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Chapter 24 Checks, The Banking System and E-Money

Chapter 24 Checks, The Banking System and E-Money. Learning Objectives. On what type of check does a bank serve as both the drawer and the drawee? When may a bank property dishonor a customer’s check without liability?

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Chapter 24 Checks, The Banking System and E-Money

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  1. Chapter 24Checks, The Banking System and E-Money

  2. Learning Objectives • On what type of check does a bank serve as both the drawer and the drawee? • When may a bank property dishonor a customer’s check without liability? • Under what circumstances might a bank not be liable for payment of a check with a forged signature? • What is E-Money? How is it used and and stored?

  3. Checks • Special type of draft by maker (drawer) drawn on a bank (drawee) ordering bank to pay third party (payee). • Cashier’s Check—bank is both drawer and drawee. • Traveler’s Check—payable on demand, payable by a financial institution, designated as a traveler’s check. • Certified Check—accepted in writing by drawee bank.

  4. Bank’s Duty to Honor Checks • Drawee has a legal duty to honor Drawer’s checks. • If it wrongfully dishonors a check, it is liable for damages. • Overdrafts • Postdated Checks (Notice required) • Stale Checks (6 months) • Stop-Payment Orders (if written, 6 months)

  5. Bank’s Duty to Honor Checks • Death or Incompetence of Customer • Forged Drawers’ Signatures • General Rule—no legal effect • Customer Negligence—bank normally not liable. • Timely Examination of Statements by Customer • Time Limit for Bank’s Liability

  6. Bank’s Duty to Honor Checks • Forged Instruments • Bank must recredit customer’s account if payment made on forged instrument. • Altered Checks • Bank has a Duty to Accept Deposits • Availability Schedule for Deposited Checks • Collection Process (local and Federal Reserve)

  7. Electronic Fund Transfers • EFT is a transfer of funds via the use electronic means • Types of EFT systems: • Automated Teller Machine • Point of Sale (debit card) • Direct Deposit and Withdrawal • Pay by Telephone • Error Resolution and Damages • Commercial Transfers

  8. E-Money • Stored-Value Cards (pre-paid cards for use with long distance, cellular and library copy machines) • Smart Cards—can authenticate the validity of transactions with digital signatures. • Deposit Insurance • Legal Protection • Privacy Protection

  9. Online Banking • Online Banking Services • Bill consolidation • Transfer between accounts • Loan applications • Virtual Banks

  10. Uniform Money Services Act • 2001 Uniform law proposed by the National Conference of Commissioners on Uniform State Laws. • Traditional services • Internet Based Money Services

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