Question 1

Under the Competitive Equality Banking Act, a nonlocal check must clear in no more than four intervening business days.

Accepted Answer

A) True 
 B)False  True

Question 2

A system for electronic funds transfers (EFT) in which machines are located in a merchant's store and are activated by the consumer's identification card and code is:

Accepted Answer

A)  POS. 
B)  RAM. 
C)  EFTA. 
D)  DOS. 
A)  POS. 
B)  RAM. 
C)  EFTA. 
D)  DOS. A

Question 3

The Competitive Equality Banking Act:

Accepted Answer

A)  allowed intermediary banks to become clearinghouses. 
B)  includes a requirement that collecting banks give provisional credit to its subagents. 
C)  has expedited the availability of funds. 
D)  None of these. 
A)  allowed intermediary banks to become clearinghouses. 
B)  includes a requirement that collecting banks give provisional credit to its subagents. 
C)  has expedited the availability of funds. 
D)  None of these. C

Question 4

For how long is a written stop payment order valid?

Accepted Answer

A)  One month. 
B)  Six months. 
C)  One year. 
D)  Indefinitely. 
A)  One month. 
B)  Six months. 
C)  One year. 
D)  Indefinitely.

Question 5

Article 4 of the UCC, entitled "Bank Deposits and Collections" provides the principal rules governing bank collection practices.

Accepted Answer

A) True 
 B)False

Question 6

If a drawer files a stop payment order on a check, he is automatically relieved of liability for the obligation.

Accepted Answer

A) True 
 B)False

Question 7

Sylvia draws a check on ABC Bank payable "to the order of Ann Smith." Ann indorses it and deposits it in her account at First Bank. First Bank is a:

Accepted Answer

A)  drawee bank. 
B)  payee bank. 
C)  depositary bank. 
D)  payor bank. 
A)  drawee bank. 
B)  payee bank. 
C)  depositary bank. 
D)  payor bank.

Question 8

Adjudication of drawer's incompetence will not affect the bank's ability to act with respect to the drawer until the bank knows and has a reasonable opportunity to act on this knowledge.

Accepted Answer

A) True 
 B)False

Question 9

A written stop payment order is effective indefinitely.

Accepted Answer

A) True 
 B)False

Question 10

Point-of-sale systems permit customers to charge items to a charge account at a bank.

Accepted Answer

A) True 
 B)False

Question 11

A critical issue in banking law is at what point an item is finally paid.

Accepted Answer

A) True 
 B)False

Question 12

Caryn deposits a check in her bank at 2:30 on Monday. The bank may, under the Code, treat the check as having been deposited on Tuesday for purposes of meeting the midnight deadline rule.

Accepted Answer

A) True 
 B)False

Question 13

Collecting banks give to a transferee the same basic warranties as those given by other parties who transfer commercial paper, except they also may give encoding warranties.

Accepted Answer

A) True 
 B)False

Question 14

ABC Bank sent Joanne, a depositor, her January statement on January 31. Within what length of time after this date will Joanne have to notify ABC bank of any instruments containing alterations or unauthorized signatures included in her January statement?

Accepted Answer

A)  10 days. 
B)  A reasonable period of time, not to exceed 30 days. 
C)  60 days. 
D)  Three years. 
A)  10 days. 
B)  A reasonable period of time, not to exceed 30 days. 
C)  60 days. 
D)  Three years.

Question 15

An objective of the Check 21 Act is to:

Accepted Answer

A)  require banks to accept checks in electronic form, thereby reducing paperwork. 
B)  make the check collection process faster by transferring files digitally. 
C)  enhance fraud detection. 
D)  All of these are objectives. 
E)  Only to make the check collection process faster by transferring files digitally and to enhance fraud detection. 
A)  require banks to accept checks in electronic form, thereby reducing paperwork. 
B)  make the check collection process faster by transferring files digitally. 
C)  enhance fraud detection. 
D)  All of these are objectives. 
E)  Only to make the check collection process faster by transferring files digitally and to enhance fraud detection.

Question 16

Theresa has just started working for Citizens Bank as a teller. A man comes into the bank with a $100 check that is 8 months old. She goes to the manager to ask whether she should pay it. If you were the manager, what would you advise her? Explain.

