Question 1

When a bank has wrongfully dishonored a check,the payee can:

Accepted Answer

A)  sue the bank for recovery of the check amount plus damages 
B)  sue the drawer for recovery of the check amount plus damages 
C)  sue the drawer or the bank for recovery of the check amount plus damages 
D)  sue either the drawer or the bank for recovery of the check amount only 
E)  sue the drawer for recovery of the check amount only 
A)  sue the bank for recovery of the check amount plus damages 
B)  sue the drawer for recovery of the check amount plus damages 
C)  sue the drawer or the bank for recovery of the check amount plus damages 
D)  sue either the drawer or the bank for recovery of the check amount only 
E)  sue the drawer for recovery of the check amount only

Question 2

Which of the following statements is not true regarding Electronic Funds Transfer Systems (EFTS)?

Accepted Answer

A)  EFTS eliminates "float." 
B)  Congress and the Federal Reserve Board have enacted legislation to protect EFTS users. 
C)  A customer has unlimited liability for the unauthorized use of a lost or stolen EFTS debit card. 
D)  A bank is liable for a wrongful dishonor if it fails to make an EFTS payment when funds are available. 
E)  One major advantage to EFTS is that they are "online" so the transactions take effect immediately. 
A)  EFTS eliminates "float." 
B)  Congress and the Federal Reserve Board have enacted legislation to protect EFTS users. 
C)  A customer has unlimited liability for the unauthorized use of a lost or stolen EFTS debit card. 
D)  A bank is liable for a wrongful dishonor if it fails to make an EFTS payment when funds are available. 
E)  One major advantage to EFTS is that they are "online" so the transactions take effect immediately.

Question 3

Under the most recent version of the UCC,banks are liable for any damages caused by paying any postdated check prior to its date.

Accepted Answer

A) True 
 B)False

Question 4

A payee has the right to demand payment of the check.

Accepted Answer

A) True 
 B)False

Question 5

Kenny has a checking account at Local Bank.Kenny writes a check to Grocery Store.What is the relationship of the parties?

Accepted Answer

A)  Kenny is the drawer; Local Bank is the drawee; Grocery Store is the payee. 
B)  Kenny is the drawee; Local Bank is the drawer; Grocery Store is the payee. 
C)  Kenny is the payee; Local Bank is the drawee; Grocery Store is the drawer. 
D)  Kenny is the payee; Local Bank is the drawer; Grocery Store is the drawee. 
A)  Kenny is the drawer; Local Bank is the drawee; Grocery Store is the payee. 
B)  Kenny is the drawee; Local Bank is the drawer; Grocery Store is the payee. 
C)  Kenny is the payee; Local Bank is the drawee; Grocery Store is the drawer. 
D)  Kenny is the payee; Local Bank is the drawer; Grocery Store is the drawee.

Question 6

What options does a payee have who is holding a check payable to her?

Accepted Answer

A)  She must seek payment directly from the drawee bank. 
B)  She must seek payment on the check,either directly from the drawee bank or by depositing the check in her account at her own bank. 
C)  She may seek payment from the drawee bank,seek payment by depositing the check in her account at her own bank,or she may indorse the check to another person,so long as the indorsement has been approved by the drawer. 
D)  She may seek payment from the drawee bank,seek payment by depositing the check in her account at her own bank,or she may indorse the check to another person,so long as the indorsement has been approved by the drawee. 
E)  She may seek payment from the drawee bank,seek payment by depositing the check in her account at her own bank,or she may indorse the check to another person,and this indorsement does not need the approval of the drawer or drawee. 
A)  She must seek payment directly from the drawee bank. 
B)  She must seek payment on the check,either directly from the drawee bank or by depositing the check in her account at her own bank. 
C)  She may seek payment from the drawee bank,seek payment by depositing the check in her account at her own bank,or she may indorse the check to another person,so long as the indorsement has been approved by the drawer. 
D)  She may seek payment from the drawee bank,seek payment by depositing the check in her account at her own bank,or she may indorse the check to another person,so long as the indorsement has been approved by the drawee. 
E)  She may seek payment from the drawee bank,seek payment by depositing the check in her account at her own bank,or she may indorse the check to another person,and this indorsement does not need the approval of the drawer or drawee.

