Wisconsin Legislature: 449,46

404.201 (title) Presumption and duration of agency status Status of collecting banks bank as agent and provisional status of credits; applicability of chapter; item indorsed endorsed “pay any bank". (1) Unless a contrary intent clearly appears and prior to before the time that a settlement given by a collecting bank for an item is or becomes final (ss. 404.211 (3), 404.212 and 404.213), the bank, with respect to the item, is an agent or subagent of the owner of the item and any settlement given for the item is provisional. This provision applies regardless of the form of indorsement endorsement or lack of indorsement endorsement and even though credit given for the item is subject to immediate withdrawal as of right or is in fact withdrawn; but the continuance of ownership of an item by its owner and any rights of the owner to proceeds of the item are subject to rights of a collecting bank, such as those resulting from outstanding advances on the item and valid rights of recoupment or setoff. When If an item is handled by banks for purposes of presentment, payment and, collection or return, the relevant provisions of this chapter apply even though action of the parties clearly establishes that a particular bank has purchased the item and is the owner of it.

(2) After an item has been indorsed endorsed with the words “pay any bank" or the like, only a bank may acquire the rights of a holder until any of the following occur:

(a) Until the The item has been returned to the customer initiating collection; or.

(b) Until the The item has been specially indorsed endorsed by a bank to a person who is not a bank.

449,38 Section 38 . 404.202 (title) and (1) (intro.) and (a) to (c) of the statutes are amended to read:

404.202 (title) Responsibility for collection or return; when action seasonable timely. (1) (intro.) A collecting bank must use exercise ordinary care in all of the following:

(a) Presenting an item or sending it for presentment; and.

(b) Sending notice of dishonor or nonpayment or returning an item other than a documentary draft to the bank's transferor after learning that the item has not been paid or accepted, as the case may be; and.

449,39 Section 39 . 404.202 (1) (d) of the statutes is repealed.

449,40 Section 40 . 404.202 (1) (e) of the statutes is renumbered 404.202 (1) (d).

449,41 Section 41 . 404.202 (2) and (3) of the statutes are amended to read:

404.202 (2) A collecting bank taking proper action before its midnight deadline following receipt of an item, notice or payment acts seasonably; taking proper action within a reasonably longer time may be seasonable but the bank has the burden of so establishing exercises ordinary care under sub. (1) by taking proper action before its midnight deadline following receipt of an item, notice or settlement. Taking proper action within a reasonably longer time may constitute the exercise of ordinary care, but the bank has the burden of establishing timeliness.

(3) Subject to sub. (1) (a), a bank is not liable for the insolvency, neglect, misconduct, mistake or default of another bank or person or for loss or destruction of an item in the possession of others or in transit or in the possession of others.

449,42 Section 42 . 404.203 of the statutes is amended to read:

404.203 Effect of instructions. Subject to the provisions of s. 403.419 to s. 403.420 concerning conversion of instruments and the provisions of both ch. 403 and this chapter to s. 403.206 concerning restrictive indorsements endorsements, only a collecting bank's transferor can give instructions which that affect the bank or constitute notice to it and a collecting bank is not liable to prior parties for any action taken pursuant to such the instructions or in accordance with any agreement with its transferor.

449,43 Section 43 . 404.204 of the statutes is amended to read:

404.204 (title) Methods of sending and presenting; sending direct directly to payor payer bank. (1) A collecting bank must shall send items by a reasonably prompt method, taking into consideration any relevant instructions, the nature of the item, the number of such those items on hand, and the cost of collection involved and the method generally used by it or others to present such those items.

(2) A collecting bank may send any of the following:

(a) Any An item direct directly to the payor payer bank;.

(b) Any An item to any a nonbank payor payer if authorized by its transferor; and.

(c) Any An item other than documentary drafts to any a nonbank payor payer, if authorized by federal reserve regulation or operating letter circular, clearinghouse rule or the like.

(3) Presentment may be made by a presenting bank at a place where the payor payer bank or other payer has requested that presentment be made.

