C241 Chapter 15

different types of EFT systems.

- ATMs - POS Systems (online terminals) - Direct deposits/withdrawals - Internet payment systems (banking funds transfer or bill pay).

availability schedule for deposited checks?

1. any local check (drawn on a bank in the same area) deposited must be available for withdrawal by check or as cash within one business day from the date of deposit. 2. for non-local checks, the funds must be available for withdrawal within not more than 5 business days. 3. under the Check 21, a bank must credit a customer's account as soon as the bank receives the funds. 4. for cash deposits, wire transfers, and government checks, funds must be available on the next business day. 5 the first $100 of any deposit must be available for cash withdrawal on the opening of the next business day after deposit.

uncertified check

A bank is not obligated to pay an uncertified check presented more than 6 months from its date (stale check). When receiving a stale check for payment, the bank has the option of paying or not paying the check. If a bank pays a stale check in good faith without consulting the consumer, the banks has the right to charge the customer's account for the amount of the clerk.

postdated checks,

A bank may charge a postdated check against a customer's account unless the customer notifies the bank, in a timely manner, not to pay the check until the stated date. The bank should treat the notice like a stop-payment order until the appropriate date.

a stop-payment

A bank must honor a stop-payment order by a customer on a specific check as long as it has not already been certified, has a valid legal ground for stop-payment, and must be issued within a reasonable time and manner.

overdrafts,

Bank - can either dishonor the item, or it can pay the item and charge the customer's account, thus creating an overdraft. The bank can subtract the difference plus a service charge from the customer's next deposit because the check carries with it an enforceable implied promise to reimburse the bank. A bank can expressly agree with a customer to accept overdrafts through what is called an "overdraft protection agreement."

Check Clearing and Check 21 Act.

Check 21 allows banks to present a substitute check for clearing rather than the original paper document. This allows financial institutions to use a digital image and transmit the information electronically. This helps to prevent the check from being paid twice and reduce the expense of paper storage and retrieval.

traditional check collection process.

Drawer Payee Depositary and Collection Bank Intermediary and Collecting Bank Drawee and Payor Bank

Commercial Fund Transfers

Funds are also transferred electronically "by wire" between commercial parties. In fact, the dollar volume of payments made by wire transfer is more than $1 trillion a day—an amount that far exceeds the dollar volume of payments made by other means. The two major wire payment systems are the Federal Reserve wire transfer network (Fedwire) and the New York Clearing House Interbank Payments Systems (CHIPS). The two major wire payment systems are the Federal Reserve wire transfer network (Fedwire) and the New York Clearing House Interbank Payments Systems (CHIPS).

general rule for forged drawer's signatures?

Generally, the bank suffers the loss. It may be able to recover at least some of the loss from the customer if the customer's negligence substantially contributed to the forgery. It may also obtain partial recovery from the forger of the check or from the holder who presented the check for payment if the holder knew that the signature was forged.

incompetence or death of the customer.

Neither the incompetence nor death of a customer revokes a bank's authority to pay an item until the bank knows of the situation and has reasonable time to act on the notice.

bank's liability for altered checks?

If the bank fails to detect an alteration, it is liable to its customer for the loss because it did not pay as the customer ordered. The bank's loss is the difference between the original amount of the check and the amount actually paid.

Certified check:

a check that has been accepted by the bank on which it is drawn. Essentially, the bank, by certifying the check, promises to pay the check at the time the check is presented.

Federal Reserve System clears checks.

The Federal Reserve System acts as a clearinghouse by providing each bank with an account so that banks can exchange checks and drafts drawn on each other and settle daily balances.

bank-customer relationship.

The bank-customer relationship includes: - a creditor-debtor relationship. - an agency relationship. - a contractual relationship.

Articles 3 and 4 of the UCC govern EFT's.

1. Article 3 sets for the requirements for all negotiable instruments, including checks. 2. Article 4 establishes a framework for deposit and checking agreements between a bank and its customers. It also governs the relationships of banks with one another as they process checks for payment. A check therefore may fall within the scope of Article 3 and yet be subject to the provisions of Article 4 while in the course of collection.

bank's duty to accept deposits.

A bank has a duty to accept the customer's deposits of cash and checks. When checks are deposited, the bank must make the funds represented by those checks available within a certain time frame. A bank also has a duty to collect payment on any checks payable or indorsed to its customer and deposited by the customer into his account. Cash deposits made in US currency are received into the customer's account without being subject to further collection procedures.

bank's duty to accept deposits for interest bearing accounts?

Banks must pay interest based on the full balance of a customer's interest-bearing account each day. Before opening an account, new customers must be provided with the following information: 1. the minimum opening balance and the minimum balance to be paid interest 2. the interest, stated in terms of the annual percentage yield on the account 3. how interest is calculated 4. any fees, charges, and penalties and how they are calculated A customer's monthly statement must disclose the interest earned on the account, any fees that were charged, how the fees were calculated, and the number of days that the statement covers.

consumer fund transfers (EFT).

The Electronic Fund Transfer Act (EFTA) provides a basic framework for the rights, liabilities, and responsibilities of users of EFT systems. The act gave the Federal Reserve Board authority to issue rules and regulations to help implement the act's provisions. The Federal Reserve Board's implemental regulation is called Regulation ERegulation EA set of rules issued by the Federal Reserve System's Board of Governors under the authority of the Electronic Fund Transfer Act to protect users of electronic fund transfer systems.. The EFTA governs financial institutions that offer electronic transfers of funds involving customer accounts. The types of accounts covered include checking accounts, savings accounts, and any other asset accounts established for personal, family, or household purposes. Telephone transfers are covered by the EFTA only if they are made in accordance with a prearranged plan under which periodic or recurring transfers are contemplated.

Traveler's check:

an instrument that is payable on demand, drawn on or payable at a financial institution, and is designated as a traveler's check. The issuing institution is directly obligated to accept and pay its traveler's checks according to the check's terms. The payee must sign upon issue and upon use.

Cashier's check:

when a bank draws a check on itself. The bank assumes responsibility for paying the check, making it more readily acceptable as a substitute for cash.