On September 30, 2014, the Alabama Supreme Court issued an important decision regarding which financial institution will bear the burden of a check encoding error under the check-encoding warranty found in Alabama’s U.C.C. Article 4.  According to the Alabama Supreme Court, this case is truly a case of first impression as there are no reported

We continue to see an increase in claims against financial institutions for fraudulent electronic payment orders.  Typically these claims involve large sums of money wired to overseas banks and quickly collected by unknown individuals.  Under U.C.C. Section 4A-204, a bank will be liable for such payment orders unless it falls within one of two exceptions. 

In recent years, a number of courts have held that the National Bank Act, 12 U.S.C. 21, et seq., (“NBA”), preempts application of state consumer protection laws against national banks where the state law “significantly impaired” the purpose of the federal act or its implementing regulations.  In Baptista v. J.P. Morgan Chase Bank, N.A.