REFERENCE TITLE: special deposits; banks; requirements; definitions State of Arizona Senate Fifty-seventh Legislature First Regular Session 2025 SB 1206 Introduced by Senator Bolick AN ACT amending title 6, chapter 2, arizona revised statutes, by adding article 5.1; relating to banks. (TEXT OF BILL BEGINS ON NEXT PAGE)
REFERENCE TITLE: special deposits; banks; requirements; definitions
State of Arizona Senate Fifty-seventh Legislature First Regular Session 2025
SB 1206
Introduced by Senator Bolick
REFERENCE TITLE: special deposits; banks; requirements; definitions
State of Arizona
Senate
Fifty-seventh Legislature
First Regular Session
2025
SB 1206
Introduced by
Senator Bolick
AN ACT
amending title 6, chapter 2, arizona revised statutes, by adding article 5.1; relating to banks.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona: Section 1. Title 6, chapter 2, Arizona Revised Statutes, is amended by adding article 5.1, to read: ARTICLE 5.1. SPECIAL DEPOSITS START_STATUTE6-251. Definitions In this article, unless the context otherwise requires: 1. "Account agreement" means an agreement that complies with all of the following: (a) Is in a record between a bank and one or more depositors. (b) May have one or more beneficiaries as additional parties. (c) States the intention of the parties to establish a special deposit. END_STATUTE 2. "Bank": (a) has the same meaning prescribed in section 6-101. (b) Includes any of the following: (i) A savings bank as prescribed in this chapter. (ii) A Savings and loan association as prescribed in chapter 3 of this title. (iii) A credit union as prescribed in chapter 4 of this title. (iv) A trust company as prescribed in chapter 8 of this title. (c) Does not include A branch or separate office of a bank. 3. "Beneficiary" means a person that either: (a) Is identified as a beneficiary in an account agreement. (b) If not identified as a beneficiary in an account agreement, may be entitled to payment from a special deposit if a payment is allowed either: (i) Under the terms of an account agreement. (ii) On termination of a special deposit. 4. "Contingency" means an event or circumstance that is stated in an account agreement and that is not certain to occur but must occur before a bank is obligated to pay a beneficiary. 5. "Creditor process" includes any of the following: (a) An attachment. (b) A garnishment. (c) A levy. (d) A notice of lien. (e) A sequestration. (f) A similar process that is issued by or on behalf of a creditor or other claimant. 6. "Depositor" means a person that either establishes or funds a special deposit. 7. "Good faith" means honesty in fact and observance of reasonable commercial standards of fair dealing. 8. "Knowledge" means either: (a) With respect to a beneficiary, actual knowledge of a fact. (b) With respect to a bank holding a special deposit, a bank established a reasonable routine for communicating material information to an individual to whom the bank has assigned RESPONSIBILITY for the special deposit and maintained reasonable compliance with the routine. 9. "Obligated to pay a beneficiary" or "Obligation to pay a beneficiary" means a beneficiary under an account agreement that is entitled to receive payment from a bank when both of the following apply: (a) A contingency has occurred. (b) The bank has knowledge that a contingency has occurred. 10. "Person": (a) means any of the following: (i) An individual. (ii) An estate. (iii) A business or nonprofit entity. (iv) Any department, agency, instrumentality or political subdivision of this state. (v) Any other legal entity. (b) Includes a protected series, however denominated, of an entity if the protected series limits the ability of a creditor to satisfy a claim from the assets of the protected series as required by law. 11. "Record" means a document that is either: (a) Inscribed on a tangible medium. (b) Stored in electronic form or other medium and retrievable in perceivable form. 12. "Special deposit" means a deposit as prescribed in section 6-254. START_STATUTE6-252. Choice of law A. This article applies to a special deposit under an account agreement that states an intention of the parties to establish a special deposit pursuant to this section, regardless of whether a party to the account agreement or a transaction is related to the special deposit or the special deposit itself, has a reasonable relation to this state. B. This article applies to the parties to an account agreement and provides the parties a right to choose a forum in this state for settling a dispute that may arise out of a special deposit regardless of whether a party to the account agreement or a transaction is related to the special deposit or the special deposit itself, has a reasonable relation to this state. C. This article does not affect: 1. A right or obligation that relates to a deposit other than a special deposit under this article. 