It is the intent of the Legislature that a financial institution shall not transfer funds from a depositor’s account unless authorization has been granted by that depositor. This division is declaratory of existing case law and is intended to codify the law for the convenience of the public, regulatory authorities, and financial institutions.
Release of Demand Deposit Funds
Section § 40500
This law states that banks and other financial institutions cannot take money out of your account unless you give them permission to do so. It's based on previous court decisions and aims to make it easier for everyone, including the public and regulators, to understand the rules.
financial institutions depositor consent fund transfer authorization
Section § 40501
This law says that banks and similar financial institutions in California cannot release money from an account to anyone other than the account holder unless the account holder has authorized it or it's allowed by law. However, this rule doesn't stop the bank from using the account to pay off debts the account holder owes to that bank.
In accordance with the implied contract existing between a financial institution and its depositor, no bank, savings association, credit union, or other financial institution operating in this state which maintains and services demand deposit accounts, including NOW accounts, may release any funds from those accounts to any person or entity who is not the account holder, unless the funds are released pursuant to the depositor’s authorization or in accordance with the law. This section does not apply to any setoff for a debt claimed to be owed to a bank, savings association, credit union, or other financial institution by a customer.
financial institutions demand deposit accounts account holder authorization