Accepted Answer

Banks are not obligated to pay a check m

Question 17

Alvero tries to make a $75 withdrawal from an ATM, but the terminal has run out of cash. The bank is liable to Alvero for damages proximately caused by its failure to make the EFT.

Accepted Answer

A) True 
 B)False

Question 18

Barry presents to Wake Bank for deposit in his account a check for $100 made out to him by Richard. Wake Bank provisionally credits Barry's account on Monday. When is payment final?

Accepted Answer

A)  Automatically at the end of the third business day. 
B)  Midnight Tuesday. 
C)  When the amount of the check is collected from Richard's bank. 
D)  When Richard's bank receives the check. 
A)  Automatically at the end of the third business day. 
B)  Midnight Tuesday. 
C)  When the amount of the check is collected from Richard's bank. 
D)  When Richard's bank receives the check.

Question 19

Goble, the seller, obtains authority from Meigs, the buyer, to debit Meigs's account after Goble ships the goods. Article 4A covers this transaction.

Accepted Answer

A) True 
 B)False

Question 20

Lane Co. instructs its bank, Second Street Bank, to pay $200,000 to Moffett, Inc., also a customer of Second Street Bank. The bank executes the payment order by crediting Moffett's account with the $200,000 and notifying Moffett that the credit was made and is available. In this case:

Accepted Answer

A)  Lane Co. is the originator; Second Street Bank is both the sender and the intermediary. 
B)  Lane Co. is both the originator and the sender, and Moffett, Inc. is the beneficiary. 
C)  the transaction is governed by the EFTA. 
D)  Lane Co.'s payment order had to be communicated either electronically or in writing. 
A)  Lane Co. is the originator; Second Street Bank is both the sender and the intermediary. 
B)  Lane Co. is both the originator and the sender, and Moffett, Inc. is the beneficiary. 
C)  the transaction is governed by the EFTA. 
D)  Lane Co.'s payment order had to be communicated either electronically or in writing.

Exam 27: Bank Deposits, Collections, and Funds Transfers

Under the Competitive Equality Banking Act, a nonlocal check must clear in no more than four intervening business days.

A system for electronic funds transfers (EFT) in which machines are located in a merchant's store and are activated by the consumer's identification card and code is:

The Competitive Equality Banking Act:

For how long is a written stop payment order valid?

Article 4 of the UCC, entitled "Bank Deposits and Collections" provides the principal rules governing bank collection practices.

If a drawer files a stop payment order on a check, he is automatically relieved of liability for the obligation.

Sylvia draws a check on ABC Bank payable "to the order of Ann Smith." Ann indorses it and deposits it in her account at First Bank. First Bank is a:

Adjudication of drawer's incompetence will not affect the bank's ability to act with respect to the drawer until the bank knows and has a reasonable opportunity to act on this knowledge.

A written stop payment order is effective indefinitely.

Point-of-sale systems permit customers to charge items to a charge account at a bank.

A critical issue in banking law is at what point an item is finally paid.

Caryn deposits a check in her bank at 2:30 on Monday. The bank may, under the Code, treat the check as having been deposited on Tuesday for purposes of meeting the midnight deadline rule.

Collecting banks give to a transferee the same basic warranties as those given by other parties who transfer commercial paper, except they also may give encoding warranties.

ABC Bank sent Joanne, a depositor, her January statement on January 31. Within what length of time after this date will Joanne have to notify ABC bank of any instruments containing alterations or unauthorized signatures included in her January statement?

An objective of the Check 21 Act is to:

Theresa has just started working for Citizens Bank as a teller. A man comes into the bank with a $100 check that is 8 months old. She goes to the manager to ask whether she should pay it. If you were the manager, what would you advise her? Explain.

Alvero tries to make a $75 withdrawal from an ATM, but the terminal has run out of cash. The bank is liable to Alvero for damages proximately caused by its failure to make the EFT.

Barry presents to Wake Bank for deposit in his account a check for $100 made out to him by Richard. Wake Bank provisionally credits Barry's account on Monday. When is payment final?

Goble, the seller, obtains authority from Meigs, the buyer, to debit Meigs's account after Goble ships the goods. Article 4A covers this transaction.

Lane Co. instructs its bank, Second Street Bank, to pay $200,000 to Moffett, Inc., also a customer of Second Street Bank. The bank executes the payment order by crediting Moffett's account with the $200,000 and notifying Moffett that the credit was made and is available. In this case:

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