Question 1

A bank's right or duty to charge a depositor's account for a check can be terminated when a:

Accepted Answer

A)  stop-payment order from the depositor after the bank has certified a check. 
B)  depositor files a bankruptcy petition. 
C)  notice of garnishment of the account by the depositor. 
D)  creditor of the depositor files a bankruptcy petition after the notified cut-off hour on the banking day after the check is received. 
A)  stop-payment order from the depositor after the bank has certified a check. 
B)  depositor files a bankruptcy petition. 
C)  notice of garnishment of the account by the depositor. 
D)  creditor of the depositor files a bankruptcy petition after the notified cut-off hour on the banking day after the check is received.

Question 2

Unlike many other federal consumer protection measures, the Electronic Funds Transfer Act does not require disclosure of important terms to the consumer.

Accepted Answer

A) True 
 B)False

Question 3

Abyss handed over a $500 check to Howard Brothers for building him a terrace garden. The next day, Abyss notices that one part of the garden has not been finished. He calls his bank to order a stop-payment on the check. When Howard Brothers presents the check next week, the bank honors it. Which of the following is true in this case?

Accepted Answer

A)  Since Abyss did not give the bank enough time to process a stop-payment order, the bank is not liable for this loss. 
B)  The bank is liable to recredit Abyss's account, since Abyss has suffered a loss by the bank's payment. 
C)  Abyss will not be able to show that he sustained any losses, hence cannot have his account recredited. 
D)  The bank is not liable for honoring any checks in good faith, that are signed by the drawer-depositor. 
A)  Since Abyss did not give the bank enough time to process a stop-payment order, the bank is not liable for this loss. 
B)  The bank is liable to recredit Abyss's account, since Abyss has suffered a loss by the bank's payment. 
C)  Abyss will not be able to show that he sustained any losses, hence cannot have his account recredited. 
D)  The bank is not liable for honoring any checks in good faith, that are signed by the drawer-depositor.

Question 4

Which of the following is true of the Check 21 Act?

Accepted Answer

A)  It allows banks to handle limited number of checks electronically. 
B)  It has made it mandatory for banks to return the canceled checks to the customers. 
C)  It authorizes banks to transform information they receive in electronic form back into a paper copy of the check. 
D)  It requires that banks keep the customers' original checks for a specified period of time. 
A)  It allows banks to handle limited number of checks electronically. 
B)  It has made it mandatory for banks to return the canceled checks to the customers. 
C)  It authorizes banks to transform information they receive in electronic form back into a paper copy of the check. 
D)  It requires that banks keep the customers' original checks for a specified period of time.

Question 5

Mendel had his car repaired by Harry's Garage (HG). He paid by check drawn on ABZ Bank when he collected his car. On the drive home, Mendel realized that the repair had not been made. He immediately called ABZ on his cell phone and told the bank to stop payment on the check. Three days later, HG negotiated the check to Amy, a holder in due course. When Amy went to cash the check, ABZ Bank refused to honor it. What is Mendel's liability on this check?

Accepted Answer

A)  Mendel is not liable to anyone because he stopped the check in time. 
B)  Mendel is liable to Amy because the stop payment order was made through a phone call. 
C)  Mendel is not liable to Amy because she took the check from HG. 
D)  Mendel is liable to Amy because he is the drawer of the check. 
A)  Mendel is not liable to anyone because he stopped the check in time. 
B)  Mendel is liable to Amy because the stop payment order was made through a phone call. 
C)  Mendel is not liable to Amy because she took the check from HG. 
D)  Mendel is liable to Amy because he is the drawer of the check.

Question 6

The main difference between a certified check and a cashier's check is that the bank is primarily liable on a certified check, but only secondarily liable on a cashier's check.

Accepted Answer

A) True 
 B)False

Question 7

An oral stop-payment order normally is good for 14 days.

Accepted Answer

A) True 
 B)False

Question 8

A check on which one bank is both the drawer and the drawee is called a:

Accepted Answer

A)  certified check. 
B)  cashier's check. 
C)  teller's check. 
D)  uncertified check. 
A)  certified check. 
B)  cashier's check. 
C)  teller's check. 
D)  uncertified check.

