This article is concerned with how losses should be allocated between holders of accounts that are implicated in payment systems and the financial institutions that participate in the payment systems by acting as intermediaries between ac- count holders. The rules involving payment systems show a wide range of divergent approaches. In the period before a transaction is executed, some payment systems take the possible negligence of an account holder into account in allocating losses for unauthorized payment transactions. The checking system is the classic case. In contrast, the Truth-in-Lending Act and the Electronic Fund Transfer Act both ignore the negligence of an account holder prior to the unauthorized transaction. This article suggests that the issue of who can police unauthorized payment transactions has become entangled with a series of technical issues about which many lawyers have little knowledge. What we should be seeking is a set of principles for payments law that are not dependent on the current state of technology. This article argues that the technology has exceeded the ability of most people to understand or control it, that this fact is unlikely to change, and that the complexity of technology will just keep increasing. In addition, it argues that the sheer quantity of information concerning payments that an account holder must process has grown tremendously. Both of these sets of facts suggest the financial institutions that participate in the payment systems should police them, including preventing unauthorized transactions. Payments law should not rely upon account holders, who can be too easily overwhelmed, to be effective monitors of unauthorized transactions.

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