449,44 Section 44 . 404.205 of the statutes is repealed and recreated to read:

404.205 Depositary bank holder of unendorsed item. If a customer delivers an item to a depositary bank for collection, all of the following apply:

(1) The depositary bank becomes a holder of the item at the time that it receives the item for collection if the customer at the time of delivery was a holder of the item, whether or not the customer endorses the item, and, if the bank satisfies the other requirements of s. 403.302, it is a holder in due course.

(2) The depositary bank warrants to collecting banks, the payer bank or other payer and the drawer that the amount of the item was paid to the customer or deposited to the customer's account.

449,45 Section 45 . 404.206 of the statutes is amended to read:

404.206 Transfer between banks. Any agreed method which that identifies the transferor bank is sufficient for the item's further transfer to another bank.

449,46 Section 46 . 404.207 of the statutes is repealed and recreated to read:

404.207 Transfer warranties. (1) A customer or collecting bank that transfers an item and receives a settlement or other consideration warrants all of the following to the transferee and to any subsequent collecting bank:

(a) The warrantor is a person entitled to enforce the item.

(b) All signatures on the item are authentic and authorized.

(d) The item is not subject to a defense or claim in recoupment of any party that can be asserted against the warrantor.

(e) The warrantor has no knowledge of any insolvency proceeding commenced with respect to the maker or acceptor or, in the case of an unaccepted draft, the drawer.

(2) If an item is dishonored, a customer or collecting bank transferring the item and receiving settlement or other consideration is obliged to pay the amount due on the item according to the terms of the item at the time it was transferred or, if the transfer was of an incomplete item, according to its terms when completed as stated in ss. 403.115 and 403.407. The obligation of a transferor is owed to the transferee and to any subsequent collecting bank that takes the item in good faith. A transferor cannot disclaim its obligation under this subsection by an endorsement stating that it is made “without recourse" or otherwise disclaiming liability.

(3) A person to whom the warranties under sub. (1) are made and who took the item in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, but not more than the amount of the item plus expenses and loss of interest incurred as a result of the breach.

(4) The warranties stated in sub. (1) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within 30 days after the claimant has reason to know of the breach and the identity of the warrantor, the warrantor is discharged to the extent of any loss caused by the delay in giving notice of the claim.

(5) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.

449,47 Section 47 . 404.208 of the statutes is renumbered 404.210, and 404.210 (1) (intro.), (a) and (b), (2) and (3) (intro.), (a) and (b), as renumbered, are amended to read:

404.210 (1) (intro.) A collecting bank has a security interest in an item and any accompanying documents or the proceeds of either in any of the following situations:

(a) In case of an item deposited in an account, to the extent to which credit given for the item has been withdrawn or applied;.

(b) In case of an item for which it has given credit available for withdrawal as of right, to the extent of the credit given, whether or not the credit is drawn upon and whether or not there is a right of charge-back ; or.

(2) When If credit which has been given for several items received at one time or pursuant to a single agreement is withdrawn or applied in part, the security interest remains upon all the items, any accompanying documents or the proceeds of either. For the purpose of this section, credits first given are first withdrawn.

(3) (intro.) Receipt by a collecting bank of a final settlement for an item is a realization on its security interest in the item, accompanying documents and proceeds. To the extent and so So long as the bank does not receive final settlement for the item or give up possession of the item or accompanying documents for purposes other than collection, the security interest continues to that extent and is subject to the provisions of ch. 409 except that, but all of the following apply:

(a) No security agreement is necessary to make the security interest enforceable (s. 409.203 (1) (a)); and.

(b) No filing is required to perfect the security interest; and.

449,48 Section 48 . 404.208 of the statutes is created to read:

404.208 Presentment warranties. (1) If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, the person obtaining payment or acceptance, at the time of presentment, and a previous transferor of the draft, at the time of transfer, warrant to the drawee that pays or accepts the draft in good faith that all of the following conditions exist:

(a) The warrantor is, or was at the time the warrantor transferred the draft, a person entitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalf of a person entitled to enforce the draft.

(b) The draft has not been altered.

