A person who opens an account enters into a contract with the bank. The precise terms of this contract depend upon the type of account.
- For an account operated by cheque, most of the terms of the contract will be implied terms, see Contracts.
- When the account is operated by a plastic card and personal identification number (PIN), the written terms of the contract will be contained in the Conditions of Use, generally given to the customer in a pamphlet when the account is opened, or whenever the conditions change.
- For savings accounts, the written terms of the contract are usually contained in the pass book provided.
A voluntary Code of Banking requires the banks which have adopted the Code to provide all customers with the terms and conditions, in writing, which apply to their contract, regardless of the type of account they have, see Complaints against banking and financial services.
The basic contractual relationship between the bank and customer is one of debtor and creditor. By depositing money into an account the customer is legally loaning the money to the bank. There are two elements in this basic relationship. The customer has no say about the way the bank uses the funds, and should the bank fail and be unable to meet its obligations, the customer is an unsecured creditor.
The Financial Transactions Reports Act 1988 (Cth) makes it an offence for people to open or operate an account for cash purposes in a name other than the name they are commonly known by. The effect of this Act is to change the previous law where a person could operate an account in any name provided there was no fraudulent intention. The law was changed to prevent accounts being used to conceal illegally obtained money or to avoid taxation.
The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.