Law Exam 3

Creditor Debtor relationship is created between?

A customer and a bank when the customer makes cash deposits into a checking account., when a customer makes a deposit the customer is the creditor and the bank the debitor for the amount deposited.

When the bank properly dishonors a check for insufficient funds, it has no?

Liability to the customer.(bank may rightfully refuse payment on a customer's check in other times as well.

Unauthorized access to EFT systems might have a penalty of what?

$10,000 fine and 10 years in prison( banks are strictly liable for any failure to adhere to efta provisions)

Checks are usally ___ party instruments?

3 party instruments( sometimes bank is drawer and drawee like when a bank draws a check against itself.

Bank must honor its cashier's checks when they are presented for payment, if a bank wrongfully dishonors a cashier's check, a holder can recover from the bank?

All expenses incurred, interest, and consequential damages.

Rights and responsibilities in respect to EFT systems?

Bank must provide monthly statement for every month in which there is an electronic transfer of funds and the statements must show the amount and the date of transfer along with the names of the retailers or other third parties involved and the location or identification of the terminal and the fees, If a customer's card is lost or stolen or used without permission has a max responsibility of $50, the customer must notify the bank of the loss or theft within 2 days or the liability increases to $500 the customer can't be liable for more than that if they don't report the abuse within 60 days after it appears on the customer statement, but if a customer willingly gives their car to another who use it improperly the protections don't apply.

a person engaged in the business of banking including a Savings Bank, savings and loan Association, Credit Union, or trust company?

Bank(if any other institution like a brokerage firm handles a check for payment or for collection the check is not covered by Article 4).

When a bank draws a check against itself?

Cashiers check(is negotiable on issue and identifies specific payee, and bak takes responsibility for paying check making it more acceptable).

Instruments that are already accepted by the drawee and help avoid alteration of effectiveness?

Cashiers, travelers or certified check.

Is a check that has been accepted by the bank on which it is drawn?

Certified check.( when a drawees Bank certified or accepts a check it immediately charges the drawers account with the amount of the check and transfers those funds to its ownl the certified check account, the bank is agreeing in advance to accept that check when it is presented for payment and to make payment from those funds reserved in the certified check account)

Special type of draft That is drawn on a bank ordering the bank to pay a fixed amount of money on demand?

Check

EFTA Governs financial institutions that offer electronic transfers of funds involving customer accounts, types of accounts covered include?

Checking accounts, savings and any other asset accounts established for personal, family or household purposes,

When a customer deposits a check into their checking account the bank as the customer's agent is obligated to?

Collect the payment on the check from the bank on which the check was drawn. (When checking account funds are transferred among different banks each bank acts as the collection agent for its customers.)

The customer's agreement with a bank includes a general obligation to keep sufficient funds on deposit to cover all checks written, the customer is liable to the payee or to the holder of a check in a civil suit if a check is Dishonored for insufficient funds, if an attempt to defraud can be proved the customer can also be subject to?

Criminal prosecution for writing a bad check.

Agency relationship arises between?

Customer and the bank when the customer writes a check on his or her account, the customer is ordering the bank to pay the amount specified on the check to the holder when the holder presents the check to the bank for payment. (bank is the customer's agent and is obligated to honor the customers request.)

Bank customer relationship begins when? 3 types of relationships that arise from it?

Customer opens a checking account and deposits funds; Creditor-Debtor,agency, and contractual.

Is a disclosure law benefiting customers and requires financial institutions to inform consumers of their rights and responsibilities in respect to EFT systems?

EFTA

Who can request certification on a check?

Either the drawer or the holder(payee)(drawee bank is not required to certify a check, and a banks refusal to certify a check is not a dishonor of the check.

Provides a basic framework for the rights, liabilities and responsibilities of users in the EFT systems and gave the federal reserve board authority to issue rules and regulations to help implement the acts provisions?

Electronic fund transfer Act(EFTA).(federal reserve boards implemental regulation is called regulation E).

When a bank customer relationship is established certain contractual rights and duties arise, the contractual rights and duties of the bank and customer depend on the?

Nature of the transaction

IF the certification does not state an amount and the amount is later increased and the instrument negotiated to a holder in due course, the certifying bank must?