Question 9

Which of the following is most true regarding checks whose amount has been altered?

Accepted Answer

A)  The bank may not pay such checks as altered in all cases. 
B)  The bank may pay such checks as altered where the alteration is due to the customer's negligence and the alteration is not obvious. 
C)  The bank must pay such checks as originally drawn. 
D)  The bank cannot ever pay such checks. 
A)  The bank may not pay such checks as altered in all cases. 
B)  The bank may pay such checks as altered where the alteration is due to the customer's negligence and the alteration is not obvious. 
C)  The bank must pay such checks as originally drawn. 
D)  The bank cannot ever pay such checks.

Question 10

Which of the following is true for a stop-payment order to be effective?

Accepted Answer

A)  The order can come up to an hour after the check has been honored. 
B)  The bank must receive the order in a way that gives the bank a reasonable opportunity to act. 
C)  The bank can receive the order after it has certified the check. 
D)  The order must be in a written format for the bank to be able to recognize it as the check corresponding to the stop-payment order. 
A)  The order can come up to an hour after the check has been honored. 
B)  The bank must receive the order in a way that gives the bank a reasonable opportunity to act. 
C)  The bank can receive the order after it has certified the check. 
D)  The order must be in a written format for the bank to be able to recognize it as the check corresponding to the stop-payment order.

Question 11

In which of the following cases will a drawer and any persons who previously indorsed the check be discharged of their liability on the check?

Accepted Answer

A)  By certification of a check. 
B)  By drawing a cashier's check. 
C)  By drawing a teller's check. 
D)  By death or incompetence after signing a check. 
A)  By certification of a check. 
B)  By drawing a cashier's check. 
C)  By drawing a teller's check. 
D)  By death or incompetence after signing a check.

Question 12

Which of the following defeats a bank's liability for failing to observe a stop-payment order?

Accepted Answer

A)  That the order was oral rather than written. 
B)  That the bank was not given 14 days to obey the order. 
C)  That the bank paid a person against whom the customer did not have a defense. 
D)  That the bank has the customer sign a disclaimer holding the bank harmless for its failure to exercise ordinary care and good faith regarding its handling of stop-payment orders. 
A)  That the order was oral rather than written. 
B)  That the bank was not given 14 days to obey the order. 
C)  That the bank paid a person against whom the customer did not have a defense. 
D)  That the bank has the customer sign a disclaimer holding the bank harmless for its failure to exercise ordinary care and good faith regarding its handling of stop-payment orders.

Question 13

A stop-payment order is authorized by the:

Accepted Answer

A)  bearer. 
B)  creditor. 
C)  drawer. 
D)  drawee. 
A)  bearer. 
B)  creditor. 
C)  drawer. 
D)  drawee.

Question 14

Which of the following is true of check collection?

Accepted Answer

A)  Checks and other drafts collected through the banking system usually have two parties-the drawer and the drawee bank. 
B)  If the payee deposits the check at a bank other than the drawee bank, the latter will take a series of steps necessary to reflect the deposit as a credit to the payee's account. 
C)  If the payee deposits the check at the same bank as the drawee bank, the depositary bank will make the ledger entry showing the deposit as a credit to the payee's account. 
D)  If the drawee and depositary banks are in the same town or county, the depositary bank will indorse the check and deliver it to the drawee bank for payment. 
A)  Checks and other drafts collected through the banking system usually have two parties-the drawer and the drawee bank. 
B)  If the payee deposits the check at a bank other than the drawee bank, the latter will take a series of steps necessary to reflect the deposit as a credit to the payee's account. 
C)  If the payee deposits the check at the same bank as the drawee bank, the depositary bank will make the ledger entry showing the deposit as a credit to the payee's account. 
D)  If the drawee and depositary banks are in the same town or county, the depositary bank will indorse the check and deliver it to the drawee bank for payment.

Question 15

Tom wrote a check to Mary for $10. Tom was careful and not negligent in the way he wrote the check. Nevertheless, Mary cleverly altered the check to read $1,000. Tom's bank cashed this check and deducted that amount from his account. Which of the following is correct?

