Policies/Terms

Payment Instruments/Roles

• Payor/Payer
  • The entity who pays or is obligated to pay
  • Used in contracts, invoices, tax, etc.
• Payee
  • The person who recieves the payment or to whom the payment is owed
• Drawer
  • The person who creates and signs the check or draft.
  • Orders someone else or another entity to pay the payee
• Drawee
  • The entity that takes an order from the drawer to pay the payee
  • Typicaly a bank/lending institution

Related Notes:

• Blank Endorsement
  • Endorser signs their name only
  • Converts an order check into a bearer instrument (must be payed to whoever bears the check)
• Special Endorsement
  • Specifies a new payee
  • Transfers the check to that specific person
• Restrictive endorsement
  • Limits how the check can me used
  • Typically means the check must be deposited, not cashed.
• Qualified Endorsement
  • Typically includes language like "without recourse," limiting the endorsers liability if the check is later dishonored.

Overdraft fees are fees imposed when you make a purchase you don't have the funds for. The bank covers the difference, but you are charged a fee as well as forced to pay off the difference. An alternative is an insufficient funds fee which is applied when the bank refuses to cover the transaction. Overdraft fees are typically only applied on debit cards and checking accounts, not credit based payment options.

May have a standard maintenance fee, possible waived with a minimum balance, scheduled direct deposits, etc. There is also a research fee if the bank has to audit you, send you transaction details, provide copies of checks, etc. Lastly there are fees for inactivity, typically after 12-24 months.

Loan Approval

1. Pre-application
   1. Identify Prospects and gather preliminary information such as name, contact, requested amount, etc.
   2. Simply required that the loan is allowed by policy, exceptions may be filed.
2. Intake, Triage, Verification
   1. Collect full application, documents, prepare for underwriting
   2. Verify fit, check blacklist, check missing documents, decides whether to proceed to underwriting, request documentation, or decline.
3. Underwriting: Receive full applicant information, complete application and give permission to pull credit report (permission required by Fair Credit Reporting Act)
   1. Underwriter decides whether loan should be approved based on score, history, relationship with the bank, risk, product fit, etc.
   2. For Businesses check debt to income ratio, debt coverage, cash flow analysis.
   3. For business, may establish covenants
4. Possible escalation for larger loans, exceptions. Could be automatic or take longer with an underwriter or committee.
5. Loan structuring
   1. Finalize loan terms, prepare legal documentation, final audit checklist.
6. Closing/funding
   1. Execute documents, collect signatures, wire/transfer funds, set up repayment schedule.
7. Post closing
   1. Monitor loan, send details to banks, send out information regarding payments.