Exam 19: Checks and Banking in the Digital Age

Joy steals a check from Kyle, forges his signature, and transfers the check to Loco Loans, Inc., for value. Unaware that the signature is not Kyle's, Loco Loans presents the check to Metro Bank, the drawee, which cashes the check. Kyle discovers the forgery and insists that Metro recredit his account. Can Metro refuse? If not, from whom can the bank recover?

Julia opens a checking account with Washington Bank and deposits funds into the account. Julia and Washington Bank

A customer who writes a bad check may be subject to criminal prosecution.

Simon signs a check "pay to the order of Tilly" drawn on Simon's account in United Bank. Vela forges Tilly's indorsement, First Federal Bank cashes the check, and Vela disappears. United pays First Federal and debits Simon's account. Most likely, the ultimate loss will fall on

Shakira issues a check drawn on Thrifty Bank to Ranch & Farm Supply to pay for a rototiller. Later, Shakira discovers a defect in the device and orders Thrifty to stop payment on the check. Shakira does not renew the order, and the bank clears the check eight months later. The bank

A customer has a right to stop payment on a check that has been certified or accepted by a bank.

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 oral stop payment order is valid for fourteen days.

A point-of-sale system is a type of electronic fund transfer system.

A written stop payment order is valid for only thirty days.

Roald writes a check for $700 to Savannah. Savannah indorses the check in blank and transfers it to Twitchell, who alters the check to read $7,000 and presents it to Union Bank, the drawee, for payment. The bank cashes it. Roald discovers the alteration and files a suit against the bank. Roald can recover

A customer has sixty days from the date of receipt of a statement of an electronic transfer to notify the financial institution of any errors.

When processing a check, Superior Bank encodes information, such as the amount of the check, on the item. Superior thereby warrants to any subsequent bank or payor

Daria writes a check for $100 drawn on Village Bank and presents it to Fast Cash, Inc., for payment. If the check is not backed by sufficient funds, Daria may be prosecuted for

Elmo pays First National Bank $1,000 plus a service fee to draw a check on itself made payable to Go Delivery Service. This is

A check can be retained at its place of deposit and only its image can be presented for payment under an electronic presentment agreement.

When a customer deposits cash into a checking account, he or she becomes a debtor for the amount deposited.

Fact Pattern 19-2 Tom draws a check, on his account in State Bank in New York, payable to Digital Media, Inc., in San Francisco. Digital deposits the check in its account at First National Bank. -Refer to Fact Pattern 19-2. Digital's bank is

A bank that pays a customer's check with a forged drawer's signature can generally pass the loss onto the customer.

Valley Bank retains the cancelled checks of its customers. Valley must be able to provide customers with legible copies of checks paid for