Ch. 15: Checks and Banking in the Digital Age – No. 10
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
THE COLLECTION PROCESS
“On–Us” Items: If the drawee and the depositary bank are
one and the same, the bank must pay a check it fails to
dishonor by midnight of the next banking day after deposit.
Deferred Posting: Banks may treat any item received
after 2:00 p.m. (or later if bank policy so dictates) as
having arrived the following banking day.
The Federal Reserve System’s Role: Most banks maintain
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
Electronic Check Presentment: Most checks today are
processed electronically, which dramatically reduces the
“float” time between deposit and payment (or dishonor).
CHECK CLEARING AND THE CHECK 21 ACT
Purpose: To speed the processing of millions of checks daily,
the Check Clearing in the 21st Century Act (“Check 21”)
(3) provide a substitute check to customers desiring a paper
copy of their check.
Substitute Check: A paper reproduction of the front
and back of an original check, containing all of the
banks to truncate their customers’ checks, it does require
banks (and everyone else) to accept substitute checks to the
same extent that they accept original checks.
Ch. 15: Checks and Banking in the Digital Age – No. 13
Automated teller machines (ATMs) allow a user to
make deposits to and withdraw funds from checking and
savings accounts, transfer funds between accounts, make
loan and credit line payments, and take cash advances
A bank’s customer may use direct deposits and
withdrawals to make regular, periodic deposits (e.g.,
paychecks) or payments (e.g., mortgage payments).
Internet banking systems enable a customer to check
non-consumer payors and payees.
Ch. 15: Checks and Banking in the Digital Age – No. 14
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
REGULATION E
(1) if a customer’s EFT card is lost or stolen, her liability is
capped at $50 if she notifies the bank within two days of
discovering the loss; otherwise, she will be liable for the
first $500 of unauthorized usage; and, in the event she
fails to notify the bank within 60 days of loss, she may
(4) a bank must provide its customers with a detailed
monthly statement for any month in which an EFT
transaction occurs; and
(5) a customer may stop authorized prepayments for utility
bills and insurance premiums up to three days before the
According to the EFTA, an unauthorized transfer
(1) is initiated by some person, other than the bank’s
customer, who has no authority to initiate the transfer,
(2) from which the customer receives no benefit, and
A number of electronic alternatives to traditional means of
payment have debuted, including:
signals a computer to debit the account when the
card is used, or
(2) a “smart card” with an embedded microprocessor
chip that can be encrypted and can simultaneously
function as a credit card, debit card, and stored–
Ch. 15: Checks and Banking in the Digital Age – No. 17
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PRIVACY ISSUES
E-Money Issuers’ Financial Records: E-money issuers are
likely to be subject to the same restraints on divulging users’
personal financial information as currently apply to traditional
financial institutions under the Right to Financial Privacy Act.
Consumer Financial Data: The 1999 Gramm-Leach-Bliley
Act requires financial institutions to safeguard consumer data
and privacy and prohibit disclosure of that information in all
but statutorily delineated situations.
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
Electronic Check Presentment: Most checks today are
processed electronically, which dramatically reduces the
“float” time between deposit and payment (or dishonor).
CHECK CLEARING AND THE CHECK 21 ACT
Purpose: To speed the processing of millions of checks daily,
the Check Clearing in the 21st Century Act (“Check 21”)
(3) provide a substitute check to customers desiring a paper
copy of their check.
Substitute Check: A paper reproduction of the front
and back of an original check, containing all of the
banks to truncate their customers’ checks, it does require
banks (and everyone else) to accept substitute checks to the
same extent that they accept original checks.
Ch. 15: Checks and Banking in the Digital Age – No. 13
Automated teller machines (ATMs) allow a user to
make deposits to and withdraw funds from checking and
savings accounts, transfer funds between accounts, make
loan and credit line payments, and take cash advances
A bank’s customer may use direct deposits and
withdrawals to make regular, periodic deposits (e.g.,
paychecks) or payments (e.g., mortgage payments).
Internet banking systems enable a customer to check
non-consumer payors and payees.
Ch. 15: Checks and Banking in the Digital Age – No. 14
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
REGULATION E
(1) if a customer’s EFT card is lost or stolen, her liability is
capped at $50 if she notifies the bank within two days of
discovering the loss; otherwise, she will be liable for the
first $500 of unauthorized usage; and, in the event she
fails to notify the bank within 60 days of loss, she may
(4) a bank must provide its customers with a detailed
monthly statement for any month in which an EFT
transaction occurs; and
(5) a customer may stop authorized prepayments for utility
bills and insurance premiums up to three days before the
According to the EFTA, an unauthorized transfer
(1) is initiated by some person, other than the bank’s
customer, who has no authority to initiate the transfer,
(2) from which the customer receives no benefit, and
A number of electronic alternatives to traditional means of
payment have debuted, including:
signals a computer to debit the account when the
card is used, or
(2) a “smart card” with an embedded microprocessor
chip that can be encrypted and can simultaneously
function as a credit card, debit card, and stored–
Ch. 15: Checks and Banking in the Digital Age – No. 17
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PRIVACY ISSUES
E-Money Issuers’ Financial Records: E-money issuers are
likely to be subject to the same restraints on divulging users’
personal financial information as currently apply to traditional
financial institutions under the Right to Financial Privacy Act.
Consumer Financial Data: The 1999 Gramm-Leach-Bliley
Act requires financial institutions to safeguard consumer data
and privacy and prohibit disclosure of that information in all
but statutorily delineated situations.