Negotiable Instruments

Negotiable Instruments
Unit B Business Law Objective 6.01 Objective

Drafts Draft - An order by one person to another person to pay money to the order of a third person Three parties to a draft: A. Drawer – Orders the money to be paid B. Drawee – One ordered to pay the money C. Payee – One who is to receive the money Acceptor - A drawee who has written “accepted” on the document and signed his/her name

Types of Drafts: Sight Draft – A draft payable as soon as it is presented to drawee for payment Time Draft – Not payable until the lapse of a particular time period stated on a draft Trade Acceptance – Used by a seller of goods to receive payment or to extend credit Check – Draft drawn on a bank and payable on demand, can be called a demand draft Honor – Pay when due Dishonor – Refuse to pay when due Stop Payment – Instruction for bank not to pay check

Types of Checks Certified Check – A personal check that has been accepted by a bank before payment Cashier’s Check – A check the bank draws on itself Money Order – Draft issued by a post office, bank, express company, or telegraph company for use in paying or transferring funds for the purchaser Traveler’s Checks – Draft drawn by a well-known financial institution on itself or its agent, used when traveling Teller’s Check – Draft drawn by a bank on funds that it has on deposit at another bank

Notes A written promise by one person to pay money to another person
An advantage of using a note is that it can be transferred without much difficulty to other people Evidence of a debt

Types of Notes: Demand Note – Payable whenever the payee demands payment Time Note – Payable at a future date that is written on the face of the note Installment Note – Paid in a series of payments

Parties to a Draft Charles Paige 319 619 Main Street
Drawers Address Check Number ABA # Payee Check Date Charles Paige 619 Main Street Raleigh, NC /1034 _________July 16_____2006 Pay To the Order of _____Donnie Tatum_________________________$100.50 _One hundred and 50/ DOLLARS State Credit Union For _______________ _Charles Paige______ Bank Name Drawer’s Signature

Parties to a Note $ 700.00 Raleigh, NC May 23, 2006
Face Value\ Principal Time\Term $ Raleigh, NC May 23, 2006 Three months AFTER DATE ______I_____ PROMISE TO PAY TO THE ORDER OF ___________Charles Paige_________________ Two thousand five hundred and no/ DOLLARS PAYABLE AT ___________his firm___________________________ VALUE RECEIVED WITH INTEREST AT ___10%___ PER ANNUM No Due March 19, Claudette Love Face Value\ Principal Due Date Payee Interest Rate Maker

Certificate of Deposit
A written acknowledgment of the receipt of money and its promise to pay back the money, usually with interest on the due date. Has a higher interest rate than most savings accounts.

Negotiability Requirements
Must abide by UCC regulations Must be in writing Maker (party agreeing to pay money to another person) or drawer (party that orders the drawee to pay money to the payee) has to sign There must be a definite amount money and time of payment known Must have words such as “to the order of” or “to bearer”.

Rules Regulating Checking Accounts
Stale Check Check that is more than 6 months old Bank may refuse without liability Avoiding Negligence Drawer is responsible if negligent in writing check Write figures close to $ sign and draw line through spaces not used Write close to “Pay to Order of” and draw line through spaces not used Figures and written amount should agree Sign name last Write “Void” on check if mistake is made and in check register

Bad Checks Check issued against checking account with insufficient funds to cover it States have statutes making it a larceny Failure of drawer to make check good within certain period of time will serve as a presumption of guilt

Forged Check Check signed by someone other than drawer and without authority If bank pays and drawer not negligent, bank bears loss Drawer has 1 year to discover and report to bank unauthorized signature or alteration on face of check Drawer has 3 years to discover and report to bank any unauthorized endorsement on check

Stop Payment Bank has no right to cash check
Bank liable if check is cashed Oral stop payment good for 14 days Written stop payment effective for 6 months Holder in due course Upon death, bank can cash checks for 10 days for those written prior to death

Balancing Checkbook Outstanding Check
Should be done as soon as possible after receiving statement Balance after writing checks Subtract checks written from balance Add deposits to balance Outstanding Check Has not cleared the bank Must be known in order to reconcile statement Find by comparing the bank statement with the checkbook register

Reconciling a Checkbook
Makes sure the bank’s records agree with your records Check for outstanding checks and deposits Check the checks, deposits, ATM activity on the bank statement to make sure that your records are correct Make adjustments to the bank statement and your records to ensure that you and the bank have the same amount of money Reconcile every statement when received