Accepted Answer

A)  Tom is liable on this check, but only for $10. 
B)  Tom is liable on this check for $1,000. 
C)  Tom is liable on this check for nothing. 
D)  Tom must reimburse the bank for any losses it suffers related to this check. 
A)  Tom is liable on this check, but only for $10. 
B)  Tom is liable on this check for $1,000. 
C)  Tom is liable on this check for nothing. 
D)  Tom must reimburse the bank for any losses it suffers related to this check.

Question 16

Laura gets a statement and a pile of paid checks from her bank on June 1. Within the pile of checks, is one check with a forged drawer's signature. Laura does not notify the bank about the forged check until the next month, July 1. Does this delay remove the bank's obligation to recredit Laura's account?

Accepted Answer

No. The customer has one year

Question 17

The Electronic Funds Transfer Act governs "check conversion" transactions.

Accepted Answer

A) True 
 B)False

Question 18

Prof. Bob DeSlob writes a check on his Big Bank checking account for $1 payable to "Department of Business Law Coffee Club" to pay for his weekly membership and gives it to his colleague Carol. Bob does not place a decimal point after the "1" nor does he complete the line ending in "dollars." Carol, knowing that Bob can well afford it, prints in block letters the words "One Hundred" on the line ending in "dollars." Carol then gives the check to Dot, the Department secretary who is in charge of the Coffee Club. Dot presents the check to Big Bank for payment, and Big Bank charges $100 from Bob's account. Which of the following statements is most accurate?

Accepted Answer

A)  Bob's account must be recredited $99. 
B)  Bob's account must be recredited $100. 
C)  Bob contributed to the alteration and may be barred from claiming forgery. 
D)  Bob had a duty to place a stop-payment order on the check. 
A)  Bob's account must be recredited $99. 
B)  Bob's account must be recredited $100. 
C)  Bob contributed to the alteration and may be barred from claiming forgery. 
D)  Bob had a duty to place a stop-payment order on the check.

Question 19

A deceased person's heirs have no power to order a bank to stop payment on checks written by the deceased prior to his death.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is true concerning multiple forgeries and alterations?

Accepted Answer

A)  A customer cannot hold the bank responsible for paying, in good faith, any altered checks after he/she receives the statement of account. 
B)  A bank will be held liable for honoring altered checks which were presented to the bank multiple times. 
C)  A customer bears the responsibility for any forgeries and subsequent forgeries that take place, even if he/she has notified the bank. 
D)  A bank will be held liable even if it proves that it suffered a loss due to the customer's failure to examine his/her statement and notify the bank. 
A)  A customer cannot hold the bank responsible for paying, in good faith, any altered checks after he/she receives the statement of account. 
B)  A bank will be held liable for honoring altered checks which were presented to the bank multiple times. 
C)  A customer bears the responsibility for any forgeries and subsequent forgeries that take place, even if he/she has notified the bank. 
D)  A bank will be held liable even if it proves that it suffered a loss due to the customer's failure to examine his/her statement and notify the bank.

Exam 34: Checks and Electronic Transfers

A bank's right or duty to charge a depositor's account for a check can be terminated when a:

Unlike many other federal consumer protection measures, the Electronic Funds Transfer Act does not require disclosure of important terms to the consumer.

Which of the following is true of the Check 21 Act?

The main difference between a certified check and a cashier's check is that the bank is primarily liable on a certified check, but only secondarily liable on a cashier's check.

An oral stop-payment order normally is good for 14 days.

A check on which one bank is both the drawer and the drawee is called a:

Which of the following is most true regarding checks whose amount has been altered?

Which of the following is true for a stop-payment order to be effective?

In which of the following cases will a drawer and any persons who previously indorsed the check be discharged of their liability on the check?

Which of the following defeats a bank's liability for failing to observe a stop-payment order?

A stop-payment order is authorized by the:

Which of the following is true of check collection?

Tom wrote a check to Mary for $10. Tom was careful and not negligent in the way he wrote the check. Nevertheless, Mary cleverly altered the check to read $1,000. Tom's bank cashed this check and deducted that amount from his account. Which of the following is correct?

The Electronic Funds Transfer Act governs "check conversion" transactions.

A deceased person's heirs have no power to order a bank to stop payment on checks written by the deceased prior to his death.

Which of the following statements is true concerning multiple forgeries and alterations?

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