Court Rules On What Is "Commercially Reasonable" Bank Security

Small business owners have new hope that they may be on the same footing as individuals when it comes to cybertheft from their bank accounts.

The First Circuit Court of Appeals has reversed a district court case over what is "commercially reasonable" under UCC Article 4A.  Under Article 4A, banks bear the risk for unauthorized transfers unless they can show that either the payment order was sent by an authorized person or that that they have commercially reasonable security procedures and they followed those procedures.

The case, Patco Construction Company v. Ocean Bank, involves a Maine construction company and Ocean Bank, a regional bank that has since been acquired by People's United Bank.  Patco, a customer of Ocean Bank, used the eBanking feature which allowed them to make electronic funds transfers via the Automated Clearing House (ACH).  Patco used this service primarily for its payroll payments. These payments were made on the same day of the week by