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

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 2

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. 3

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. 4

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 Guidance for the Facilitator for Learning Outcome1: Learners should be actively involved throughout the delivery of this unit. Information may be gained from web sites, text books, the quality press, banks and building societies. The two banking professional bodies may also be able to assist. Delivery of outcome 1 and 2 could be supported by learners undertaking independent research using indicated web sites, books and journals on the various topics covered in the unit to build on more formal classroom input from tutors. Learners will need guidance and tutorial support to ensure their research is carried out appropriately, enabling them to have sufficient knowledge and evidence to achieve the assessment criteria. 5

Assessment Criteria for Learning Outcome 1 1.1 Explain how the banker-customer relationship is established Assessment Guidance for the Facilitator for Learning Outcome 1: For outcome 1, this requires the learners to know the origins of banks. A poster presentation or an information leaflet which could be displayed at an open day or course recruitment event could be used as an assessment method. This could include an illustrated and annotated time line. 6

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 Guidance for the Facilitator for Learning Outcome2: Delivery of outcome 1 and 2 could be supported by learners undertaking independent research using indicated web sites, books and journals on the various topics covered in the unit to build on more formal classroom input from tutors. Learners will need guidance and tutorial support to ensure their research is carried out appropriately, enabling them to have sufficient knowledge and evidence to achieve the assessment criteria. 7

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

Assessment Criteria for Learning Outcome 2 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 2.3 Describe the exceptions when a banker is not duty bound to secrecy Assessment Guidance for the Facilitator for Learning Outcome 2: For outcome 2, this requires learners to know the functions of a bank. Assessment for this outcome could take the form of a presentation to colleagues or a similar form to that used for outcome 1. 9

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 Guidance for the Facilitator for Learning Outcome 3: For outcome 3, this requires learners to understand the need for liquidity and other sources of finance. Resources used for the delivery of this outcome could include a simple series of bank balance sheets to demonstrate the effects of reducing liquidity, ranging from one for a bank that is entirely (i.e. at the very least, satisfactorily liquid) through one whose position might be questionable to one which is having problems, concluding with one that is insolvent. Learners will need to be able to discuss the effect of increasing or decreasing liquidity. 10

Assessment Criteria for Learning Outcome 3 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 Assessment Guidance for the Facilitator for Learning Outcome3: For outcome 3, this requires learners to understand the need for other sources of finance and the role of liquidity. This outcome could be assessed through a written report, structured to meet each of the assessment criteria. The report title set should clearly state a target audience for the learners so that it can be written in a banking context. 11

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)

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

Assessment Criteria for Learning Outcome 4 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

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

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 16

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 17