Summary Judgment Highlights Benefits of Positive Pay
AP Technology Establishes Technical Basis for Judgment
CARLSBAD, CA – July 27, 2010 – AP Technology, a leading provider of secure payments solutions, provided expert witness testimony in a recent check fraud liability case between Wachovia Bank and a Wachovia bank customer. In a summary judgment rendered July 14, 2010 by the U.S. District Court of Minnesota, the Court found Wachovia not liable for payment, as payor bank, of a fraudulently-altered $150,000 check, because the customer failed to implement fraud-detection products and services recommended by Wachovia which would have prevented payment of the check.
Court records show that the customer contended that Wachovia Bank should bear the loss because the altered check was not “properly payable” under Article 4-401(a) of the Uniform Commercial Code (“UCC”). If a bank charges a customer’s account for a check that is not properly payable (e.g. forged and therefore not authorized by the customer), a bank will ordinarily be held responsible for the customer loss under Section4-401(a) of the UCC.
However, this is merely a default rule. Banks and customers can agree to a different rule in the bank’s depository agreement with the customer, per Section4-103(a) of the UCC. The requirement for the depository agreement, though, is that the agreement "cannot disclaim the responsibility of a bank for its lack of good faith or failure to exercise ordinary care." Wachovia disagreed with the customer’s claim of bank liability, citing that Wachovia’s depository agreement clearly provided that if the customer declined to implement Wachovia’s “Positive Pay” fraud-deterrence program that the customer could not hold Wachovia liable for subsequent check fraud losses.
Court records show that the customer acknowledged that Wachovia had made Positive Pay available to them and that their use of Positive Pay would have detected the fraudulently-altered check. However, the customer argued that it was unreasonable for the Court to enforce Wachovia’s depository agreement, because, among other things, it was too expensive to modify the customer’s computer to use Positive Pay and it was not technically feasible to implement Positive Pay on the customer’s computer. The Court rejected these arguments and found that the customer could not hold Wachovia liable for the fraudulent check.
Per William Mohrman, the attorney for Wachovia, “AP Technology was critical in evaluating and supporting the standard for determining the reasonableness of Wachovia’s contract on the grounds of technical feasibility and cost of implementing Positive Pay.” Mr. Mohrman states, “AP Technology clearly established the basis that Wachovia acted reasonably in requiring the customer to utilize Positive Pay from both an implementation and total-cost-of-ownership perspective.” Mr. Mohrman further explains, “AP Technology acknowledges that it is unfortunate that the customer mistakenly thought it would cost tens of thousands of dollars to implement Positive Pay, when in fact Positive Pay could have been configured on existing computers for significantly less money, as the company sees this same scenario occurring many times over.”
Positive Pay is a bank treasury service that enables a customer to transmit pertinent information to its bank about every check they issue. When checks are presented for payment, discrepancies from the check-issue file are flagged for review and a customer payment decision.
Wachovia recommends Positive Pay services and SecurePay implementation software to its customers as the most effective way to combat check fraud. Wachovia explains in court documents that unless a customer implements a program such as Positive Pay a bank has little chance of identifying a forged or altered check, because a bank has no way of knowing whether a particular check was actually issued by a customer or whether a particular check was issued in the amount that appears on the check.
SecurePay software provided by AP Technology would have enabled Wachovia’s customer to implement Positive Pay services quickly and at minimal expense. SecurePay software is a universal software solution for Positive Pay that allows customers to convert check issue files to their bank’s required format and automate transmission to the bank’s Positive Pay system – creating a seamless and effortless process for fraud protection for any size business. SecurePay software is currently recommended to business customers by 7 of the 10 leading U.S. commercial banks as an easy and cost-effective way to begin using the bank’s Positive Pay services. SecurePay is already helping thousands of businesses to connect to their banks for Positive Pay protection.
It is clear from the court’s decision that banks and businesses must both do their part to prevent check fraud and avoid losses. Banks that exercise "ordinary care" by offering Positive Pay services and products such as SecurePay software to their customers, along with providing clear, specific language to customers in depository contracts, can potentially avoid liability for subsequent check fraud losses should a customer choose to forego implementing prevention offerings. Businesses that cost-effectively implement Positive Pay using SecurePay software will not only meet bank requirements to avoid check fraud liability, they will also establish an effective partnership with their bank to stop check fraud and make the real criminal liable for their crime.
About AP Technology
AP Technology, a private California Corporation founded in 1989, is a leading provider of secure payment solutions for financial institutions and corporations. AP Technology solutions enhance the connection between banks and their customers by automating secure check issuance and data exchange. These solutions include SecurePay Positive Pay file conversion software, the APSecure official check issuance system, and advanced banking e-HUB and secure communications technology. From our ground-breaking accomplishments in secure laser check printing to our bank cashiers check printing solutions, AP Technology has a long history of developing industry-leading innovations in MICR check printing and fraud prevention. Seven of the ten leading U.S. commercial banks have partnered with AP Technology. For more information, visit http://www.aptechnology.com
AP Technology Contact:
Jessica Andrews
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AP Technology
Phone: 760-602-5424
Fax: 760-930-6281
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