Exam 14: Checks and Banking in the Digital Age

A check is not a substitute for cash.

Fact Pattern 14-2 (Questions 30-31 apply) 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 ac?count at First National Bank. -Refer to Fact Pattern 14-2. Tom's bank is

The Federal Reserve System acts as a clearinghouse where banks exchange 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

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

Jen signs a check "pay to the order of Key" drawn on Jen's account in Little Bank to buy Key's car. If there are insufficient funds in Jen's account to cover the amount of the check, but the bank pays it, this creates

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 certified check is a check that has been signed by a notary public.

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

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

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, Main Street Bank, pays the check. Clyde can recover from

Luc writes a check for $1,000 drawn on Ridgetop Bank and presents it to Bianca. Bianca presents the check for payment to Ridgetop Bank, which dis?hon?ors it for insufficient funds. The party most likely liable to Bianca is

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

Stored-value cards are a form of digital cash.

On Monday, Michelle deposits in her account at Fiscal Bank a local check for $500. After 5:00 p.m. on Friday, from these funds, Michelle can withdraw no more than

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

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

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

Jon writes a check to LocoMotion, Inc., as payment for a golf cart but soon discov?ers the cart is broken. He goes to Fairway Bank, the drawee, and orally author?izes Lolly, a bank officer, to stop payment on the check. This order is valid for

Under the Check Clearing in the 21st Century Act, a bank has to credit a customer's account as soon as the bank receives the funds.