Duty Issues in the Ever-Changing World of Payments Processing: Is it Time for New Rules?
Sarah Jane Hughes
Indiana University Bloomington School of Law
Chicago-Kent Law Review, Vol. 83, No. 721, 2008
Indiana Legal Studies Research Paper No. 122
The marketplace of retail payments is evolving faster than statutory law and government regulations are accommodating changes. This phenomenon creates gaps that facilitate new types of payments fraud including, for example, duplicate presentments of the same obligation, new-age alterations, and counterfeits. They also introduce new system and counter-party risks that the legal regime does not allocate as precisely as it has in the past.
Theoretical choices for allocating duties range from open-ended systems that relied on assessments of "good faith" and the exercise of "ordinary care" as the Uniform Commercial Code does and more defined systems such as the bright-line eligibility and warranty standards in system rules such as ECCHO. This article looks at issues such as how duty obligations may be adjusting to new processing realities, how one demonstrates compliance or non-compliance with duties, and what barriers prevent some participants from benefitting from duties others should have fulfilled. The analysis centers on four principles drawn from the past: transparency, consistency, privity, and proof - to explore duties in the context of hypotheticals. It concludes that we should devote more attention to important economic and fairness concerns in payments, giving some examples.
Number of Pages in PDF File: 30
Keywords: Retail Payments, Payments Fraud, System and Counter-Party Risks, Good Faith, Ordinary CareAccepted Paper Series
Date posted: January 22, 2009 ; Last revised: July 1, 2013
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