2. The voidability of a deposit or transfer that is fraudulent or voidable under other law. END_STATUTE START_STATUTE6-253. Account agreement amendment; excuse of liability A. This section and Sections 6-251, 6-252, 6-254, 6-255, 6-257, 6-258, 6-259 and 6-260 may not be changed by an account agreement except as provided in those sections. Sections 6-256, 6-261 and 6-262 may be changed by an account agreement except as provided in subsection B of this section. B. A provision in an account agreement or other record that substantially excuses liability or substantially limits a remedy for the failure to perform an obligation under this article is not sufficient to vary the effect of this article. C. If a beneficiary is a party to an account agreement, the bank and a depositor may amend the account agreement WITHOUT the consent of the beneficiary only if the account agreement expressly allows an amendment. D. If a beneficiary is not a party to the account agreement and the bank and the depositor know that a beneficiary has knowledge of the account agreement's terms, the bank and the depositor may amend the account agreement without the consent of the beneficiary only if the amendment does not adversely and materially affect the beneficiary's right to receive payment. E. If a beneficiary is not a party to the account agreement and the bank and the depositor Do not know whether the beneficiary has knowledge of the account agreement's terms, the bank and the depositor may amend the account agreement without the consent of the beneficiary only if the amendment is made in good faith.END_STATUTE START_STATUTE6-254. Special deposits A deposit is a special deposit if all of the following apply: 1. If the deposit of funds was made under an account agreement. 2. It is for the benefit of at least two beneficiaries for which one or more may be a depositor. 3. It is a medium of exchange that is recognized by law. 4. It is for a permissible purpose as stated in the account agreement. 5. It is subject to a contingency. END_STATUTE START_STATUTE6-255. Permissible purpose objectives; permissible purpose duties; special deposit termination A. A special deposit shall include at least one permissible purpose that is stated in the account agreement at the creation of the special deposit until the special deposit terminates. B. A permissible purpose shall: 1. Include any of the following objectives: (a) Governmental. (b) Regulatory. (c) Commercial. (d) Charitable. (e) Testamentary. 2. Include any of the following duties: (a) To Hold monies: (i) In escrow, including for a purchase and sale, lease, buyback or other transaction. (ii) As a security deposit of a tenant. (iii) That may be distributed to a person as remuneration, retirement or other benefit, compensation under a judgment, consent decree, court order or other decision from a court of competent jurisdiction. (iv) For distribution to a defined class of persons after identification of the class members and their interest in the funds. (b) To provide assurance when an obligation is created by a contract that includes earnest money to ensure a transaction closes. (c) To settle an obligation that may arise in the operation of a payment system, securities settlement system or other financial market infrastructure. (d) To provide assurance when an obligation may arise in the operation of a payment system, securities settlement system or other financial market infrastructure. (e) To hold margin, other cash collateral or monies that support an orderly function of a financial market infrastructure or perform an obligation within the financial market infrastructure. C. Before a special deposit terminates, a bank shall cease to apply any monies that are deposited into a special deposit if either: 1. the bank or a court of competent jurisdiction determines that a special deposit no longer satisfies subsection A of this section or sections 6-257, 6-258 and 6-260. 2. the bank determines the special deposit no longer satisfies subsection a of this section. The bank may take any action that is reasonable and necessary under the circumstances, including terminating the special deposit. END_STATUTE START_STATUTE6-256. Account agreement; special account; payment to beneficiary; discharge of obligation A. Unless the account agreement states otherwise: 1. A bank is obligated to pay a beneficiary if there are sufficient funds in the special deposit. 2. A bank's obligation to pay a beneficiary is immediately due and payable. 3. If the funds that are available in a special deposit are insufficient to cover the bank's obligation to pay a beneficiary, the beneficiary may elect: (a) To be paid the monies that are available, if there is one beneficiary. (b) To receive a pro rata share of the monies that are available, if there is more than one beneficiary. B. A bank's obligation to pay a beneficiary is excused if the monies that are available in a special deposit are insufficient to cover a payment, Except as provided in subsection A, paragraph 3 of this section. c. A bank may discharge the bank's obligation under this section by either: 1. Crediting another transaction account of the beneficiary. 