Question 7

When a drawee bank is presented with a check drawn on a customer's account in which there are not sufficient funds to pay the check,the bank:

Accepted Answer

A)  must pay the check if the customer is an established customer 
B)  is not permitted to pay the check 
C)  must notify the drawer prior to deciding whether or not to pay the check 
D)  may choose whether to pay the check,but cannot charge interest on the overdraft unless the customer previously agreed to the payment of interest in the event of an overdraft 
E)  may choose whether to pay the check,and can charge interest on the overdraft in all circumstances 
A)  must pay the check if the customer is an established customer 
B)  is not permitted to pay the check 
C)  must notify the drawer prior to deciding whether or not to pay the check 
D)  may choose whether to pay the check,but cannot charge interest on the overdraft unless the customer previously agreed to the payment of interest in the event of an overdraft 
E)  may choose whether to pay the check,and can charge interest on the overdraft in all circumstances

Question 8

The major purpose of certified cashier's checks is to make the bank primarily liable,so third parties will be more willing to accept the checks.

Accepted Answer

A) True 
 B)False

Question 9

A postdated check is one in which the buyer fills in the date on the check after he or she has written to whom the check is payable to.

Accepted Answer

A) True 
 B)False

Question 10

Why does the law generally place the risk of forgery on the payor bank,yet place the risk of unauthorized completion on the drawer? What factors would justify a difference in liability of the bank? What factors would justify a difference in liability of the drawer?

Accepted Answer

With unauthorized completion,the drawer

Question 11

Which of the following is correct about the Uniform Commercial Code?

Accepted Answer

A)  Article 3 covers negotiable instruments; Article 4 covers bank deposits and collections. 
B)  Article 2 covers negotiable instruments as well as bank deposits and collections. 
C)  Article 4 and 4A are the only articles that affect the banking system. 
D)  It does not apply to the banking collection and deposit process because negotiable instruments are not considered "goods." 
A)  Article 3 covers negotiable instruments; Article 4 covers bank deposits and collections. 
B)  Article 2 covers negotiable instruments as well as bank deposits and collections. 
C)  Article 4 and 4A are the only articles that affect the banking system. 
D)  It does not apply to the banking collection and deposit process because negotiable instruments are not considered "goods."

Question 12

The drawee bank is not obligated to certify a check.

Accepted Answer

A) True 
 B)False

Question 13

An overdraft is an amount of money a drawer owes a bank after it has paid a check despite insufficient funds in the drawer's account.

Accepted Answer

A) True 
 B)False

Question 14

When a drawer gives an incomplete check to a payee,and the payee completes the check contrary to the instructions of the drawer,if the bank pays the check according to the unauthorized terms,the drawer is generally liable for payment of the check as completed.

Accepted Answer

A) True 
 B)False

Question 15

The payee is the bank on which the check is drawn.

Accepted Answer

A) True 
 B)False

Question 16

When a bank pays a check that has been materially altered to a higher amount,the bank can:

Accepted Answer

A)  not charge the depositor's account 
B)  charge the depositor's account for the original amount of the check,but cannot recover the additional amount from anyone 
C)  charge the depositor's account for the original amount of the check,and recover the additional amount only from the person who altered the check 
D)  charge the depositor's account for the original amount of the check,and recover the additional amount from the person who presented the check for payment,even if that person did not know the check was altered 
E)  charge the depositor's account for the original amount of the check,and recover the additional amount from the person who presented the check for payment,but only if that person knew that the check was altered 
A)  not charge the depositor's account 
B)  charge the depositor's account for the original amount of the check,but cannot recover the additional amount from anyone 
C)  charge the depositor's account for the original amount of the check,and recover the additional amount only from the person who altered the check 
D)  charge the depositor's account for the original amount of the check,and recover the additional amount from the person who presented the check for payment,even if that person did not know the check was altered 
E)  charge the depositor's account for the original amount of the check,and recover the additional amount from the person who presented the check for payment,but only if that person knew that the check was altered

Question 17

Which of the following is not true regarding a drawer's duty to discover and report alterations and forgeries?

