the person identified as the drawer.
AB784, s. 8 23Section 8. 404.208 (1) (d) of the statutes is created to read:
AB784,4,2
1404.208 (1) (d) If the draft is a demand draft, the creation of the draft according
2to the terms on its face was authorized by the person identified as the drawer.
AB784,4,33 (End)
Loading...
Loading...