83 Chi.-Kent L. Rev. 499 (2008)
Uniformity and Diversity in Payment Systems

handle is hein.journals/chknt83 and id is 523 raw text is: UNIFORMITY AND DIVERSITY IN PAYMENT SYSTEMS
CLAYTON P. GILLETTE* AND STEVEN D. WALT**
INTRODUCTION
Current law adopts different rules for different payment systems. The
allocation of losses from unauthorized payment, erroneous payment, and
the reversibility of instructions to pay varies depending on whether pay-
ment is made by check, credit or debit card, wholesale wire transfer, or
letter of credit.1 On its face, the diversity of payment systems rules seems
counterproductive. It can cause confusion among users of payment sys-
tems, who might assume that rules with which they are familiar from one
system apply similarly to other systems. Diversity thus increases learning
costs among users and leads to unanticipated consequences when unin-
formed users make incorrect assumptions about uniformity. The greater the
degree of uniformity across payment systems, the lower the search costs
incurred by a party in selecting the appropriate device for her transaction.
Diversity also often appears to be a consequence of historical contingency
rather than well-designed analysis. To take a minor example, it is difficult
to reconcile the different statutory definitions for unauthorized credit
cards and consumer electronic fund transfers other than by reference to
drafting inconsistencies over time.2 Finally, the costs of diversity appear to
* Max E. Greenberg Professor of Contract Law, New York University School of Law. Thanks
to Oren Bar-Gill and Ronald Mann for insightful comments on earlier drafts.
** Professor of Law and Sullivan & Cromwell Research Professor, University of Virginia School
of Law.
1. Rules applicable to particular payment devices also vary across countries. See BENJAMIN
GEVA, BANK COLLECTIONS AND PAYMENT TRANSACTIONS 210-18 (2001) (wire transfer law); Paulo S.
Grassi, Letter of Credit Transactions: The Bank's Position in Determining Documentary Compliance: A
Comparative Evaluation Under U.S., Swiss and German Law, 7 PACE INT'L L. REV. 81, 118-21 (1995)
(describing different standards of strict compliance under domestic letter of credit law). This article,
however, is concerned solely with domestic payment systems rules. For a cross-country comparison of
the different frequencies of use of paper instruments and electronic payments, see David B. Humphrey,
Lawrence B. Pulley & Jukka M. Vesala, Cash, Paper, and Electronic Payments: A Cross-Country
Analysis, 28 J. MONEY, CREDIT & BANKING 914 (1996).
2. Under the Truth-In-Lending Act, an unauthorized use of a credit card means use by a person
other than the cardholder who does not have actual, implied, or apparent authority for such use. 15
U.S.C. § 1602(o) (2000). Under the Electronic Fund Transfer Act, however, an 'unauthorized elec-
tronic fund transfer' means a transfer from a consumer's account initiated by a person other than the
consumer without actual authority to initiate such transfer. 15 U.S.C. § 1693a( 11). It is unclear why a

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