2. Taking any other action that either: (a) Is allowed under the account agreement for the bank to obtain a discharge. (b) Would constitute a discharge under the law. D. If a bank that is obligated to pay a beneficiary incurred the obligation to discharge a person, the person's obligation is discharged if the bank's action constitutes a discharge under subsection C of this section. END_STATUTE START_STATUTE6-257. Property interest; depositor; beneficiary; special deposit A. A depositor or a beneficiary does not have a property interest in a special deposit. B. Except as otherwise provided by law, a property interest in a special deposit is limited to a right to receive payment if the bank is obligated to pay a beneficiary and not in the special deposit. END_STATUTE START_STATUTE6-258. Creditor process; enforceability A. Except as provided in subsection B of this section, a creditor process is not enforceable against a bank that is holding a special deposit. B. A creditor process is enforceable against a bank that is Holding a special deposit up to the amount the bank is obligated to pay a beneficiary or a depositor if the creditor process: 1. Is served on the bank. 2. Provides sufficient information that allows a bank to identify the depositor or the beneficiary from the bank's books and records. 3. Gives the bank a reasonable opportunity to act on the creditor process. C. Unless the creditor process is enforceable against a bank as prescribed in subsection B of this section or as allowed by law, a creditor process that is served on a bank does not create a right of the creditor against the bank or a duty of the bank to a creditor.END_STATUTE START_STATUTE6-259. Injunction; civil remedies; material fraud A party may seek an injunction in a court of competent jurisdiction and a court may enjoin a bank or grant similar relief that would prohibit a bank from paying a depositor or beneficiary only if payment would constitute material fraud.END_STATUTE START_STATUTE6-260. Recoupment or setoff A. Except as provided in subsection B or C of this section, a bank may not exercise a right of recoupment or setoff against a special deposit. B. An account agreement may authorize a bank to debit the special deposit: 1. When the bank becomes obligated to pay a beneficiary, in an amount that does not exceed the amount necessary to discharge the obligation. 2. For an overdraft fee. 3. For any costs that are incurred by the bank that are related to a special deposit. 4. To reverse an earlier credit that was posted by the bank to the balance of the special deposit and to make a reversal to correct a mistake. C. A bank that is holding a special deposit may exercise a right of recoupment or setoff against an obligation to pay a beneficiary with monies from the special deposit. END_STATUTE START_STATUTE6-261. Duty to beneficiary; account agreement A. A bank does not have a fiduciary duty to any person with respect to a special deposit. B. When a bank that holds a special deposit becomes obligated to pay a beneficiary, a debtor-creditor relationship exists between the bank and a beneficiary. C. A bank that holds a special deposit: 1. Has a duty to a beneficiary to comply with the account agreement and this article. 2. Shall pay a beneficiary if the bank becomes obligated to pay a beneficiary. 3. Is liable to a depositor or a beneficiary for any damages that are proximately caused by the bank's noncompliance with the account agreement or this article. Except as provided by any other law, a bank is not LIABLE for consequential, special or punitive damages. 4. May reasonably rely on records that are presented in compliance with an account agreement to determine whether the bank is obligated to pay a beneficiary. If an account agreement requires payment on presentation of a record, the bank shall determine within a reasonable time whether the record is sufficient to require payment. If the account agreement requires action by the bank on presentation of a record, the bank is not liable for relying in good faith on the genuineness of the record, if the record appears to be genuine on its face. D. Unless the account agreement provides otherwise, the bank is not required to determine whether a permissible purpose pursuant to section 6-255 that was stated in the account agreement continues to exist. END_STATUTE START_STATUTE6-262. Special deposit termination A. Unless otherwise provided in an account agreement, a special deposit terminates not more than five years after the date that the special deposit was first funded. B. Unless otherwise provided in the account agreement, if the bank cannot identify or locate a beneficiary that is entitled to receive payment when the special deposit is terminated and a balance remains in the special deposit, the bank shall pay the balance to the depositor. C. A bank that pays the remaining balance as provided under subsection B of this section has no further obligation to the special deposit. END_STATUTE
Be it enacted by the Legislature of the State of Arizona:
Section 1. Title 6, chapter 2, Arizona Revised Statutes, is amended by adding article 5.1, to read:
ARTICLE 5.1. SPECIAL DEPOSITS
START_STATUTE6-251. Definitions
In this article, unless the context otherwise requires:
1. "Account agreement" means an agreement that complies with all of the following:
(a) Is in a record between a bank and one or more depositors.