Accepted Answer

A)  If there is a series of forgeries,the drawer's failure to discover and report these to the bank could relieve the bank of some liability. 
B)  A drawer must report a forgery or alteration within 6 months or the bank is discharged. 
C)  The bank is not always liable for paying a check over a forged signature. 
D)  The statutory time is 30 days to report a series of forgeries. 
A)  If there is a series of forgeries,the drawer's failure to discover and report these to the bank could relieve the bank of some liability. 
B)  A drawer must report a forgery or alteration within 6 months or the bank is discharged. 
C)  The bank is not always liable for paying a check over a forged signature. 
D)  The statutory time is 30 days to report a series of forgeries.

Question 18

With an "on us" item,which banks are the same?

Accepted Answer

A)  the depository and the payor 
B)  the payee and intermediary 
C)  the collecting and intermediary 
D)  the payee and depository 
A)  the depository and the payor 
B)  the payee and intermediary 
C)  the collecting and intermediary 
D)  the payee and depository

Question 19

If a party presents a check containing a forged signature to a bank for payment that the bank pays,from whom can the bank collect?

Accepted Answer

A)  the forger only 
B)  the forger or the drawer 
C)  the forger or the party who presented the check 
D)  the forger or the party who presented the check,but only if the party presenting the check had knowledge that the signature was not genuine 
E)  the forger and any person who has been a holder 
A)  the forger only 
B)  the forger or the drawer 
C)  the forger or the party who presented the check 
D)  the forger or the party who presented the check,but only if the party presenting the check had knowledge that the signature was not genuine 
E)  the forger and any person who has been a holder

Question 20

If a bank does not honor funds when there is a sufficient amount of funds in a drawer's account to pay a properly payable check,it is liable for wrongful dishonor.

Accepted Answer

A) True 
 B)False

Exam 25: Checks, the Banking System, and E-Money

When a bank has wrongfully dishonored a check,the payee can:

Which of the following statements is not true regarding Electronic Funds Transfer Systems (EFTS)?

Under the most recent version of the UCC,banks are liable for any damages caused by paying any postdated check prior to its date.

A payee has the right to demand payment of the check.

Kenny has a checking account at Local Bank.Kenny writes a check to Grocery Store.What is the relationship of the parties?

What options does a payee have who is holding a check payable to her?

When a drawee bank is presented with a check drawn on a customer's account in which there are not sufficient funds to pay the check,the bank:

The major purpose of certified cashier's checks is to make the bank primarily liable,so third parties will be more willing to accept the checks.

A postdated check is one in which the buyer fills in the date on the check after he or she has written to whom the check is payable to.

Why does the law generally place the risk of forgery on the payor bank,yet place the risk of unauthorized completion on the drawer? What factors would justify a difference in liability of the bank? What factors would justify a difference in liability of the drawer?

Which of the following is correct about the Uniform Commercial Code?

The drawee bank is not obligated to certify a check.

An overdraft is an amount of money a drawer owes a bank after it has paid a check despite insufficient funds in the drawer's account.

When a drawer gives an incomplete check to a payee,and the payee completes the check contrary to the instructions of the drawer,if the bank pays the check according to the unauthorized terms,the drawer is generally liable for payment of the check as completed.

The payee is the bank on which the check is drawn.

When a bank pays a check that has been materially altered to a higher amount,the bank can:

Which of the following is not true regarding a drawer's duty to discover and report alterations and forgeries?

With an "on us" item,which banks are the same?

If a party presents a check containing a forged signature to a bank for payment that the bank pays,from whom can the bank collect?

If a bank does not honor funds when there is a sufficient amount of funds in a drawer's account to pay a properly payable check,it is liable for wrongful dishonor.

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