Operating Customer Accounts

1. Unit 7 Operating Customer Accounts Facilitator Support Materials for Operating Customer Accounts

2. Unit Aim The aim of this unit is to gain knowledge on how banks operate customer accounts in respect of opening accounts, closing accounts, dealing with doubtful debt and the daily operation of credit and debits to an account. This unit is 20 Guided Learning Hours

3. Unit Description In this unit the learner will investigate the operation of customers’ accounts by banks. Learners will consider what a bank’s requirements are when an account is opened and why the bank has these requirements. Learners will then be introduced to Claytons Case and how the principles of this case are implemented in the running of accounts today. The unit will then investigate the procedures applied when a bank closes an account.

4. Unit Description Continued • When operating accounts, banks monitor them to ensure they are managed within guidelines. Banks can use the intelligence gained either as a selling opportunity or as an indicator that customers may be in financial difficulty. • The forms of intelligence used and the actions that may be taken are considered in this unit. • Finally in this unit, learners will investigate the options open to a bank to recover doubtful debt.

5. Learning Outcome 1: Know the bank’s requirements when opening an account Amplification of the Learning Outcome: Requirements: eg ‘request to open an account’ form, identification, references and in the case of joint accounts a joint and severally liable mandate Why banks have these requirements: to minimise fraud eg money laundering; correctly identifying the customer; management of risk

6. Assessment Criteria for Learning Outcome 1 Assessment Criteria: 1.1 Describe the bank’s requirements when opening an account 1.2 Describe the purpose of the bank’s requirements when opening an account

7. Learning Outcome 2: Understand the principle of Clayton’s Case (Devayne v Noble (1816)) Amplification of the Learning Outcome: Principle of Clayton’s Case:first debit out absorbs first credit in and/or vice versa

8. Assessment Criteria for Learning Outcome 2 Assessment Criteria: 2.1 Explain the principle of Clayton’s Case 2.2 Illustrate the application of Clayton’s Case to a given situation

9. Learning Outcome 3: Know the procedures a bank must undertake when closing an account Amplification of the Learning Outcome: Reasons: customer’s wish to close the account; dormancy; conduct of customer Differing procedures undertaken dependant on whether the account has a debit or credit balance: reasonable notice (Prosperity Ltd v Lloyds)

10. Amplification of the Learning Outcome Continued: • Closing a deceased customer’s account: notice of death; production of a grant of probate; letters of administration; registration of grant or letters; identification of personal representative; repayment of balance; return of assets of deceased to personal representative

11. Assessment Criteria for Learning Outcome 3 Assessment Criteria: 3.1 Distinguish between the procedures undertaken when closing an account which has a credit balance and one which has a debit balance Open discussion with Learners 3.2 State the procedures a banker will need to undertake before closing a deceased customer’s account Open discussion with Learners

12. Learning Outcome 4: Understand why bankers must closely monitor accounts Amplification of the Learning Outcome: • Why:potential selling opportunities; customer may be in financial difficulty • Open discussion with Learners

13. Amplification of the Learning Outcome Continued: • Sources of information: noting payees of cheques; examining standing order and direct debit details; noting the originators names of credits to the account; discussions with the customer; receiving of opinion requests; principal daily monitoring reports produced for branch bankers eg daily report on overdrawn accounts • Open discussion with Learners

14. Assessment Criteria for Learning Outcome 4 Assessment Criteria: • 4.1 Describe the sources of information available to monitor accounts • Open discussion with Learners • 4.2 Explain why accounts must be monitored • Open discussion with Learners • 4.3 Discuss when a banker should be utilising the information as a selling opportunity or as a warning sign that the customer is in financial difficulty • Open discussion with Learners

15. Learning Outcome 5: Know the options open to a bank to obtain recovery of a ‘doubtful debt’ Amplification of the Learning Outcome: • Characteristics: difficulty in recovery • Options: writing to customer; contacting the customer; realisation of any security to petitioning for bankruptcy

16. Assessment Criteria for Learning Outcome 5 Assessment Criteria: • 5.1 Describe the characteristics of doubtful debt • Open discussion with Learners • 5.2 Describe the options available to recover doubtful debt • Open discussion with Learners

17. Appropriate Books Diploma in Financial Services, Banking Operations Chapter Operating Customer Accounts, pages 67–80

18. Appropriate websites www.bankingcode.org.uk www.bba.org.uk www.jstor.org/