Competitive Banking Act
Funds from the following must be available on day after deposit Checks drawn on US Treasury, State, or Local Government Bank Drafts Cashier’s Check Postal Money Order Funds from these must be available within 3 business days following deposit Checks drawn on banks within same district Funds from checks drawn on banks in different districts must be available within 7 days

Electronic Funds Transfer
EFT – Banking method in which computers and electronic technology are used as a substitute for checks and other paper forms of banking Electronic Funds Transfer Act Provides Automated Teller Machines (ATM’S) Pay-By-Phone Systems Direct Deposit or Withdrawals Point-of-Sale Transfers Automatic Deposits and Payments

Federal Laws Regulating EFT
No right to stop payment Must receive a receipt each time you use ATM Periodic statement must be issued 60 days from date a problem or error appears to notify bank Banks have 10 days to investigate Disputed funds, if returned, must be deposited to your account within 45 days Must notify bank it card is lost or stolen Will lose no more than $50 if reported in 2 days If more than 2 days notification, you can lose $500 or more

Types of Negotiable Instruments
Endorsements Unit B Business Law Objective 6.01 Types of Negotiable Instruments

Endorsements Signature on the back of a negotiable instrument
Allow payee to cash, deposit or transfer payment of the check to someone else Proof that the payee cashed or transferred payment of the check to someone else Endorser is responsible for payment of the check if the new owner cannot collect payment Endorse should sign the check the way it is on the front of the check and if the name is misspelled, correct the signature directly up under the first endorsement

DO NOT WRITE BELOW THIS LINE
Blank Endorsements Signed with endorser’s name only Can be cashed by anyone who has a check with a blank endorsement X Jane Doe DO NOT WRITE BELOW THIS LINE

Special Or Full Endorsements
Transfer payment to someone else Can make a payment on a debt with this endorsement Payee signs the check over to another person to receive payment X Pay to the order of Jane Doe John Doe DO NOT WRITE BELOW THIS LINE

Restrictive Endorsements
Limits use of check Safest type of endorsement Can not be cashed by someone who has stolen the check Safest way to send a check through the mail X For Deposit Only DO NOT WRITE BELOW THIS LINE

Laws Protecting Debtors/Creditors and Bankruptcy
Unit C Basic Business Law Objective 6.02

Laws Protecting Debtors
Setting maximum interest rates Usually apply to loans of money Some states govern charges imposed on credit purchases of goods/services “on time”

Disclosure of Terms Full disclosure of interest and finance charges Does not limit percentage amount True annual percentage rate (APR) Does not apply to first mortgages

Challenging Unconscionable Contracts Unfair and oppressive Judge decides if conscionable Refuse to enforce contract Remove unfair clause and enforce contract Limit clause’s application so no longer unfair

Prohibiting Abuse in the Credit System Federal Equal Credit Opportunity Act May not refuse due to sex or marital status May not ask marital status if applying for unsecured separate account May not prohibit a married female from opening/maintaining account in maiden name May not request information about birth control practices or intentions Married persons with joint accounts have right to have credit information reported in both names

Federal Fair Debt Collection Practices Act Prohibits: Harassment of debtors Abusive and profane language Threats of violence Contract with 3rd parties Communication with the debtor at work

Federal Fair Credit Billing Act Creditors must mail bills at least 14 days before due date Creditors must acknowledge billing inquiries within 30 days Creditors must settle complaints within 90 days Creditors may not send repeated letters demanding payment until disputes over billing are settled Credit cardholders may withhold payment for items defective without being liable for entire amount owed (purchases of $50 or more and 100 miles from home)

Federal Fair Credit Reporting Act Deals with unfavorable credit reports Have right to correct report Credit Repair Organization Act Governs companies that help consumers correct credit reports

Notice of debt payment to be recorded Request receipt Canceled checks Bankruptcy Chapter 7 Chapter 11 Chapter 13 Chapter 12

Bankruptcy Chapter 7 – Liquidation Sale of nonexempt property for cash
Bank Accounts Stocks Bonds

Chapter 7 Bankruptcy Procedure
File the following with the court: List of all creditors and amounts owed List of all property owned Statement about financial affairs List of current income and expenses Trustee is selected Assets liquidated Proceeds used to pay creditors Money left over returned to debtor

Bankruptcy Chapter 11 Reorganization Business can keep operating
Files plan of reorganization Court approves plan

Bankruptcy Chapter 12 Used for Family Farmers wishing to make a debt adjustment to save the business Debt Ceiling $1.5 million Debt plan is for 3 years with a possibility of a 2 year extension

