Negotiable Instruments and Transaction Processing
The Negotiable Instruments and Transaction Processing domain tests the documents tellers handle and the rules that decide when a bank may pay, return, or hold funds. Expect checks, drafts, endorsements, holds, stop payments, and check-collection issues.
Core rules
- A check has a drawer, drawee, payee, amount, date, signature, and MICR line. The drawer writes the check; the drawee is the bank that pays it.
- Endorsements: blank is a signature only; special names the person to be paid; restrictive limits use, such as for deposit only; qualified says without recourse. A restrictive endorsement limits further negotiation, so a check endorsed for deposit only should go to the named account, not be cashed.
- If the written amount and figures differ, the written amount controls under the UCC, but many banks refuse the item; follow policy.
- Postdated checks should not be paid before the date; stale-dated checks may be refused. For a stop payment, verify account, date, amount, and payee, and follow the deadline and confirmation process.
- Check 21 substitute checks carry the same legal status as the original; handle warranty and claim issues through the proper process.
- Reg CC gives next-day availability for cash, wires, cashier's, certified, teller's, and Treasury checks; other checks follow the institution's schedule, and exception holds require notice.
Worked example
A customer deposits a check payable to ABC Plumbing with a for deposit only endorsement, and the account name is ABC Plumbing. Accept it for deposit after verifying the account and endorsement. If the customer asks for cash, refuse; the restrictive endorsement prevents cash payment. If the names do not match, escalate rather than guessing.
Traps that cost marks
Cashing a third-party check, missing an endorsement, ignoring an amount discrepancy, and treating a cashier's check as guaranteed funds are common traps.