Very good opinion from the Seventh Circuit. Fridman sued NYCB for violations of Truth in Lending Act because NYCB waited two days to credit her account when she made an electronic payment. This put her payment past the grace period so NYCB charged her a late fee. The court had to define what is “date of receipt” and “payment instrument”. The court also defined what is a “third-party payment service.”
Using the Dodd-Frank definition of payment instrument, the court concluded that it included electronic payments. Having decided on the definition of a payment instrument, the court then looked at “date of receipt”. The court concluded that at the time an electronic payment is made, it constitutes “date of receipt” much the same way as when one mails in check. The date of receipt is the date the bank receives authorization to debit the borrower’s bank account.
The court finally concluded that a “third-party payment service” is a service that is contracted by the bank to process payments. In this case, the electronic payment was made directly through the bank’s website and not through a third-party payment service.