Asked by Kennedy Bulman on May 30, 2024
Verified
Which of the following is true of a collecting bank?
A) A collecting bank is an agent of the owner of an item only after settlement becomes final.
B) The relationship between a collecting bank and the owner of an item, once settled, becomes a debtor-creditor relationship.
C) A collecting bank may not be a sub-agent of the owner until settlement becomes final.
D) Collecting banks must give substantially more warranties than those given by parties under Article 3 upon presentment and transfer.
Collecting Bank
A bank that processes checks or payments on behalf of a depositor, responsible for the collection of funds from the paying institution.
Debtor-Creditor Relationship
The financial relationship that occurs when an individual or entity (debtor) borrows money from another (creditor), with the promise of repaying the loaned amount.
Settlement
refers to the agreement reached by disputing parties outside of court to resolve a lawsuit, often involving the payment of compensation or undertaking specific actions.
- Understand the roles and responsibilities of banks in the collection and payment processes.
- Recognize the warranties and duties of collecting banks in the check collection process.
Verified Answer
MA
Mahmoud AljohaniJun 02, 2024
Final Answer :
B
Explanation :
The relationship between a collecting bank and the owner of an item indeed becomes a debtor-creditor relationship once the item is settled. This means that after the bank collects the funds on behalf of the owner, it owes those funds to the owner, creating a debtor (bank) to creditor (owner) relationship.
Learning Objectives
- Understand the roles and responsibilities of banks in the collection and payment processes.
- Recognize the warranties and duties of collecting banks in the check collection process.