UCC ARTICLE 4A AND REG J Flashcards
If a credit union decides to reject a payment order, does the credit union have an obligation to send the member a notice of that rejection? What possible liability could the credit union face for not sending a notice?
A credit union acting as a receiving bank is not obligated to send the member a notice of rejection of the payment order. However, if no notice is sent, the credit union may be liable for the interest that would have been paid on the payment order.
Why should credit unions establish a cutoff time for processing funds transfer requests?
Credit unions are not required to establish cutoff times. However, by not having an established cutoff time, all funds transfers must be treated as having been received on the day the credit union actually received them for purposes of determining the credit union’s rights and obligations under UCC4A and Reg J.
Why is it important to include a disclosure or notice to members regarding their obligation to provide the sending credit union the correct name and routing
number of the institution to receive the wire transfer?
If this notice is provided to the member, the credit union will be able to charge the member for any loss or expense involved in completing the transfer or due to sending the transfer to the wrong institution based on the name and/or routing number provided.
Why is it important to restrict members from making wire transfers from regular share accounts?
If the credit union allows members to wire funds out of their regular share account without limitation, all of the credit union’s regular share accounts may
be deemed “transaction accounts” under Reg D and those accounts will be subject to reserve requirements of that regulation.
What types of funds transfers are covered by UCC 4A and Regulation J?
UCC 4A and Regulation J cover: 1) transactions typically referred to as wire transfers, 2) Automated Clearing House (ACH) transfers not covered by
Regulation E, and 3) book transfers.
