Exam 27: Checks, the Banking System, and E-Money

If a customer's debit card is lost or stolen, the customer will not be liable for any unauthorized use of the card.

Kip writes a check for $1,000 drawn on Local Bank and presents it to Mira. Mira presents the check for payment to Local Bank, which dis?hon?ors it. The party most likely liable to Mira is

A bank that fails to detect an alteration to its customer's check is liable to the customer for the loss.

Dru signs a check "pay to the order of Eppie" drawn on Dru's account in First Federal Bank. Greta forges Eppie's indorsement. First Federal pays the check. Most likely

A customer who fails to examine a bank statement and report a forged signa?ture may be liable for later forgeries by the same wrongdoer.

A cashier's check is an instrument in which a bank draws a check on itself.

Rikki signs a check "pay to the order of Scholar University" drawn on Rikki's account in State Bank to pay her tuition. Rikki is

A bank cannot recover from a holder who cashes a check bearing a forged indorsement once the bank has accepted and paid the item.

Kris presents an instrument that states "pay to the order of Liv" to Metro Bank for payment. This is a special type of draft drawn on a bank, ordering the bank to pay a fixed amount of money on demand. This is

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

Liu signs a check "pay to the order of Marv" drawn on Liu's account in National Bank. Liu later orders National not to pay the check, but the bank pays it over Liu's order. Subsequent checks written on Liu's account "bounce." Most likely liable for the costs to Liu is

Generally, a bank has no obligation to pay a customer's overdrafts.

Generally, the funds represented by a deposited local check must be avail?able for withdrawal within one business day.

A check carries with it an implied promise to reimburse the bank for paying the check.

City Bank mistakenly transfers $1,000 from the account of Donna, its cus?tomer, to the account of Earl in First Federal Bank. The transfer is done electronically. When City Bank learns of the mistake, it credits Donna's account and asks First Federal to "return" $1,000. First Federal refuses. City Bank files a suit against First Federal, claiming that it is violation of the Electronic Fund Transfer Act. How might the court rule?

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

Clyde issues a check payable to Discount Mart. Elle, Discount's cashier, forges the store's indorsement and deposits the check in her bank ac?count. Clyde's bank, First State Bank, pays the check. Clyde can recover from

A stale check is one that has been outstanding for longer than one month.

A forged signature is effective as the signature of a drawer to the extent that is resembles the drawer's actual signature.

UCC Articles 3 and 4 govern checks.