(b) May have one or more beneficiaries as additional parties.
(c) States the intention of the parties to establish a special deposit. END_STATUTE
2. "Bank":
(a) has the same meaning prescribed in section 6-101.
(b) Includes any of the following:
(i) A savings bank as prescribed in this chapter.
(ii) A Savings and loan association as prescribed in chapter 3 of this title.
(iii) A credit union as prescribed in chapter 4 of this title.
(iv) A trust company as prescribed in chapter 8 of this title.
(c) Does not include A branch or separate office of a bank.
3. "Beneficiary" means a person that either:
(a) Is identified as a beneficiary in an account agreement.
(b) If not identified as a beneficiary in an account agreement, may be entitled to payment from a special deposit if a payment is allowed either:
(i) Under the terms of an account agreement.
(ii) On termination of a special deposit.
4. "Contingency" means an event or circumstance that is stated in an account agreement and that is not certain to occur but must occur before a bank is obligated to pay a beneficiary.
5. "Creditor process" includes any of the following:
(a) An attachment.
(b) A garnishment.
(c) A levy.
(d) A notice of lien.
(e) A sequestration.
(f) A similar process that is issued by or on behalf of a creditor or other claimant.
6. "Depositor" means a person that either establishes or funds a special deposit.
7. "Good faith" means honesty in fact and observance of reasonable commercial standards of fair dealing.
8. "Knowledge" means either:
(a) With respect to a beneficiary, actual knowledge of a fact.
(b) With respect to a bank holding a special deposit, a bank established a reasonable routine for communicating material information to an individual to whom the bank has assigned RESPONSIBILITY for the special deposit and maintained reasonable compliance with the routine.
9. "Obligated to pay a beneficiary" or "Obligation to pay a beneficiary" means a beneficiary under an account agreement that is entitled to receive payment from a bank when both of the following apply:
(a) A contingency has occurred.
(b) The bank has knowledge that a contingency has occurred.
10. "Person":
(a) means any of the following:
(i) An individual.
(ii) An estate.
(iii) A business or nonprofit entity.
(iv) Any department, agency, instrumentality or political subdivision of this state.
(v) Any other legal entity.
(b) Includes a protected series, however denominated, of an entity if the protected series limits the ability of a creditor to satisfy a claim from the assets of the protected series as required by law.
11. "Record" means a document that is either:
(a) Inscribed on a tangible medium.
(b) Stored in electronic form or other medium and retrievable in perceivable form.
12. "Special deposit" means a deposit as prescribed in section 6-254.
START_STATUTE6-252. Choice of law
A. This article applies to a special deposit under an account agreement that states an intention of the parties to establish a special deposit pursuant to this section, regardless of whether a party to the account agreement or a transaction is related to the special deposit or the special deposit itself, has a reasonable relation to this state.
B. This article applies to the parties to an account agreement and provides the parties a right to choose a forum in this state for settling a dispute that may arise out of a special deposit regardless of whether a party to the account agreement or a transaction is related to the special deposit or the special deposit itself, has a reasonable relation to this state.
C. This article does not affect:
1. A right or obligation that relates to a deposit other than a special deposit under this article.
2. The voidability of a deposit or transfer that is fraudulent or voidable under other law. END_STATUTE
START_STATUTE6-253. Account agreement amendment; excuse of liability
A. This section and Sections 6-251, 6-252, 6-254, 6-255, 6-257, 6-258, 6-259 and 6-260 may not be changed by an account agreement except as provided in those sections. Sections 6-256, 6-261 and 6-262 may be changed by an account agreement except as provided in subsection B of this section.