(2) A drawee making payment may recover from a warrantor damages for breach of warranty equal to the amount paid by the drawee less the amount the drawee received or is entitled to receive from the drawer because of the payment. In addition, the drawee is entitled to compensation for expenses and loss of interest resulting from the breach. The right of the drawee to recover damages under this subsection is not affected by any failure of the drawee to exercise ordinary care in making payment. If the drawee accepts the draft, breach of warranty is a defense to the obligation of the acceptor, and if the acceptor makes payment with respect to the draft, the acceptor is entitled to recover from a warrantor for breach of warranty the amounts stated in this subsection.

(3) If a drawee asserts a claim for breach of warranty under sub. (1) based on an unauthorized endorsement of the draft or an alteration of the draft, the warrantor may defend by proving that the endorsement is effective under s. 403.404 or 403.405 or the drawer is precluded under s. 403.406 or 404.406 from asserting against the drawee the unauthorized endorsement or alteration.

(4) If a dishonored draft is presented for payment to the drawer or an endorser or any other item is presented for payment to a party obliged to pay the item, and the item is paid, the person obtaining payment and a prior transferor of the item warrant to the person making payment in good faith that the warrantor is, or was at the time the warrantor transferred the item, a person entitled to enforce the item or authorized to obtain payment on behalf of a person entitled to enforce the item. The person making payment may recover from any warrantor for breach of warranty an amount equal to the amount paid plus expenses and loss of interest resulting from the breach.

(5) The warranties stated in subs. (1) and (4) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within 30 days after the claimant has reason to know of the breach and the identity of the warrantor, the warrantor is discharged to the extent of any loss caused by the delay in giving notice of the claim.

(6) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.

449,49 Section 49 . 404.209 of the statutes is renumbered 404.211 and amended to read:

404.211 When bank gives value for purposes of holder in due course. For purposes of determining its status as a holder in due course, the a bank has given value to the extent that it has a security interest in an item provided that, if the bank otherwise complies with s. 403.302 on what constitutes a holder in due course.

449,50 Section 50 . 404.209 of the statutes is created to read:

404.209 Encoding and retention warranties. (1) A person who encodes information on or with respect to an item after issue warrants to any subsequent collecting bank and to the payer bank or other payer that the information is correctly encoded. If the customer of a depositary bank encodes, that bank also makes the warranty.

(2) A person who undertakes to retain an item pursuant to an agreement for electronic presentment warrants to any subsequent collecting bank and to the payer bank or other payer that retention and presentment of the item comply with the agreement. If a customer of a depositary bank undertakes to retain an item, that bank also makes this warranty.

(3) A person to whom warranties are made under this section and who took the item in good faith may recover from the warrantor as damages for breach of warranty an amount equal to the loss suffered as a result of the breach, plus expenses and loss of interest incurred as a result of the breach.

449,51 Section 51 . 404.210 of the statutes is renumbered 404.212 and amended to read:

404.212 (title) Presentment by notice of item not payable by, through or at a bank; liability of secondary parties drawer or endorser. (1) Unless otherwise instructed, a collecting bank may present an item not payable by, through or at a bank by sending to the party to accept or pay a written notice that the bank holds the item for acceptance or payment. The notice must be sent in time to be received on or before the day when presentment is due and the bank must meet any requirement of the party to accept or pay under s. 403.505 403.501 by the close of the bank's next banking day after it knows of the requirement.

(2) Where If presentment is made by notice and neither honor nor payment, acceptance or request for compliance with a requirement under s. 403.505 403.501 is not received by the close of business on the day after maturity or, in the case of demand items, by the close of business on the third 3rd banking day after notice was sent, the presenting bank may treat the item as dishonored and charge any secondary party drawer or endorser by sending the secondary party it notice of the facts.

449,52 Section 52 . 404.211 of the statutes is repealed.

