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BANKS AND THEIR CUSTOMERS
BANKS AND THEIR CUSTOMERS
BANKS AND THEIR CUSTOMERS A PRACTICAL GUIDE FOR ALL WHO KEEP BANKING ACCOUNTS FROM THE CUSTOMERS’ POINT OF VIEW BY HENRY WARREN AN ENTIRELY NEW AND ENLARGED EDITION (THE EIGHTH) With Introduction by a London Banker LONDON ROBERT SUTTON 43, THE EXCHANGE, SOUTHWARK STREET, S.E. 1908 Banks and their Customers ( SEVENTH EDITION ) By HENRY WARREN The Pall Mall Gazette says:— “Caustic and interesting.” The Financial News says:— “Contains a vast amount of useful information intelligently discussed. To
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INTRODUCTION
INTRODUCTION
BY A LONDON BANKER I confess that when a publisher asked me to write an introduction to Mr. Warren’s little book I experienced some surprise; because, in the past, he handled bankers rather roughly. Perhaps the audacity of the request appealed to me. At any rate, I consented to read the proof-sheets, and, finally, perhaps a trifle reluctantly, to stand sponsor for the work in a qualified sense. I do not agree with all he says, by any means. Here is the eighth edition of a well-written, interesti
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CHAPTER I BANKING EVOLUTION
CHAPTER I BANKING EVOLUTION
We owe a great deal to the financial instinct of the Jew, who, having no country of his own, has developed an acquisitive mania for the goods of those people among whom he dwells, thanks to a progressive civilization of which he was the pioneer, in comparative safety; and, by an irony of fate, we are also indebted to him for a religion, which his more subtle mind rejects; yet, stranger still, it is a civilization based on commerce that keeps the whole world moderately sane, and tends to at least
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CHAPTER II ON THE CHOICE OF A BANKER
CHAPTER II ON THE CHOICE OF A BANKER
There is an opinion which is very prevalent to the effect that, provided one’s account be an overdrawn one, it does not matter where it is kept; and, of course, if it were possible to find a nice, philanthropic banker who would allow one a big overdraft without even hinting at security, there would be much truth in the assertion; but in view of the existing relations between banker and client, the idea is both unfortunate and fallacious. We have seen how the large joint-stock banks, by developin
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Order or Bearer.
Order or Bearer.
A cheque is payable either to “order” or to “bearer”; and, if the latter word be used, then it does not require indorsing, while should neither word be upon the document, the cheque is held to be an “order” one. Either the person to whom it is payable or the drawer may change a cheque from bearer to order; and this he would do by running his pen through the former word; but the drawer alone can alter an order cheque by writing the word “bearer” in full and initialling the alteration. If the cheq
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Date of a Cheque.
Date of a Cheque.
Any person who receives an undated cheque is entitled to fill in what he believes to be the correct date, and need not trouble to return it to the drawer for that purpose. He cannot, of course, make any alteration in the date, but should, in the event of a mistake on the drawer’s part, return it to him for correction, when he (the drawer) would make the desired alteration and write his initials against it. It is, perhaps, as well to remember that a certain class of debtors, who may be described
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A Stale or Out-of-Date Cheque.
A Stale or Out-of-Date Cheque.
Most bankers would probably decline to pay a cheque which had been outstanding more than six months. The drawer, however, does not cease to be liable upon the instrument until six years after the date thereupon; though he may claim damages against the payee if he can prove that he has suffered loss through his delay....
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Crossed Cheques.
Crossed Cheques.
Though this practice originated in the United Kingdom, the French banks have now adopted the idea, which is as simple as it is undoubtedly useful and protective to the customer. A cheque may be crossed either generally or specially—specially, that is to say, to some bank or to the account of an individual who keeps an account with a banker. If a customer draw two parallel lines across the face of a cheque, thus, / /, he has instructed his banker not to give cash in exchange for it to the payee a
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Not Negotiable Cheques.
Not Negotiable Cheques.
