The Banker—Customer Relationship; Rights and Duties

1. Unit 8 The Banker—Customer Relationship; Rights and Duties Facilitator Support Materials for The Banker—Customer Relationship; Rights and Duties

2. Unit Aim In this unit the learner will be introduced to the banker-customer relationship, and how it is established. The many rights and duties of a banker and of a customer will be explored. This unit is 20 Guided Learning Hours

3. Unit Description This unit introduces the learners to the issues surrounding the relationship between customers and banks. Learners commence the unit by looking at how the relationship between banker and customer is established, through several routes. The relationship between the customer and the bank gives rise to duties and responsibilities for both parties and these are considered in the unit.

4. Unit Description Continued • Once an account is open and running learners need to understand the concepts of ‘bankers lien’ and how payments are appropriated in an account. Learners complete the unit by investigating the special circumstances that affect the banker-customer relationship. • Completion of this unit will equip the learners with knowledge and understanding that they can apply in a variety of jobs in the banking sector.

5. Learning Outcome 1: Understand how the banker-customer relationship is established Amplification of the Learning Outcome: Relationship: deemed to begin either when the bank opens an account for someone (with the intention that the relationship be permanent) or as soon as the bank agrees to provide any other service

6. Assessment Criteria for Learning Outcome 1 Assessment Criteria: 1.1 Explain how the banker-customer relationship is established

7. Learning Outcome 2: Know the rights and duties of a banker and of a customer Amplification of the Learning Outcome: Rights and duties of a banker: right to charge a reasonable commission for the bank’s services; the right to interest; the right to set-off; the right to return unpaid any cheque, which would create an unauthorised overdraft or any cheque which would exceed an agreed overdraft limit; duty to receive money and collect cheques for the customer’s account; duty to pay customers’ cheques on demand (provided that they are properly drawn and that there are adequate funds/approved facilities to honour the cheques); duty to act in good faith and without negligence when dishonouring a cheque; duty to maintain secrecy regarding all the affairs of customers; duty to advise the customer of any forgery of their signature; duty to give reasonable notice before closing a credit account

8. Amplification of the Learning Outcome Continued: Duties of a customer: duty to exercise reasonable care in drawing cheques; duty to advise the bank of any forgery of their signature; the duty to pay charges The banker’s duty of secrecy: Tournier v National Provincial and Union Bank of England Ltd 1924

9. Assessment Criteria for Learning Outcome 2 Assessment Criteria: 2.1 Compare the duties of a banker and a customer Open discussion with Learners 2.2 Describe the rights of a banker and a customer Open discussion with Learners 2.3 Describe the exceptions when a banker is not duty bound to secrecy Open discussion with Learners

10. Learning Outcome 3: Understand what is meant by ‘banker’s lien’ and appropriation of payments Amplification of the Learning Outcome: Lien of the banker: general lien over negotiable instruments (such as bills, cheques, promissory notes) and securities (such as bearer bonds) which have occurred in the normal course of banking transactions Appropriation of payments: law regarding appropriation of payments as laid down in Clayton’s case

11. Assessment Criteria for Learning Outcome 3 Assessment Criteria: 3.1 Explain what is meant by ‘banker’s lien’ Open discussion with Learners 3.2 Illustrate the application of Clayton’s Case to a given bankers lien situation Open discussion with Learners

12. Learning Outcome 4: Understand the special circumstances which affect the banker-customer relationship Amplification of the Learning Outcome: • Death of a customer: authority to pay ceases; all transactions on the account should be stopped; that cheques should be returned marked ‘Drawer Deceased’; record should be kept of all cheques presented but not paid; solicitors acting for the personal representatives advised of the position of the account and given a list of any documents or securities held on behalf of the deceased; noting of grants of probate and letters of administration; release of the funds and securities to the personal representative(s)

13. Amplification of the Learning Outcome Continued: • Law relating to trusts: creation and constitution of trusts; powers, duties, liabilities of trustees; investment powers of trustees • Testate and intestate succession: relevant law of succession eg Administration of Estates Act 1925; application of local conditions for testate or intestate succession rules • Different types of legacy: general; special; demonstrative legacies • Different methods of electronic funds transfer: CHAPS; BACS; ATMs; EFTPOS; direct banking

14. Assessment Criteria for Learning Outcome 4 Assessment Criteria: • 4.1 Explain the action to be taken on the death of a customer • Open discussion with Learners • 4.2 Explain the law relating to trusts • Open discussion with Learners

15. Assessment Criteria for Learning Outcome 4 Continued: • 4.3 Describe the implications of testate succession • Open discussion with Learners • 4.4 Explain the different methods of electronic funds transfer • Open discussion with Learners

16. Appropriate Books Retail Banking, Book One (England and Wales) , Chapter; Banker and Customer — Rights and Duties 70–85, pages; 100-114 Retail Banking, Book One (England and Wales), Chapter; Banker and Customer — Special Circumstances, pages; 120-149

17. Appropriate websites www.bankofengland.co.uk/ www.bba.org.uk www.bba.org.uk/bba/jsp/polopoly.jsp;jsessionid=az3XEMccpMo_?d=103 www.fsa.gov.uk/ www.hm-treasury.gov.uk/ www.projects.exeter.ac.uk/RDavies/arian/origins.html