4000 - Advisory Opinions
Users' Rights Under the Electronic Funds Transfer Act in the Event of Bank Error Regarding an Electronic Wire Transfer
April 26, 1994
Mark A. Mellon, Senior Attorney
This is in response to your letter of January 31, 1994 to the FDIC Office of Consumer Affairs concerning wire transfers of funds. Your letter has been referred to the FDIC Legal Division for handling.
Based on your letter and our telephone conversations, it is my understanding that your mother, *** sent $200 from Germany to her grandson in Arizona (your son) by means of an electronic wire transfer. Ms. *** went to her bank in Germany and gave them the equivalent of $200 in deutschmarks along with an additional payment to cover the fee which her bank charged for wire transfers.
Ms. *** had previously sent wire transfers through her bank to a joint account which you and your son held in [BANK "A"] in Arizona. Unbeknownst to Ms. ***, however, you and your son had closed out your joint account with [BANK A] prior to the wire transfer of $200. In your letter you indicate that the wire transfer of $200 was sent to the [BANK "B"] in Arizona rather than to [BANK A] for reasons unknown to you (you state that [BANK A] was formerly wholly-owned by [BANK B]). You received a cashier's check from [BANK B] for the sum of $165 which was payable to either you or your son. Upon inquiry, you were informed by employees of [BANK B] that the $35 difference between the $200 which your mother wired and the $165 which you received was the fee which [BANK B] charges non-accountholders for the handling of wire transfers. You wish to know why the wire was sent to [BANK B] and whether that institution could legally charge such a fee for the handling of a wire transfer.
The rights and liabilities of users of electronic fund transfer systems are defined by the Electronic Fund Transfer Act. The regulation, however, which implements this statute, 12 C.F.R. Part 205, Regulation E, specifically states that its provisions are inapplicable to a situation such as yours where a consumer (Ms. *** makes a wire transfer of funds through a network that is primarily used for transfers between financial institutions, such as the one which the German bank employed to transfer funds to the bank in Arizona. See 12 C.F.R. § 205.3(b). One must therefore look to the law of Arizona, the state where is located, in order to determine whether it was permissible for [BANK B] to charge a wire transfer handling fee of $35.
Wire transfers of funds to depository institutions in Arizona are covered by Chapter 4A of Title 47 of Arizona law. Ariz. Rev. Stat. Ann. §§ 47--4A101 to 47--4A507 (1993). The state of Arizona enacted Article 4A (Funds Transfers) of the Uniform Commercial Code (the "U.C.C.") into law as Chapter 4A of Title 47 in 1991.
Chapter 4A provides that the rights and obligations between the sender of a payment order (in this case, Ms. ***) and the receiving bank (in this case, the German bank) are governed by the law of the jurisdiction in which the receiving bank is located. Ariz. Rev. Stat. Ann. § 47--4A507.A. (1993). The rights and obligation between the sender, Ms. ***, and the receiving bank, her bank, are therefore governed by the laws of Germany. We can not advise you on German law respecting wire transfers of funds. Moreover, as the rights and obligations between the various parties involved in a wire transfer of funds can vary in accordance with the rules or whatever funds-transfer system is used by a receiving bank to transmit money to a beneficiary's bank (Ariz. Rev. Stat. Ann. § 47--4A501 (1993)), we are unable to respond extensively to your question.
With respect to your inquiry regarding the fee collected by [BANK B], we can say that under section 47--4A302 of Arizona law, a depository institution which wire transfers funds may not deduct any fees for handling the wire transfer from the amount of money which is to be transferred unless the sender of the funds agrees beforehand to such an arrangement. There is no comparable provision under Arizona law, however, for an institution which accepts the wire transfer on the behalf of a named payee (a beneficiary). Although the Arizona code has not been interpreted to our knowledge on this issue, the lack of a restriction on the beneficiary's bank deducting fees could be interpreted as allowing a beneficiary's bank to deduct a fee for the handling of a wire transfer from the sum of money which has been transferred. See Hawkland & Moreno UCC Series § 4A--302:06--(Art 4A).
I hope that the above has been of some assistance. If you have any questions, please feel free to contact me at (202) 898-3854.