Notices Of Maturity

Another old-established custom is that of sending notices to the makers of bills a short time before maturity. This serves a double purpose. Firstly, it reminds the promissor of the approaching due date of his bill, and probably causes him to prepare to meet it. Secondly, it is, like the first-mentioned notice, a guard against systematic forgery by a discounting customer.

It would likely bring an earlier enlightenment in the case of a forgery palmed off on the bank by a transient discounter; that is, if the other kind of notice had been omitted. Thus it is that the banks, for their own protection, are obliged to send out notices constantly.

Sometimes customers ask that the promissors on notes discounted by them be not notified. They may have a proper reason for making the request. But if the point be too strongly insisted upon, without the proper reason being apparent, the manager would be right in regarding it as a suspicious circumstance.

The notices to promissors and endorsers are made out by the discount clerk. The manager indicates the names that are to be notified. It is necessary to keep a record of the notices, as the bank should be in position to say that notice was sent to any particular person, and to give the date on which it went.

The other notices, of the maturity of bills, are commonly made out by the junior. He takes the particulars from the discount diary. Printed forms are used, the amount of the bill and the due-date having to be written in.

Handling Discounts At Maturity

The description of the methods followed in the case of collection bills on the day of their maturity applies to discounted bills also, the only difference being that when the teller takes over and initials the discounted bills maturing on a certain day, each bill becomes to him the equivalent of cash, because at the end of the day he has to put through a credit entry for the gross amount of all the discounted bills shown as due that day.

As they are due, they must come out of loan bills, trade bills, or whatever account they may have gone into. These accounts represent current discounts. So, through the day the teller parts with some bills in exchange for cash handed in as payment therefor; some he charges up as cheques on customers' accounts; some go in as cash items in the exchanges with other banks; those remaining unprovided for at the end of the day are debited to overdue debts or past due bills.

How Endorsers Are Held

It has been mentioned that the bank becomes the owner of the bills which it discounts. Strictly speaking, what it becomes possessed of is a right of recourse or action against the parties to the bills. To illustrate, suppose the bank discounts on 1st June a bill for $100 due 10th August made by John Jones, payable to and endorsed by William Smith. As additional security the bill is also endorsed by Henry Brown.

Until the 10th August the bank merely holds the bill in its possession. It holds all three parties liable for the due payment of the bill at maturity. When the 10th of August comes, if the bill is duly paid by Jones the transaction is closed, the rights of action are extinguished. But if payment is not made by three o'clock on the due date, then the bank can take immediate action. The first thing it has to consider is that something must be done to hold its recourse against the endorsers.

When they endorsed the note they made themselves liable till the close of the 10th August. They are not the primary debtors; Jones is the primary debtor. If they do not get formal notice from the bank, or from whoever holds the bill they have endorsed, they may presume that it was duly paid. If nothing is done by the holder, Smith and Brown are free from all liability in connection with the bill on the morning of the nth August.