B. A provision in an account agreement or other record that substantially excuses liability or substantially limits a remedy for the failure to perform an obligation under this article is not sufficient to vary the effect of this article.
C. If a beneficiary is a party to an account agreement, the bank and a depositor may amend the account agreement WITHOUT the consent of the beneficiary only if the account agreement expressly allows an amendment.
D. If a beneficiary is not a party to the account agreement and the bank and the depositor know that a beneficiary has knowledge of the account agreement's terms, the bank and the depositor may amend the account agreement without the consent of the beneficiary only if the amendment does not adversely and materially affect the beneficiary's right to receive payment.
E. If a beneficiary is not a party to the account agreement and the bank and the depositor Do not know whether the beneficiary has knowledge of the account agreement's terms, the bank and the depositor may amend the account agreement without the consent of the beneficiary only if the amendment is made in good faith.END_STATUTE
START_STATUTE6-254. Special deposits
A deposit is a special deposit if all of the following apply:
1. If the deposit of funds was made under an account agreement.
2. It is for the benefit of at least two beneficiaries for which one or more may be a depositor.
3. It is a medium of exchange that is recognized by law.
4. It is for a permissible purpose as stated in the account agreement.
5. It is subject to a contingency. END_STATUTE
START_STATUTE6-255. Permissible purpose objectives; permissible purpose duties; special deposit termination
A. A special deposit shall include at least one permissible purpose that is stated in the account agreement at the creation of the special deposit until the special deposit terminates.
B. A permissible purpose shall:
1. Include any of the following objectives:
(a) Governmental.
(b) Regulatory.
(c) Commercial.
(d) Charitable.
(e) Testamentary.
2. Include any of the following duties:
(a) To Hold monies:
(i) In escrow, including for a purchase and sale, lease, buyback or other transaction.
(ii) As a security deposit of a tenant.
(iii) That may be distributed to a person as remuneration, retirement or other benefit, compensation under a judgment, consent decree, court order or other decision from a court of competent jurisdiction.
(iv) For distribution to a defined class of persons after identification of the class members and their interest in the funds.
(b) To provide assurance when an obligation is created by a contract that includes earnest money to ensure a transaction closes.
(c) To settle an obligation that may arise in the operation of a payment system, securities settlement system or other financial market infrastructure.
(d) To provide assurance when an obligation may arise in the operation of a payment system, securities settlement system or other financial market infrastructure.
(e) To hold margin, other cash collateral or monies that support an orderly function of a financial market infrastructure or perform an obligation within the financial market infrastructure.
C. Before a special deposit terminates, a bank shall cease to apply any monies that are deposited into a special deposit if either:
1. the bank or a court of competent jurisdiction determines that a special deposit no longer satisfies subsection A of this section or sections 6-257, 6-258 and 6-260.
2. the bank determines the special deposit no longer satisfies subsection a of this section. The bank may take any action that is reasonable and necessary under the circumstances, including terminating the special deposit. END_STATUTE
START_STATUTE6-256. Account agreement; special account; payment to beneficiary; discharge of obligation
A. Unless the account agreement states otherwise:
1. A bank is obligated to pay a beneficiary if there are sufficient funds in the special deposit.
2. A bank's obligation to pay a beneficiary is immediately due and payable.
3. If the funds that are available in a special deposit are insufficient to cover the bank's obligation to pay a beneficiary, the beneficiary may elect:
(a) To be paid the monies that are available, if there is one beneficiary.
(b) To receive a pro rata share of the monies that are available, if there is more than one beneficiary.
B. A bank's obligation to pay a beneficiary is excused if the monies that are available in a special deposit are insufficient to cover a payment, Except as provided in subsection A, paragraph 3 of this section.
c. A bank may discharge the bank's obligation under this section by either:
1. Crediting another transaction account of the beneficiary.
2. Taking any other action that either:
(a) Is allowed under the account agreement for the bank to obtain a discharge.
