Bank Account Types, Overdrafts and Check Defaults

Classification of Demand Deposit Accounts by Owner

Types of bank accounts in view (current / savings):

• Individual accounts: a single holder.
• Collective accounts:
  • Joint or pooled: several owners at the same time.
  • Indistinct or solidary: other holders, each with autonomy and availability with respect to others.

Relationship Between a Checking-Account Overdraft and Account Credit

What is the relationship between an overdraft in a checking account and an account credit overdraft?

The relationship between an overdraft (exceeded balance) in a current account and an account credit / overdraft is as follows:

• Both involve bank funds.
• They constitute an unauthorized loan when not previously agreed.
• They are penalized by high interest.
• They imply a risk for the financial institution.
• Repayment is often required within a very short period (days).
• They are usually granted to creditworthy customers.

Limitations for Minors and Those Without Permission

Limitations of the freed and permitted in call accounts.

• They cannot decide to leave the account open unilaterally.
• They cannot borrow without permission from a parent or guardian.
• When holders want to cancel their current account, they should have sufficient funds to cover any potential overdraft balances and, if any remains, collect the balance in their favor.

Circumstances That Influence Credit-Security Decisions

What circumstances influence the security assessment of any active operation?

Factors that influence the credit/security decision include:

• Experience with the client.
• Present and future prospects of the applicant's business.
• Purpose of the credit, possibilities, and amortization plan.
• Amount requested.
• Reports and documentation provided.
• Guarantees provided.
• Participation in the business (joined the business).
• Employment status (joined at work).
• Age of the applicant.

Actions in Case of Check Default

Actions that can be performed in case of default on a check.

You can claim recovery against the person who delivered the check, against previous endorsers (if any), and against the drawer.

What can be done?

The holder of the unpaid check (that is, the last person who received it and presented it for payment) can bring proceedings to claim payment from:

• the person who delivered the check;
• previous endorsers, if any;
• the maker (drawer) of the check.

Procedural instruments and evidence include:

• Notarial protest.
• A statement from the drawee, dated and written on the check, indicating the date of presentation and declaring total or partial default.
• A dated statement from a clearinghouse or clearing system stating that the check was presented in due time and was not paid.

The notarial protest or equivalent statement must be made before the deadline expires, or two days later when the check is presented for collection on the last permissible day.

What Is an Overdraft (Discovered) on a Current Account?

What is discovered of a / c? Who cannot do it?

Overdraft in a current account (c/c): when the bank has sufficient confidence in its client, it can allow, temporarily, cash withdrawals that exceed the balance maintained. Overdrafts are genuine credit facilities that banks grant to their customers.

Who can do this?

They can authorize temporary overdrawn balances and provide short-term credit facilities to eligible clients.

Further Discussion on Overdrafts in Current Accounts

Discuss what you know about the discovery of a c / c.

Same as above, plus: when holders want to cancel their current account, they should have sufficient funds to cover any overdrafts, and, if any balance remains in their favor, receive that balance.