The Next Big Clip

Cited: FindLaw Blog

The ability to shop and conduct financial transactions online has made life easier with the Internet in more ways than just these.  However, just like in the real world, criminals work everywhere on the Internet.  They are seeking to skew your identity, personal information as well as your money.  These “Cyber” criminals are responsible for their wrongdoing according to the criminal and civil law.  But, the question is whether or not others can also be held responsible for the harm they cause as a result of their illegal activities.

The recent case of Patco Construction Company, Inc. vs People’s United Bank d/b/a Ocean Bank, filed in state court in Maine, tees up this very question for resolution.  Patco alleges that it has been a customer of Ocean Bank. Patco asserts that Ocean Bank failed to fulfill “ones of its most basic obligations, namely, to protect its customers’ funds against theft.”

According to Patco’s complaint, over the course of one week in May of this year, cyber criminals accessed Patco’s accounts at Ocean Bank and transferred hundreds of thousands of dollars to numerous banks accounts by way of the Automated Clearing House network, a system used by banks to transfer funds electronically between accounts.

Patco states that Ocean Bank purportedly informs its customers that its online banking system utilizes sophisticated “behind-the-scenes” security measures that are suppose to monitor the type, frequency and origination point of electronic transactions. However, Patco complains that the security measures on Patco’s account were structured in a manner that leaves the account vulnerable to the very attacks that occurred.

Moreover, Patco alleges that Ocean Bank did not detect the improper transfers that should have been seen as suspicious because they were larger than usual Patco transactions, they were directed to numerous accounts as to which Patco had never transferred funds, and the transfers original from Internet protocol addresses that Patco had not used before to conduct its online banking.

In addition to the foregoing, Patco complains that Ocean Bank allowed the perpetrators to draw on a line of credit Patco had with the bank in excess of more than $200,000 in additional stolen funds. Patco states that it is particularly insulted that Ocean Bank expects the repayment of this money plus interest by Patco.

Patco has asserted causes of action for negligence, breach of contract, breach of fiduciary duty, among others.  Patco’s complaint is just one side of the story, of course. Ocean Bank will have its day in court and will be able to present its defenses. How this case unfolds and resolves largely will turn on the facts.

For those sore looking for some financial assistance along the lines of mortgage assist . . .

Factual questions to be answered will include: the extent to which Ocean Bank represented and agreed that it would implement security measures to protect the funds of customers; whether Ocean Bank fulfilled its representations and promises in that regard; whether Ocean Bank acting responsibly in light of its position of trust and in light of reasonable industry standards; and whether Ocean Bank should have been on notice of improper criminal conduct based on the facts.

Other facts to be considered include the banking history of Patco with Ocean Bank, whether Patco possibly did anything to contribute to the compromised scenario as it unfolded, and whether the Cyber attacks were beyond what a reasonable financial institution could detect and prevent under these circumstances.

—————————————————-

My Take: This is something that every bank should worry about especially if they claim to be able to protect clients’ funds.  I definitely would not want to keep my money in a bank that could not protect it.  Businesses usually have a retail merchant account that they utilized for all of their online in credit card purchases.  If an account is not to say, then their business will not succeed.

It should not make any difference if businesses are using wireless credit card machines or telephone transfers, a bank should be able to protect the information from being stolen.  I could understand a bank not being held responsible if they could prove that the information was stolen through some other means and they had the proper security.

—————————————————-

Related Resources

Commercial Money

Commercial loan brokers understand financing, there clients understand leverage. Whether utilizing other people’s money or expertise, their clients understand the benefits of both.  They are constantly attuned to the internal forces within their lending institutions that create the temporary pricing disparities. Because of the breadth and quality of their lending relationships, they have been consistently successful in identifying these disparities and converting them into advantageous borrowing opportunities for their clients.  They have long established relationships with insurance companies, savings banks, foreign and domestic commercial banks, private lenders and hedge funds, Fannie Mae, Freddie Mac, and pension funds have allowed them to provide their clients with the most competitive terms and most reliable executions in the market including a commercial loan workout.

Business Financing

One company’s business model was engineered from the very beginning to provide financing to merchants at the lowest possible cost with no “fine print.”  They are the only financing company in the industry to disclose full financing information right on their web site.  They are one of the country’s leading small business lenders, providing business cash advances and quick loans to merchants in the form of short-term working capital.  They are changing the face of the small business lender.  They provide business owners with an affordable alternative to the traditional loans obtained through a commercial finance company, the small business loan.