Bankruptcy Chapter 13 Extended Time Payment Plan
Applies to individuals with regular income Unsecured debts less than $250,000 and/or secured debts of less than $750,000 Submit plan for repayment of debts within three years May be extended to five years Creditors cannot file suit

Unit C Basic Business Law Objective 6.02
6.00 Sources of Credit Unit C Basic Business Law Objective 6.02

Sources of Credit Credit Cards and Charge Accounts
Unsecured form of credit Interest Calculations Adjusted Balance – Finance charges added after subtracting payment Previous Balance – Finance charges are figured as if no payment was made Average Daily Balance – Finance charges figured by adding balances for each day in billing period and then divide by the number of days in the billing period Simple Interest = Principal * Rate * Time

Sources of Credit Installment Plans
Secured – Collateral used to secure loan Pledge – Creditor obtains possession of collateral by written or oral agreement Security agreement – Contract where debtor retains possession of collateral under a written contract Repossession – Taking back of items used to secure loan when payment is not made Unsecured – No collateral used

Sources of Credit Closed end credit – Credit given for a specific amount of money and payments are made. Open end credit – Credit that can be increased by debtor up to a limit set by creditor, a line of credit is given.

Simple Interest Formula
Simple Interest Formula: I = PRT Sally buys a car at 6% interest for $25, on a 5 year plan. How much interest does she pay? I – Interest = $ P – Principle = $25,000.00 R – Rate = 6% T – Time = 5 years I = $25, * 6% * 60 I = $

Adjusted Balance Method
Adjusted Balance = Previous Balance – Payments Adjusted Balance * Interest = Finance Charge Michael’s credit card has a balance of $ and he makes a payment of $ The credit card company charges 7.75% interest per month. What is the interest using the adjusted balance method? Adjusted Balance = $100.00 Previous Balance = $150.00 Payment = $50.00 Interest = 7.75% Finance Charge = $7.75 $ $50=$100.00 $ * 7.75% =$7.75

Previous Balance Method
Previous Balance * Interest = Finance Charge Michael’s credit card has a balance of $ and he makes a payment of $ The credit card company charges 7.75% interest per month. What is the interest using the adjusted balance method? Previous Balance = $150.00 Interest = 7.75% Finance Charge = $11.63 $ * 7.75% =$11.63

Types of Loans and Procedures for Borrowing Money
Unit C Basic Business Law Objective 6.02

Creditors obtain an interest in something of value
Types of Loans Secured Loan Creditors obtain an interest in something of value Collateral – Property that is the subject of the loan Cosigner – Helps protect a loan when a borrower’s credit rating is poor Secured Party – Lender or seller who holds secured interest Repossession – Property is returned because of non-payment

Creditors obtain no collateral for loan
Types of Loans Unsecured Creditors obtain no collateral for loan No Collateral Creditors make sure that debtor is reliable and able to pay back loan Example (Credit Cards)

Debtor pays off loan in one payment
Types of Loans Single Payment Loan Debtor pays off loan in one payment Promissory Note - Written promise to repay with interest Installment Loan - Paid in regular payments

Types of Loan Regulations
Truth in Lending Act Regulation Z Actual cost of finance charge must be known Annual percentage rate Liable for $50 unauthorized credit card purchases made prior to notification

Types of Loan Regulations
Equal Credit Opportunity Act Applying for credit Granted only on the ability to repay Evaluation of application Cannot discriminate based on gender, age, ethnicity, or religion Acceptance and rejection Based on income, current debts, or poor credit record

Procedures for Borrowing Money
Loan Application Consideration Reputation for paying bills Source of regular income Competency Number of dependants Use of loan and for how long

Rules Cannot ask sex, race, national origin, or religion Cannot refuse on basis of sex or marital status Marital status may/may not be asked Do not have to disclose income from alimony or child support unless relying on income May not be prohibited from using given names (birth)

Interview Reference and credit check Request for credit Inaccuracy of credit report Acceptance/Rejection Must inform client within 30 days If denied, must provide, upon request, reasons for denial within 60 days Cannot close account due to change in marital status, unless person unwilling/unable to pay

Negotiable Instruments

Similar presentations

Presentation on theme: "Negotiable Instruments"— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

Negotiable Instruments

Similar presentations

Presentation on theme: "Negotiable Instruments"— Presentation transcript:

Similar presentations

About project

Feedback