449,53 Section 53 . 404.212 (title), (1) and (2) to (5) of the statutes are renumbered 404.214 (title), (1) and (3) to (6), and 404.214 (title), (1), (3), (4) and (6), as renumbered, are amended to read:

404.214 (title) Right of charge-back or refund; liability of collecting bank; return of item. (1) If a collecting bank has made provisional settlement with its customer for an item and itself fails by reason of dishonor, suspension of payments by a bank or otherwise to receive a settlement for the item which is or becomes final, the bank may revoke the settlement given by it, charge-back charge back the amount of any credit given for the item to its customer's account, or obtain refund from its customer, whether or not it is able to return the items item, if by its midnight deadline or within a longer reasonable time after it learns the facts it returns the item or sends notification of the facts. If the return or notice is delayed beyond the bank's midnight deadline or a longer reasonable time after it learns the facts, the bank may revoke the settlement, charge back the credit or obtain a refund from its customer, but it is liable for any loss resulting from the delay. These rights to revoke, charge-back and obtain refund terminate if and when a settlement for the item received by the bank is or becomes final (ss. 404.211 (3) and 404.213 (2) and (3)).

(3) A depositary bank which that is also the payor payer may charge-back charge back the amount of an item to its customer's account or obtain refund in accordance with s. 404.301 governing return of an item received by a payor payer bank for credit on its books.

(4) The right to charge-back is not affected by any of the following:

(a) Prior Previous use of the a credit given for the item; or.

(b) Failure by any bank to exercise ordinary care with respect to the item, but any a bank so failing remains liable.

(6) If credit is given in dollars as the equivalent of the value of an item payable in a foreign currency money, the dollar amount of any charge-back or refund shall must be calculated on the basis of the buying sight bank-offered spot rate for the foreign currency money prevailing on the day when the person entitled to the charge-back or refund learns that it will not receive payment in ordinary course.

449,54 Section 54 . 404.212 (1m) of the statutes is repealed.

449,55 Section 55 . 404.213 (title) and (1) (intro.), (a), (b) and (d) of the statutes are renumbered 404.215 (title) and (1) (intro.), (a), (b) and (c), and 404.215 (title) and (1) (intro.) and (a) and (b), as renumbered, are amended to read:

404.215 (title) Final payment of item by payor payer bank; when provisional debits and credits become final; when certain credits become available for withdrawal. (1) (intro.) An item is finally paid by a payor payer bank when the bank has first done any of the following, whichever happens first:

(a) Paid the item in cash; or.

(b) Settled for the item without reserving having a right to revoke the settlement and without having such right under statute, clearinghouse rule or agreement; or.

449,56 Section 56 . 404.213 (1) (c) of the statutes is repealed.

449,57 Section 57 . 404.213 (1a) of the statutes is repealed.

449,58 Section 58 . 404.213 (2) to (4), (4m) and (5) of the statutes are renumbered 404.215 (3) to (5), (5m) and (6), and 404.215 (3), (4), (5), (5m) (a) and (b) 1., 2. and 3. and (6), as renumbered, are amended to read:

404.215 (3) If provisional settlement for an item between the presenting and payor payer banks is made through a clearinghouse or by debits or credits in an account between them, then to the extent that provisional debits or credits for the item are entered in accounts between the presenting and payor payer banks or between the presenting and successive prior collecting banks in a series, they become final upon final payment of the item by the payor payer bank.

404.215 (4) If a collecting bank receives a settlement for an item which is or becomes final (ss. 404.211 (3) and 404.213 (2)), the bank is accountable to its customer for the amount of the item and any provisional credit given for the item in an account with its customer becomes final.

(5) Subject to applicable law stating a time for availability of funds and to any right of the bank to apply the credit to an obligation of the customer, credit given by a bank for an item in an a customer's account with its customer becomes available for withdrawal as of right:

(a) In any case where If the bank has received a provisional settlement for the item,—when such when the settlement becomes final and the bank has had a reasonable time to learn that the settlement is final; receive return of the item and the item has not been received within that time.

(b) In any case where If the bank is both a the depositary bank and a payor the payer bank and the item is finally paid,—at at the opening of the bank's second 2nd banking day following receipt of the item.

(5m) (a) As used in In this subsection, “banking day" means a business day as defined in s. 421.301 (6) that is not a federal legal holiday.