This description is somewhat misleading, for a cheque crossed / not negotiable / is in reality negotiable, though not so fully as is the one that has been discussed in the foregoing division. The distinction, however, is not difficult to grasp. Take a cheque with two parallel lines across the face simply. Now, if such a document be lost, and find its way into dishonest hands, a third party, who gives value in exchange for it, provided he have no guilty knowledge, has a good title against all the
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Cheques Crossed Specially.
Cheques Crossed Specially.
A cheque is said to be crossed specially when one writes across the face of it, say:— “A/C John Smith, Provident Bank of London.” One may name, in the crossing, any particular bank, and the banker upon whom the cheque is drawn will take care that it comes through the channel indicated thereupon. In the above illustration, for instance, your banker will see that the cheque has the name of the “Provident Bank of London” stamped upon it; and should he not find it there, then he would decline to pay
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How to Cancel a Crossing.
How to Cancel a Crossing.
The drawer alone can do this by writing upon the cheque the words “pay cash,” and signing his name beneath them in full....
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How to Indorse or Back a Cheque.
How to Indorse or Back a Cheque.
For all practical purposes one cannot do better than sign one’s name upon the back of a cheque exactly as the drawer has written it upon the face, with, of course, the omission of any courtesy title, such as Miss, Mr. or Esquire, which are merely there as a mark of civilization and progress. If one’s name be spelt incorrectly, then one should back the cheque just as it is drawn, and write one’s correct name underneath the misspelt signature. Further, do not bully the cashier if he make this requ
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Agents and “Per Pro” Indorsements.
Agents and “Per Pro” Indorsements.
A signature by procuration indicates that the agent’s power to bind his principal may be, and probably is, limited. For instance, the agent may only have authority to indorse cheques and bills, and if he sign as either drawer or acceptor, he cannot bind his principal. Moreover, as a procuration signature operates as notice of his limitations, a holder has no claim upon his principal, as he should have protected himself by demanding to see the agent’s letter of authority. A customer, when he wish
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Banker’s Liability on Forged Indorsements.
Banker’s Liability on Forged Indorsements.
The paying banker is not liable upon a forged or unauthorized indorsement, but the collecting banker is in the case of uncrossed cheques, and, according to a recent decision by the House of Lords, may be upon crossed ones. If a banker credit his customer’s account with the amount of a crossed cheque after it has been cleared, he is protected by Section 82 of the Bills of Exchange Act; but should he credit his client’s account with the said cheque before he himself has collected it, then he cease
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Banker’s Liability where Drawer’s Signature is Forged.
Banker’s Liability where Drawer’s Signature is Forged.
The banker is liable to a customer upon any forged cheque he debits to his account....
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When a Cheque is Legally Paid.
When a Cheque is Legally Paid.
A banker, having passed the cash across his counter, cannot legally demand it back again, and the pre senter may please himself whether or not, if asked, he will return the money. The banker has no power to compel him....
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Stopping Payment of a Cheque or Bill.
Stopping Payment of a Cheque or Bill.
This must be done by the drawer or acceptor, as the case may be, and by him alone. He should write a note to his banker, giving an exact copy of the cheque or bill he wishes returned, and the banker will then mark his ledger and instruct the cashiers to refuse payment of the document, if presented. Should he pay the instrument in spite of the customer’s order to the contrary, he will have to make good any loss occasioned by his negligence....
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Lost Cheques.
Lost Cheques.
The payee or the holder who loses a cheque can, of course, give notice of his loss to the banker upon whom it is drawn, and the banker would doubtless question any presenter, but he, the payee or holder, must obtain an order from the drawer instructing his banker to stop payment. The drawer, though he cannot refuse such a request, may insist upon receiving security before he issues a fresh cheque. Further, if the drawer employ the customary means of communication, such as, for instance, sending
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Sending Cheques through the Post.
Sending Cheques through the Post.