(b) Would constitute a discharge under the law.
D. If a bank that is obligated to pay a beneficiary incurred the obligation to discharge a person, the person's obligation is discharged if the bank's action constitutes a discharge under subsection C of this section. END_STATUTE
START_STATUTE6-257. Property interest; depositor; beneficiary; special deposit
A. A depositor or a beneficiary does not have a property interest in a special deposit.
B. Except as otherwise provided by law, a property interest in a special deposit is limited to a right to receive payment if the bank is obligated to pay a beneficiary and not in the special deposit. END_STATUTE
START_STATUTE6-258. Creditor process; enforceability
A. Except as provided in subsection B of this section, a creditor process is not enforceable against a bank that is holding a special deposit.
B. A creditor process is enforceable against a bank that is Holding a special deposit up to the amount the bank is obligated to pay a beneficiary or a depositor if the creditor process:
1. Is served on the bank.
2. Provides sufficient information that allows a bank to identify the depositor or the beneficiary from the bank's books and records.
3. Gives the bank a reasonable opportunity to act on the creditor process.
C. Unless the creditor process is enforceable against a bank as prescribed in subsection B of this section or as allowed by law, a creditor process that is served on a bank does not create a right of the creditor against the bank or a duty of the bank to a creditor.END_STATUTE
START_STATUTE6-259. Injunction; civil remedies; material fraud
A party may seek an injunction in a court of competent jurisdiction and a court may enjoin a bank or grant similar relief that would prohibit a bank from paying a depositor or beneficiary only if payment would constitute material fraud.END_STATUTE
START_STATUTE6-260. Recoupment or setoff
A. Except as provided in subsection B or C of this section, a bank may not exercise a right of recoupment or setoff against a special deposit.
B. An account agreement may authorize a bank to debit the special deposit:
1. When the bank becomes obligated to pay a beneficiary, in an amount that does not exceed the amount necessary to discharge the obligation.
2. For an overdraft fee.
3. For any costs that are incurred by the bank that are related to a special deposit.
4. To reverse an earlier credit that was posted by the bank to the balance of the special deposit and to make a reversal to correct a mistake.
C. A bank that is holding a special deposit may exercise a right of recoupment or setoff against an obligation to pay a beneficiary with monies from the special deposit. END_STATUTE
START_STATUTE6-261. Duty to beneficiary; account agreement
A. A bank does not have a fiduciary duty to any person with respect to a special deposit.
B. When a bank that holds a special deposit becomes obligated to pay a beneficiary, a debtor-creditor relationship exists between the bank and a beneficiary.
C. A bank that holds a special deposit:
1. Has a duty to a beneficiary to comply with the account agreement and this article.
2. Shall pay a beneficiary if the bank becomes obligated to pay a beneficiary.
3. Is liable to a depositor or a beneficiary for any damages that are proximately caused by the bank's noncompliance with the account agreement or this article. Except as provided by any other law, a bank is not LIABLE for consequential, special or punitive damages.
4. May reasonably rely on records that are presented in compliance with an account agreement to determine whether the bank is obligated to pay a beneficiary. If an account agreement requires payment on presentation of a record, the bank shall determine within a reasonable time whether the record is sufficient to require payment. If the account agreement requires action by the bank on presentation of a record, the bank is not liable for relying in good faith on the genuineness of the record, if the record appears to be genuine on its face.
D. Unless the account agreement provides otherwise, the bank is not required to determine whether a permissible purpose pursuant to section 6-255 that was stated in the account agreement continues to exist. END_STATUTE
START_STATUTE6-262. Special deposit termination
A. Unless otherwise provided in an account agreement, a special deposit terminates not more than five years after the date that the special deposit was first funded.
B. Unless otherwise provided in the account agreement, if the bank cannot identify or locate a beneficiary that is entitled to receive payment when the special deposit is terminated and a balance remains in the special deposit, the bank shall pay the balance to the depositor.
C. A bank that pays the remaining balance as provided under subsection B of this section has no further obligation to the special deposit. END_STATUTE