Final answer:
When a payor bank gets an item payable from a customer's account with insufficient funds, they have several options: reject the item and charge an overdraft fee, pay the item and honor the payment, place a hold on the item until the customer's funds are sufficient, or report the customer to a credit bureau for insufficient funds.
Step-by-step explanation:
When a payor bank gets an item payable from a customer's account with insufficient funds, the bank may take different actions based on its policies and the specific circumstances. In general, the options are:
- Reject the item and charge the customer an overdraft fee: Some banks choose to decline the payment and charge the customer a fee for attempting to make a transaction without sufficient funds in their account.
- Pay the item and honor the payment: In other cases, the bank may allow the payment to go through, even if there are insufficient funds in the account. This means the bank covers the transaction on behalf of the customer.
- Place a hold on the item until the customer's funds are sufficient: The bank may hold the item, such as a check, until the customer's account has enough funds to cover the payment.
- Report the customer to a credit bureau for insufficient funds: While not as common, the bank may choose to report the customer's lack of funds to a credit bureau, which can negatively impact their credit history.