Deck 22: Checks, Deposits, and Financial Institutions

Question 1

A cashier's check is a check drawn from a personal account that the bank guarantees will clear with sufficient funds.

Answer 1

False

Question 2

The relationship between the drawee bank and drawer is governed by the common law of service contracts.

Answer 2

True

Question 3

Bertha makes a check payable "to Cash" and hands it to Jonah. This indicates that whoever has physical possession of the check may negotiate it or transfer it to another person.

Answer 3

True

Question 4

A drawee bank has two weeks to rightfully dishonor a check.

Question 5

Debit cards are an electronic payment system that authorizes nearly instant payment from the cardholder's checking account.

Question 6

If Reid authorized his bank to make recurring monthly mortgage payments with funds taken from his bank account, the process is called ACH transaction.

Question 7

Bitcoin is heavily regulated by the federal government and therefore, generally considered safe and reliable.

Question 8

Gloria purchases the hockey NHL, Stanley Cup game 7 tickets through StubHub to watch the St. Louis Blues win the Stanley Cup using a Paypal account which is an example of a mobile payment app.

Question 9

Evie's debit card was stolen and used to purchase a $500 hairless cat. If Evie notifies her bank within two days of the stolen card, she will only be held responsible for $50.00 of the wrongful transaction.

Question 10

The recently implemented chip-enabled card system has allowed banks to utilize more economical electronic transaction system thereby saving banks millions of dollars.

Question 11

An unconditional order issued to a bank to pay a fixed amount that is in writing and signed by the party undertaking to pay is a

A) Secured transaction
B) Release
C) Negotiable instrument
D) Contract

Question 12

Ronald writes out an order to pay Eunice $500.00 if she makes him 12 peach pies and sign the document. Is this a valid check?

A) Yes as long as he has sufficient funds to pay the $500.00.
B) No as his promise to pay is conditioned upon Eunice making 12 peach pies.
C) Yes as long as it was done in good faith.
D) No as both parties must sign the order.

Question 13

Tyler writes a check, from his checking account at Sun Bank, payable to the order of Stan and Bonnie. Which entity is the drawee?

A) Stan
B) Tyler
C) Bonnie
D) Sun Bank

Question 14

Another word for a check is a(n)

A) Secured transaction
B) Draft
C) Order
D) Contract

Question 15

Chuck is walking down the street and finds a check on the ground made out to "cash." Can he legally cash it?

A) No as the facts indicate that he found it and therefore the maker of the check did not have the specific intent to Chuck.
B) Yes as long as the value of the check is under $100.00.
C) Yes since the check is made out to "cash" and Chuck found it, he can cash it.
D) No as Chuck knows it was not intended for him.

Question 16

Diane wants to purchase some flowers from an online vendor. Diane does not have a credit card and asks if she can send a personal check. The vendor will not allow this, but instead requires Diane to send them a check issued by a bank itself. What type of check are the requiring?

A) A certified check
B) A cashier's check
C) A promissory note
D) A traveler's check

Question 17

Fred gets paid by check on a Friday afternoon. As he is driving home, he sees a motorcycle for sale by Barney. Fred has no cash on him, nor does he have his checkbook, but he really wants to buy the motorcycle immediately. Therefore, Fred offers to sign the back of the check, "pay to Barney" and give it to Barney in exchange for the motorcycle. Barney is unsure if that would work or is even legal. What statement below is correct about this transaction?

A) If Fred indorsed it and gave physical possession of the check to Barney, Barney could present the check for payment.
B) Barney would not be able to cash the check as the instrument was originally written payable to Fred.
C) Barney would not be able to cash the check unless both parties wrote out a statement indicating the purpose of the transfer.
D) If the amount and the check and the fair market value of the motorcycle where close, Barney would be able to present the check for payment.

Question 18

Which Article of the UCC governs the process through which a check is paid and honored is

A) Article 2
B) Article 2A
C) Article 3
D) Article 4

Question 19

Jack's employer electronically deposits his pay every Friday into his checking account. One Thursday, his funds are running low in his checking account, but knowing that he will be paid the next day, he tries to pay with his debit card for groceries that exceed the amount in his account. What most likely is the outcome of this situation?

A) Debit card transaction are posted within 24 hour after the transaction, and therefore it should be processed with no problem.
B) As long as the funds customarily go into his account on Fridays, even though it would exceed the funds in his account on Thursday, bank traditionally offer a 12 hour grace period.
C) Debit Card transactions occur instantaneously to a checking account and therefore payment would be declined.
D) Jack would be held criminally liable for conversion.

