Legal Duties of the Banker and Customer - Essay Example

LEGAL DUTIES OF THE BANKER AND CUSTOMER By Student’s Name Code+ course name Professor’s name University name City, State Date The Most Important Legal Responsibilities of the Banker in Maintaining the Customer’s Current The first most important legal responsibility of the banker in maintaining the customer’s current account is honouring of cheques (Tyree, 2005). In this scenario, the banker turns to be under legislative responsibility of honouring the checks of its customers in the normal operation of the business. Actually, when the banker wrongfully dishonours any cheque, he becomes liable for damages to the existing customers (Tyree, 2005). Therefore, the banker is under an obligation of honouring its customers’ cheques so long as certain conditions get adhered to. First, there ought to be enough money of the drawer within the drawee’s hands (Baxt, Black and Hanrahan, 2003). In this case, the banker ought to be offered enough time of releasing the total amount of money within the cheque that get sent for purposes of collection a head of drawing upon by the particular customer (Baxt, Black and Hanrahan, 2003). The banker thus permits the right of dishonouring the cheques in case of inadequate funds. Second, appropriate applicability of finances must be ensured (Baxt, Black and Hanrahan, 2003). In this scenario, perhaps a customer might have opened multiple bank accounts within his different capabilities. It is imperative that any account that gets a cheque drawn must possess adequate money. In cases where the customer has earmarked some funds particular function, the cheque is under no obligation of being honoured by the banker (Tyree, Weaver and Weerasoreas, 2006). But in case the customer possesses an overdraft facility then, the banker possesses a responsibility of honouring the cheque that is equivalent to the sanctioned overdraft amount. Third, the banker ought to be suitably required of making payments only the moments he is appropriate to make payments. The second legal responsibility of the banker is serving as a debtor-collector (Tyree, Weaver and Weerasoreas, 2006). As a matter of fact, the opening of an account by the customer involves filling in as well as signing the opening form of the account. The customer enters in a contract/agreement with that bank after signing that form (Tyree, 2005). The moment the customer puts in money within his account, he becomes the creditor whereas, the bank turns to be the debtor. The deposited money by the customer turns to be the property of the bank and it possesses rights of using that money the manner in which it feels (Tyree, Weaver and Weerasoreas, 2006). The bank is under no responsibility of informing the customer the way of using the money he deposited. The depositor is not offered any security by the bank. The banker thus plays the legal responsibility of paying the depositor on demand. However, demand for payment can only be made during normal business days (Everett and McCracken, 2004). The debtor is under an obligation of following the bank’s terms and conditions that were mentioned within the opening form of the account. The third useful legal responsibility of the banker in maintaining the customer’s current account is acting as creditor-debtor (Everett and McCracken, 2004). Actually, one of the most imperative bank’s activities is lending money. Banks mobilize resources for lending purposes. Thus, the banker lends money to the customers whereby they become debtors and the bankers become creditors. The banker offers documents to be executed by the borrower while the customer provides security ahead of issuing the credit service (Everett and McCracken, 2004). Importantly, the banker acts as custodian, lessor, agent, principal, trustee and bailee to its customers as explained in this paper. First, in case of a trustee, the banker gets entrusted with safe custody of valuable things for the customer whereby safekeeping charges apply (Canadian Bankers Association, 2011). Second, banks act as bailee. In this scenario, banks obtain their advances through getting touchable securities. In certain instances, physical ownership of bonds, valuables and pledge or securities goods among others are taken (Canadian Bankers Association, 2011). While securities’ physical possession is taken, the bank turns to be the bailee while the customer turns to be the bailor. Additionally, banks maintains safety of securities, valuables and articles among others on its’ customers behalf thus as acting as bailee (Canadian Bankers Association, 2011). While acting as a bailee, the bank possesses the responsibility of maintaining protection of the bailed goods. Third, banks act as lessor (Canadian Association, 2011). Actually, the correlation between customer and bank turns to be that of lessee and customer. In this case, banks play the responsibility of leasing their permanent properties to their