Exam 25: Checks and Banking in the Digital Age

A bank that pays a customer's check bearing a forged indorsement is not obligated to recredit the customer's account. 

The Uniform Commercial Code regulates checks. 

When a bank pays a check on which the drawer's signature is forged,generally the customer suffers the loss. 

Keanu presents an instrument that states "pay to the order of Laura" to Mega Bank for payment.This instrument is the most common type of negotiable instrument,which is 

A check is a special type of draft. 

A bank is NOT obligated to pay an uncertified check presented less than six months from its date.

A customer must examine a bank statement and report any discovered forged signature to recover from the bank for the forgery. 

Financial institutions that exchange digital images of checks must also send the original paper checks.

Brandy forges Caleb's signature on a check "payable to the order of Brandy" drawn on Caleb's account in Downtown Bank.Caleb's forged signature is​ 

An agency relationship arises between the customer and the bank when the customer writes a check on his or her account. 

Stored-value cards are a form of digital cash.

Finance Bank receives a check drawn on the account of Get-Rich Industries,Inc.,one of the bank's customers,at 3 p.m.Friday.Hildy,the presenter of the check,is not one of the bank's customers.The bank uses deferred posting with a 2 p.m.cutoff hour.If it decides to dishonor the check,it must do so by midnight​ 

Horace can write checks on his account at InterCity Bank.Jemma steals the checks,forges Horace's signature,and cashes the checks at InterCity.The bank is excused from any liability if,after receipt of the first forged check,Horace fails to report the forgeries within​ 

Nick steals two checks from Pauline-a blank check and a check payable to the order of Retail Outlets Company,drawn on Pauline's account with State Bank.Nick forges Pauline's signature on the blank check and makes it payable to himself.Nick forges Retail Outlets's indorsement on the back of the check payable to Retail Outlets,and adds "Pay to the order of Nick." At United Credit Union,Nick indorses the back of both checks with his own name and gives them to United for cash.United does not know about the theft or the forged signatures and presents the checks to State Bank,which pays them.Pauline,who was not negligent,discovers the forgeries and asks State Bank to recredit her account.Who suffers the loss on each check?​

A bank's responsibility to honor its customers' checks is NOT absolute.

A bank that encodes information on an item after its issue warrants to any subsequent bank that the information is correct.

Dhani signs a check "pay to the order of Etan" drawn on Dhani's account in First State Bank and dates the check "May 1." Etan presents the check to the bank for payment on December 15.This is​ 

A customer has two days to discover and notify the bank of any error on the monthly statement involving an electronic transfer of funds. 

The first bank to receive a check for payment is the intermediary bank.

The Check Clearing in the 21st Century Act (Check 21)applies only in about 75 percent of the states.