When remitting cheques to one’s banker for the credit of one’s account it is advisable to write across the face of each: “A/C Payee, with —— Bank of London.” In the event of a cheque thus marked getting into dishonest hands no banker would care to collect it. Where the sender is the holder, and not the payee, he would, of course, cross the cheque “A/C John Jones,” etc. As the paying banker is not liable on a forged indorsement, it is always desirable to receive an acknowledgment from the payee o
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Paid Cheques.
Paid Cheques.
These are the legal property of the drawer; but a banker is entitled to an acknowledgment from the customer before he surrenders them....
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Providing for Cheques Specially.
Providing for Cheques Specially.
A customer, whether his account be overdrawn or not, may pay in a certain sum to his credit, and re quest his banker to pay a particular cheque against it. The person who adopts this procedure is invariably somewhat “hard up”; and having issued cheques which, in the aggregate, amount to more than the balance at his credit, or which would, if presented, overdraw his account beyond the agreed sum, he is naturally nervous lest his banker should return one or two of them. Assuming that he has some h
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Present your Cheques at Once.
Present your Cheques at Once.
A business man, in order to give himself every chance, will pay all cheques to the credit of his banking account upon the day he receives them from his customers. He has, in the legal sense, until the close of the first business-day following the day he gets the cheque, when, if he like, he can post it to his agent, who has the same time-allowance for presentment, provided the cheque be not drawn upon a bank in his own town. If he delay longer any loss incurred by the drawer through non-presenta
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Returned and Dishonoured Cheques.
Returned and Dishonoured Cheques.
It does not follow that, because a banker returns a cheque, the money is not there to meet it, as, more often than not, a cheque is sent back for some irregularity in the indorsement, which can be at once put right. It is necessary, therefore, before jumping to conclusions, to carefully examine the words written upon the document. The following are the usual answers given by bankers, with their abbreviations: “R/D” (refer to drawer). Such an answer clearly implies that the cheque has been dishon
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Drawer too Ill to Sign.
Drawer too Ill to Sign.
In the above instance the customer makes his mark, which is usually witnessed by his doctor. Sometimes he authorizes a person to draw cheques upon his account up to a certain sum, and cancels the authority upon his recovery....
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Backing a Cheque for a Friend.
Backing a Cheque for a Friend.
The man who backs a cheque in order to oblige a friend should remember that he makes himself responsible for its payment, and that should his friend have no money to meet it, he, the indorser, will be called upon to make good the loss. He does not merely vouch for the respectability of his friend, but he also guarantees that his cheque will be duly honoured upon presentation, which is quite another matter. One should, therefore, decline to back a cheque for a stranger upon any consideration....
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CHAPTER IV CREDIT-ACCOUNT CUSTOMERS
CHAPTER IV CREDIT-ACCOUNT CUSTOMERS
As by far the greater number of a bank’s customers keep their accounts in credit, we will begin this chapter by considering what average balance should entitle a person to have his account worked free of charge. In London, a man who opens a small account with a bank, and whose credit balance averages £100, will not be debited with any commission at the end of the quarter or half-year when the companies rule off their books, while in the suburbs an appreciably smaller balance is accepted, and, oc
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CHAPTER V DEPOSIT-RECEIPT CUSTOMERS
CHAPTER V DEPOSIT-RECEIPT CUSTOMERS
A deposit-receipt, which is not a negotiable instrument, cannot be transferred by one person to another. Where the receipt is issued in more than one name, instructions should be given to the banker as to whether, in the event of withdrawal, the note is to be signed by all or by any two or any one of the depositors. Should no instructions be given, then all must sign when a withdrawal is made, or when the interest is taken. These receipts, as a rule, are issued subject to either seven or fourtee
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CHAPTER VI THE BANK RATE IN RELATION TO BANKERS’ CHARGES
CHAPTER VI THE BANK RATE IN RELATION TO BANKERS’ CHARGES
Very many persons who are out of touch with money-market problems fail to see why the Bank of England’s rate of discount should be in any way connected with a banker’s charges; and though, to those who have not studied the question, the swaying of the pendulum seems due to some occult influence, the forces that move it are both visible to the naked eye and capable of explanation. In the first place, the Bank of England keeps the cash reserves of all the banks in the United Kingdom, and, as a nat