customers and offer them the right of enjoying such property at the specified moments, for example, during banking/operation hours where they charge rentals. The moment the locker holder fails to make payments at the agreed time, the bank possesses the right of breaking-open the locker. Actually, banks assume zero responsibility or liability to any damage of the items stored into the locker (Baxt, Black and Hanrahan, 2003). Additionally, the banks never insure the locker contents of its customers. Fourth, banks serve as principals and agents of their customers. Agents are people employed for the purposes of doing acts for others or representing others in transactions with third individuals (Canadian Association, 2003). The represented people or for whom those acts are done for are known as principals. Actually, banks collects bills, cheques and pays different authorities like, insurance premium, telephone bills, and rent among others on their customers’ behalf. Also, banks adhere to the standing instructions offered by the customers (Canadian Association, 2003). In all those cases, banks serve as agents to their customers where they charge for the offered services. The other responsibility of banks is acting as custodians. In this case, bankers serve the legal role of taking of securities of its customers. The other legal responsibility of the banks is serving as guarantors (Tyree, Weaver and Weerasoreas, 2006). In this case, banks for the purposes of maintaining the customers’ current account, offer guarantee on their behalf. The other important legal responsibility of the bankers to the customers is accepting cash over the counters (Tyree, 2005). In point of fact, bankers have the responsibility of ensuring that all their branches take cash given by their customers over the availed counters as some banks disallow that practice. Unfortunately, the banks that disallow handing of cash on counters restrict their customers to making transactions through Automated Trailing Machines (ATMs) (Ellinger, 2009). That is illegal as banking means depositing of money from the populace for the purposes of investment and lending. The other important responsibility of bankers is ATMs failure reconciliations (Canadian Association, 2003). As a matter of fact, bankers play an important role of handling customers’ complaints regarding money that they have deposited in the banks. In such cases, banks use substantial amount of their time in solving money issues until the problem get solved (Tyree, Weaver and Weerasoreas, 2006). The other important responsibility of bankers is issuance of risk alleviation measures and security issues. Actually, this involves sending credit/debit cardholders’ alerts on continued basis. As such, bankers institute online alerts system for all the transaction types without consideration of amount, entailing cards usage at different channels. The other important legal responsibility of the bankers is prescription of banking hours’ changes (Everett and McCracken, 2004). For the purposes of maintaining current account customers, bankers intending to close on a certain day one or all of its offices during working days give appropriate and enough notice to the customers to avoid being affected by the closure (Everett and McCracken, 2004). The branches of various banks fix hours of business, for instance, number of working hours as well as the holidays that comes in weekly for the purposes of suiting local requirements. Legal Duties of the Banker The first legal duty of a banker is issuing of notes. For all the notes issued by the bankers, they augment their liabilities of making payments when demanded (Muraleedharan 2009). For example, when a note gets issued for exchange with gold, the gold gets purchased by the banker and he offers in retaliation to the seller the right of demanding gold when he feels like. The banker obtains gold utilisation for an unspecified period as the note does not cost him anything (Muraleedharan, 2009). If the note gets issued to the customer as loan, the gold right’s exchange on demand prevails, but the client is under an obligation of paying interest to all the rights that he purchases. The banker in this case does not pay such an interest. The other duty of a banker is helping customers requiring monetary services (Goosen, Pampallis, Merwe and Mdluli, 2006). In this case, bankers arrange meetings with customers for the purposes of determining their needs. For example, helping a customer might entail arranging a loan for the student. In offering loans, the banker reviews the financial history of the customer in order to find out his creditworthiness. The other duty of bankers entails maintaining complete and accurate records of the bank’s daily financial transactions (Exforsys, 2006). This involves making all records from and to the accounts together with balancing records of the banks at the closure of business. Documents like, loan applications and