BP BHEAD INT S

AN ACT Relating to check fraud; adding a new chapter to Title 19 RCW; and creating a new section.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature recognizes that account closed check fraud has grown out of control and represents an extraordinary and unfair financial burden upon the merchant community. Since the volume of account closed check fraud is so great and cannot be managed effectively, the legislature deems it necessary for financial institutions to report the routing number and account number for checking accounts closed due to customer checking account abuse, as that term is defined in section 2 of this act.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Account closed" means the financial institution closed the checking account due to checking account abuse by the account holder.

(2) "Account closed data" means the bank routing number and account number for each checking account closed for abuse by a financial institution.

(3) "Banking day" means that part of a day on which a financial institution is open to the public for carrying on substantially all of its functions, except that it shall not include Saturday, Sunday, or a legal holiday.

(4) "Check verification service" means an organization that provides computerized check verification services.

(5) "Checking account" means a contract of deposit between a depositor or depositors and a financial institution that is subject to withdrawal by check.

(6) "Checking account abuse" means the checking account holder is issuing checks as payment for goods and services, but does not have the funds available in a checking account for payment of these checks.

(7) "Electronic mailbox system" means a type of technology that provides a storage house for information to be sent and forwarded electronically using computer communication protocols.

(8) "Financial institution" means a bank, trust company, savings bank, savings and loan association, securities broker dealer, or credit union authorized to do business and offer checking accounts in this state.

(9) "Law enforcement agency" means the police department, the prosecuting attorney, the state patrol, or the office of the sheriff.

NEW SECTION. Sec. 3. To aid in the reduction of account closed check fraud, financial institutions are required to report account closed data through an electronic mailbox system on a daily basis to the following entities:

(1) Check verification services for the purpose of making account closed data available to the merchant community for their protection against financial losses due to fraudulent check crimes;

(2) Law enforcement agencies for their use in investigation and prosecution of individuals committing account closed check crime; and

(3) Financial institutions to aid in the prevention of opening new checking accounts to known checking account abusers.

These entities are required to use account closed data under the provisions of applicable federal laws and in accordance with the laws of the state of Washington.

NEW SECTION. Sec. 4. The department of financial institutions shall oversee the electronic mailbox system, and a vendor providing the mailbox services will maintain day to day operations of the mailbox system. The vendor shall provide to all financial institutions the compatible software necessary to transmit account closed data to the electronic mailbox, and will make the same available to those organizations or subscribers registered with the department of financial institutions to obtain account closed data as stated in section 3 of this act.

NEW SECTION. Sec. 5. Financial institutions shall not be required to pay any costs associated with sending account closed data to an electronic mailbox. Costs associated with maintaining the electronic mailbox are divided monthly amongst subscribers to the electronic mailbox. The vendor of the mailbox services is responsible for billing the subscribers. Subscribers shall also pay a reasonable fee to the department of financial institutions for costs incurred in creating and overseeing the electronic mailbox system.

NEW SECTION. Sec. 6. All financial institutions are required to report to the electronic mailbox system a daily listing of the accounts closed for abuse and a daily listing of the accounts that are reopened and back in good standing with the financial institution. Account closed data must be sent to the electronic mailbox within three banking days of closure of the abused account. Subscribers to the electronic mailbox system shall access the information daily from the electronic mailbox system and make updates as necessary.

NEW SECTION. Sec. 7. If a financial institution transmits erroneous information to the electronic mailbox system, the financial institution is not liable unless, from the date of discovery or written notification, the financial institution fails to correct the error within a reasonable time after notification. For purposes of this section, a reasonable time means within three banking days after the date of discovery or notification.

NEW SECTION. Sec. 8. The department of financial institutions shall adopt rules necessary to implement sections 3 through 7 of this act. The department may appoint a temporary advisory committee consisting of merchants, retailers, financial institutions, law enforcement officials, and other consumers to assist in developing proposed rules.

NEW SECTION. Sec. 9. Sections 2 through 8 of this act shall constitute a new chapter in Title 19 RCW.