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CHAPTER VII LOANS AND ADVANCES IN LONDON
CHAPTER VII LOANS AND ADVANCES IN LONDON
We are told that London banking is quite different to country banking, but it is a difference of degree rather than of kind, and in London, as in the provinces, the bank-manager has two rates—one for those who, taking him at his word, do not attempt to bate him down, and a second and lower rate for those persons who, knowing that he is of the City, and scenting instinctively a servant of the company, who is in possession of instructions, literally force his hand. A seller in a free market where
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CHAPTER VIII OVERDRAFTS IN THE COUNTRY
CHAPTER VIII OVERDRAFTS IN THE COUNTRY
In the preceding chapter we discussed the “loan account” and its mysteries, and now we are brought face to face with the country practice of granting the customer a “limit.” The banker, we will assume, agrees that, upon his depositing certain securities, he may overdraw his current account to the extent of £1,500. This sum, then, is the client’s “limit” which he is not supposed to exceed, and if he draw a cheque that would, when presented for payment, overdraw his account beyond the agreed figur
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CHAPTER IX HOW TO CHECK BANKERS’ CHARGES
CHAPTER IX HOW TO CHECK BANKERS’ CHARGES
Bankers make up their pass-books in two ways. When the customer is in account with the banker the cash he pays in appears on the right-hand side of his book, and the cheques he draws out on the left. The more general method, however, is to make the bank in account with the customer, when the debits and credits in the pass-book are an exact copy of the client’s own cash-book, whereas the entries in the bank’s ledger are reversed. The latter and more usual practice will be adopted in this chapter.
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Discounted Bills.
Discounted Bills.
The city-article of every morning paper contains a list of market discounts from which one can see at what rates the bill-brokers and discount-houses are taking the various classes of bills. Bank-bills would be paper either accepted or indorsed by the banks; and fine trade-bills or best trade-bills would be the acceptances of those firms whose credit is so good that the question of their paper not being paid at maturity is practically never considered. As the credit of the banks ranks highest it
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Coupons.
Coupons.
Many people leave their coupons with bankers for collection, and here, again, we get an example of making those pay who will. The usual rates are ⅛ per cent. commission on English and ¼ per cent. upon foreign and colonial coupons, but, as a matter of fact, certain managers keep a list of those persons who refuse to pay these charges, while they who do not protest, no matter how large a sum they may keep to their credit upon current account, are made to pay the ordinary rates. It is only fair tha
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CHAPTER XI UNCLAIMED BALANCES
CHAPTER XI UNCLAIMED BALANCES
I would describe this banking custom as legal stealing. * Bankers, as well as other estimable persons, obtain their gleanings and their perquisites, which are credited to certain sundry accounts, such as “unclaimed dividends,” “unclaimed balances,” and so on. Those banks, too, that issue notes must profit to a certain extent by the paper that is lost and destroyed by the public; and though it is impossible to estimate the gain to the banks from these sources, their absolute silence on the subjec
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An English Provincial Bank.
An English Provincial Bank.
Liabilities to the public upon current, deposit and other accounts are given in the balance-sheet as £4,200,000. The bank’s liquid assets are thus described:— This bank’s position might be described in one very short word. In the first place, it has neglected to state the amount of its cash in hand and with bankers at call separately, but has mixed it up with its loans at short notice. The only deduction to be made is that the bank possesses so little legal tender that it deems it prudent not to
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CHAPTER XIII THE PAY OF BANK-CLERKS
CHAPTER XIII THE PAY OF BANK-CLERKS
It cannot be said that bank-directors, when considering the question of remuneration, err on the side of generosity; but nobody would dream of accusing them of that crime, and if the bank-clerk is not paid lavishly, his salary, as a rule, is appreciably above the wages paid for clerical labour in the open market. Nor can it be affirmed that the country private banker was one whit more generous than a board of directors. Indeed, the evidence points in quite an opposite direction, for the clerks o
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