Mark E. Budnitz

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The 1990 official revision to Articles 3 and 4 of the Uniform Commercial Code ("U.C.C.") represents a major failure in process. A crying need exists for a comprehensive national reevaluation of the law of payment systems as it affects all consumers. Instead, the sponsors of the revisions, the American Law Institute and the National Conference of Commissioners on Uniform State Laws, chose to exclude entirely issues of concern to consumers. The failure of process, however, goes beyond this omission. Recent developments in the provision of government benefits to those without bank accounts raise the question whether the uniform state laws approach is a viable method for future legislative action in regard to payment systems law that affects consumers.

The extent of the failure of process is illustrated by the plight of those consumers who have the greatest need for legal protection, but who have very little: The twenty million recipients of government benefits who cannot afford checking accounts. Because these recipients lack checking accounts, they must use cash and money orders, both of which lack many advantages of checking accounts (legal and otherwise). Meanwhile, the federal and many state governments are planning to stop sending checks to these consumers, instead transfering benefits to them under an electronic system that may be devoid of any statutory protection whatsoever. This system is known as Electronic Benefits Transfer ("EBT"). It is not clear that EBT is the optimum system for transferring government benefits. If a law of consumer payment systems was enacted on the federal level, proposed new national programs such as EBT could be evaluated within that framework. If necessary, federal law could be adjusted to accommodate EBT. In the alternative, other systems could be considered, such as one accompanied by a federal law providing all recipients with bank accounts in which benefits would be transferred through direct deposit. If a federal law of consumer payment systems was adopted, no need would exist to compromise national projects so they conform to state payment law drafted without regard to consumer needs, or to enact federal legislation preempting state law to the extent necessary to facilitate every new national development.

The drafters of the new Articles 3 and 4 adopted a process that excludes consumer interests and suggests that individual state legislatures are to decide whether more needs to be done for consumers.6 Exactly the opposite process is needed: A comprehensive national examination of consumer payment systems.