Pay the amount of the instrument when it was taken by the HDC.

checks that are presented for payment more than six months from its date are called what according to Commercial Banking practice?

Stale.( a bank is not obligated to pay an uncertified check presented more than six months from its date and when it receives a stale check for payment the bank has the option of paying or not paying the check).

if a bank accepts a stale check on good faith of the customer it has the right to charge a customer's account for the amount of?

The check.

A person who writes a check is called?Person to whom a check is payable?

The drawer and is usually the depositor in the bank on which the check is drawn; payee(and the bank or institution on which the check is drawn is the drawee).

An instrument that is payable on demand, drawn on or payable at a financial institution like the bank, and designated as a travelers check?

Travelers Check.(Issuing institution is directly obligated to accept and pay its travelers checks according to the checks terms).

Safeguard and substitute for cash and is issued for a fixed amount, purchaser is required to sign the check at the time its purchased and again at time its used?

Travelers check.(American express travellers checks are more common today).

To certify a check the bank?

Writes or stamps the word certified on the face of the check and typically indicates the amount that it will pay. Once a check is certified, the drawer and any prior indorsers are completely discharged from liability on the check. Only the certifying bank is required to pay the instrument.

a bank can expressly agree with the customer to accept overdrafts through an overdraft protection agreement, if such an agreement was formed any failure of the bank to honor a check because it would create an overdraft reaches this agreement and is considered?

a wrongful dishonor

if a bank violates the efta what is the customer entitled to?

actual damages including attorneys fees and punitive damages of not less than a hundred bucks and no more than a thousand bucks, failure to investigate an error in the good faith makes the bank liable for treble damages which is 3 times the amount.(Even if customer has suffered no damage the bank may be liable for legal costs and punitive damages if it fails to follow EFTA procedures.)

Banks typically ignore the dates on checks and treat them as demand instruments unless a customer has notified the bank the check was posted, the notice of post-dating must be given in time to allow the bank to act on the notice before committing itself to pay the check, a bank that fails to act on the customers notice and charges the account before the date on post-dated checks may be liable for?

any damage the customer has incurred.

what are some more rights and responsibilities in respect to EFT system?

customer must discover any error on the monthly statements within 60 days and notify the bank, the bank has 10 days to investigate and must report its conclusions to the customer in writing, if the bank takes longer than 10 days it must return the disputed amount to the customer's account until it finds the error if there is no error the customer is required to return the funds to the bank , Bank must make receipts available for transactions made through computer terminals but it is not obligated to do so for telephone transfers.

When a bank receives an item properly payable from its checking account but the account has insufficient funds to cover the check the bank has what two options?

it can either dishonor the item or it can pay the item and charge the customers account that's creating an overdraft.( the bank can subtract that difference plus a service charge from customers next deposit because the check carries with it an enforceable implied promise to reimburse the bank, If it is a joint account you can't hold the joint account owner liable unless they signed the check or benefited from the proceeds).

when a bank provides checking Services it agrees to honor the checks written by customers with the usual stipulation that sufficient funds must be available in the account, when a drawee bank wrongfully fails to honor a check it is liable to a customer for damages resulting from refusal to pay, the customer does not have to?

prove the bank breaches contractual commitment or was negligent.

is an order by a customer to her or his bank not to pay a certain check, only a customer or person authorized to draw on the account can do this when it is presented for payment?

stop payment order( these work on not only checks but anything payable to Banks)

certification is a promise that?

sufficient funds are on deposit and have been set aside to cover the check

a customer has no right to stop payment on a check that has already been certified or accepted by a bank but a person who wrongfully stop payment on a check will be liable to the payee for?

the amount of the check( customer or drawer must also have a valid legal ground for issuing a stop payment order or a holder can sue the customer or drawer for payment)

a bank May charge a post-dated check against a customer's account unless?

the customer notifies the bank in a timely manner, not to pay the check until the started date.

if a bank post items to a customer's account only once a day several items of different amounts May accumulate before the posting depending on?

the order in which the items are posted. (an overdraft may occur earlier or later in sequence).(fees may be applied to each overdraft).