bank statements require appropriate updating and filling. Therefore, the bankers keep the records suitably a factor that helps them in quick retrieval of the records when they require them at any time. The other banker’s duty involves helping customers in the management of their accounts (Hassan, 2011). Further, bankers through suitable management of those accounts assist customers in closing or opening their accounts if they so wish. The bankers review the monetary histories of the customers and enlighten them of the available account packages thus, managing their accounts even more suitably. According to the contractual duty of the bank, bankers are not allowed to reveal the financial position of the client to anybody without his authorization (Hassan, 2011). The other duty of the banker is implementing new products, processes and services according to the directions offered by the senior management (Goosen, Pampallis, Merwe and Mdluli, 2006). As a matter of fact, customers require bankers to offer them information regarding those services and products when they become available. On the other hand, financial institutions expect bankers to sell those products to the customers. In this regard, bankers work with those new customers in selling those products (Muraleedharan, 2009). Importantly, bankers are required to have an apparent understanding of the bank’s services or products to aid them in selling successfully. The other duty of a banker is collecting important fiscal information from both existing as well as new customers (Exforsys, 2006). After a banker’s sharing a conversation with a client, he uses the collected information in the preparation of loans and accounts. The banker use the gathered information in determination of whether his monetary institution would be capable of fulfilling the financial needs of the customer; this duty of information collection helps fiscal institutions in making sound decisions which improves the profit margin of the institution (Goosen, Pampallis, Merwe and Mdluli, 2006). For instance, the bank utilises that information in offering loans to people who are creditworthy and who possesses relatively littler opportunities of defaulting. The other duty of bankers is disbursing funds and accepting deposits (Exforsys, 2006). In most cases, bankers utilise machines in the counting of money. This eases banker’s work, wipes out human error, boosts accuracy and augments counting bills together with dispensing speed. The other duty of bankers is passing bills that are deposited by clients via the fake money detectors for the purposes of curbing any counterfeit bills from getting their way on the money till (Goosen, Pampallis, Merwe and Mdluli, 2006). Additionally, bankers look for fake checks which customers might try to cash. Thus, the bankers kindly demand customers withdrawing funds to confirm their identity to curb deceptive activity. Conclusion Actually, the legal responsibilities of bankers includes honouring of cheques, ATM reconciliations, and acting as creditor-debtor among others. Thus, bankers perform their work well in order to attract more customers. They charge for the services to ensure their continued operations. There are several duties of the bankers that range from simple to complex ones. Some of the duties include collecting meaningful information regarding the customers for the purposes of making sound decisions. As a matter of fact, bankers are expected by their institutions to form good relationships with their customers. In this regard, institutions are capable of maintaining customers who must be there for the institutions to continue operating. On the other hand, bankers ought to keep a hawk eye to the customers to reduce and avoid fraud cases. Fortunately, technology has assisted bankers with machines that assist them in making simple and complex calculations thus easing their work. Bibliography Baxt R., Black A. and Hanrahan P., 2003. Securities and Financial Services Law. 6th Ed. Lexis Nexis, Butterworths. Canadian Banker’s Association., 2011. The Canadian Banker, California, Canadian Bankers’’ Association. Ellinger, E, P., 2009. Ellinger’s Modern Banking Law. Oxford: Oxford University Press. Everett and McCracken., 2004. Banking & Financial Institutions Law. 6th Ed. Thomson Lexis Nexis, Lawbook. Exforsys., 2006. Duties of a Banker. [Online]. Available at: [Accessed 28th, October, 2014]. Goosen, W., Pampallis, A, Merwe, A, V, D., & Mdluli, L., 2006. Banking in the New Millennium. Kenwyn, South Africa: Juta & Co, Ltd. Hassan, Z., 2011. Law of Banking and Security. [Online]. Available at: Viewed [28th, October, 2014]. Muraleedharan, D., 2009. Modern Banking: Theory and Practice. New Delhi: PHI Learning. Tyree, A., 2005. Banking Law in Australia, 7th Ed. Lexis Nexis, Butterworths. Tyree, A., Weaver, P. and Weerasoorea’s W, S., 2006. Banking Law and the Financial System in Australia, 6th Ed. Lexis Nexis, Butterworths. Read More