1 Click your mouse anywhere on the screen to advance the text in each slide. After the starburst appears, click a blue triangle to move to the next slide or previous slide.

2 Quote of the Day “The law, unfortunately, has always been retained on the side of power: laws uniformly have been enacted for the protection and perpetuation of power.” Thomas Cooper, American scientist, educator

3 Who’s Who  Despositary Bank – the first to take check.  Payor Bank – the bank that pays the issuer’s check.  Intermediary Bank – any bank that handles a check during the collection process, except the depositary or payor bank.  Collecting Bank -- any bank that handles a check during the collection process, except the payor bank.  Presenting Bank – a bank that submits a check to the payor bank.

4 Bank’s Duty to Provide Information  A bank is not required to provide a monthly statement, but most do.  A statement (if provided) must disclose: Interest rate paid Amount of interest earned Fees imposed by the bank The number of days covered by the statement  When an account is opened (and in ads), the bank must disclose: Interest rate paid How long this rate will be in effect Requirements to earn the advertised rate Fees or penalties imposed by the bank

5 The Bank’s Duty to Pay  A bank must pay a check if the check is authorized by the customer and complies with the terms of the checking account agreement.  A bank is not required to pay a check on an overdrawn account, but may choose to do so. It is then allowed to either repay itself out of the next deposit or demand immediate payment of the overdraft.

6 Wrongful Dishonor  If a bank violates its duty and wrongfully dishonors an authorized check, it is liable to the customer for all actual and consequential damages.

7 Difficult Situations for a Bank  The Death of a Customer Bank may continue to pay checks for ten days after it learns of the death, unless it receives a stop payment order from someone claiming an interest.  Incompetent Customers Once notified that a court has found a customer to be incompetent, the bank is liable if it pays the customer’s checks.

8 Invalid Instruments  Forgery If a bank pays when the issuer’s name is forged, it must recredit the issuer’s account.  Alteration If a check has been altered, the customer is liable only for the original terms of the check, and the bank is liable for the rest.  Completion If an incomplete check is later filled in by someone other than the original issuer, the bank is not liable unless it was on notice that the completion was improper.

9 Dating on Checks  Stale Checks A bank is not required to pay checks that are presented more than six months after their date, but it is not liable if it does pay.  Post-dated Checks A bank is not liable for paying a post-dated check unless the customer has notified the bank in advance that a post-dated check is coming.

10 Stop Payment Orders  As a general rule, if a bank pays a check over a stop payment order, it is liable to the customer for the loss he suffers.  The “bank is subrogated to” the rights of the parties, which means that the bank can substitute for, or take the place of, either party.

11 Withdrawing Money by Check  A bank may not allow funds to be withdrawn for several days after a deposit is made.

12 Withdrawing Cash  Because a bank is at greater risk of loss when a customer withdraws cash, he generally must wait about a day longer to withdraw cash against a deposit than the time period for writing a check.

13 Provisions of the Electronic Fund Transfer Act of 1978  Employers may require all employees to accept payment by electronic transfer (direct deposit), but may not require that it go to a particular bank.  Electronic fund transfer cards (ATM, debit, etc.) sent without a customer’s request must be invalid until the consumer activates it.

14 Electronic Fund Transfer Act (cont’d)  Documentation of electronic transfers must be provided both at the ATM and in monthly or quarterly statements.  Preauthorized transfers (such as an automatic mortgage payment) must be authorized in writing.  Errors If reported within 60 days, a bank must investigate an error within the next 10 days or provisionally credit the account until the investigation can take place.

15 Electronic Fund Transfer Act (cont’d)  Consumer Liability for Unauthorized Transactions (stolen ATM card) If reported within 2 days of theft: consumer liable for $50, bank liable for the rest. If more than 2 days, but within 60 days of theft: consumer liable for up to $500. If not reported within 60 days, consumer is liable for the full amount of loss.  Bank’s Liability If a bank fails to make an authorized electronic fund transfer, it is liable for damages caused by the nonpayment.

16 Electronic Fund Transfer Act (cont’d)  System Malfunctions If a payment cannot be made due to a system malfunction, the obligation is suspended until the malfunction is repaired or the intended recipient has asked, in writing, for a non-electronic payment.  Disclosure The provisions of the EFTA must be disclosed in clear language to a consumer opening an account with electronic fund transfer capability.

17 Bank Errors  Bank Sends the Wrong Amount Bank is liable when too much money is sent; it may try to recover from recipient.  Bank Sends Money to the Wrong Person Bank is liable when money is sent to the wrong person; it may try to recover from recipient. If bank sends money to wrong account, but that account number was given by the originator, the bank may not be liable.

18 “This area of law is important because virtually everyone has written a check or used an ATM and because the law regarding these transactions is changing rapidly.” “This area of law is important because virtually everyone has written a check or used an ATM and because the law regarding these transactions is changing rapidly.”

19 Link to the Internet  Clicking on the orange button below will link you to the website for this book. (You must first have an active link to the internet on this computer.)  Once there, click: Online Study Guide, then Your choice of a chapter, then Practice, then Internet Applications  You should then see web links related to that chapter. Click here! Click above to return to the slide show.