Question 20

A card that allows a cardholder to make purchases through an electronic network on credit terms that have been pre-negotiated with the card issuing bank is a(n)

A) Debit card
B) Credit card
C) Prepaid card
D) ACH card

Question 21

Wendel has a Mastercard from Countrybank. He uses it to purchase a cat from a local pet store, Paws and Pets. Which statement below is correct?

A) Paws and Pets must contact Countrybank directly to receive payment.
B) At the end of each calendar month Countrybank, as the bank of the credit card must tender payment to Paws and Pets.
C) Communication and tendering of payment will occur between Paws and Pets and Mastercard using an interbank network.
D) Mastercard must ensure that Countrybank pays Paws and Pets.

Question 22

Credit cards a largely governed by

A) The Uniform Commercial Code
B) State statutory laws
C) Constitutional laws
D) Common law of contracts

Question 23

Valerie works for SWAK Industries. Each week instead of a receiving a hard copy of a check, her pay is deposited directly into her savings account at Moon Bank. This process is called

A) ACH transaction
B) UCC transaction
C) Fiduciary transaction
D) NAFTA transaction

Question 24

SOS Construction is currently building many new homes for students and therefore needs to purchase a large amount of building supplies from Alfred Lumber. Therefore, SOS Construction sends a payment order instruction to its bank to send funds to Alfred Lumber's bank to cover the costs of the supplies. SOS Construction is using what type of service?

A) ACH transaction
B) Debit Card
C) Certified check
D) Commercial wire

Question 25

Commercial wires are governed by

A) Article 2A of the UCC
B) Article 3A of the UCC
C) Article 4A of the UCC
D) Article 5A of the UCC

Question 26

Christie gets a message from her son who was working in Peru when his wallet and money was stolen. He needs money immediately and asks her if she can help him get money quickly. Which statement below is correct?

A) Christie will have to mail him a check for him to cash upon receipt which will take as long as international mail system to Peru will take.
B) Christie's only option will be to send a commercial wire which will require her to find two willing commercial entities to complete the transfer.
C) Christie will have to mail cash.
D) Christie will use a consumer wire service offered by banks.

Question 27

Consumer wire services are governed by

A) Article 3A of the UCC
B) Electronic Funds Transfer Act
C) Article 4A of the UCC
D) Consumer Wire Fraud Act

Question 28

Venmo, a digital wallet app on a person's phone which allows people to share payment with friends is an example of

A) A debit card
B) A consumer wire transfer
C) A mobile payment app
D) A credit card app

Question 29

A type of software based currency that is created using encryption techniques that is an unregulated currency system is

A) Cryptocurrency
B) Electronic funds transfer
C) Digital wallet transfer
D) Wire transfer

Question 30

Callaghan is a college student who often shares rides and expenses with her fellow classmates. However, she is getting tired, and broke, with friends who tell her that they will pay her back for Uber fares, dinners out and other expenses that she covers upfront for her friends and do not. Which type of fund transfer system would be the best system for her and her friends to use to allow an easy immediate transfer of money without having to wait on someone to give her cash?

A) Consumer wire
B) Mobile payment apps
C) Cryptocurrency
D) Bitcoin

Question 31

In United States v. Faiella, the court ruled that Bitcoin

A) Was not money according to the plain meaning of money.
B) Was not money because it did not involve banks or other financial institutions.
C) Was money because it can be easily used in ordinary financial transactions.
D) Was money because to rule otherwise would offend notions of good faith and fair dealing.

Question 32

Twin Bank, located in Missouri, must follow the laws of ________________ when determining who faces liability when a check is forged, stolen or altered.

A) The Federal Reserve
B) Missouri adopted UCC laws
C) National UCC laws
D) Common laws

Question 33

Armando cashes a check that he stole from Ricardo at Sufficiency Bank and spends the money at Dollar Tree. According to the general rules of the UCC who in this transaction would assume liability?

A) Armando
B) Ricardo
C) Dollar Tree
D) Sufficiency Bank

Question 34

Tara receives a check from Shelby and fraudulently changes the amount on the check from $100.00 to $120.00 and deposits the check into her bank, Kania Bank. According to the general rules of the UCC which entity would be liable for fraudulent check?

A) Tara
B) Shelby
C) Kania Bank
D) All of the parties

Question 35

Kennison fraudulently indorses a check, written out to Adam Canon, that she stole from Adam, and gives the check to Cathi to pay for her driving services. Shortly thereafter when Cathi attempts to cash the check at Callaghan Banking, the bank refuses to honor it stating that there had been a stop payment order as the check had been stolen. According to the general rules of the Uniform Commercial Code, which entity assumes liability?

A) Kennison
B) Adam Canon
C) Cathi
D) Callaghan Banking

Question 36

John used his debit card to purchase gas. John's debit card fell out of his pocket and a scammer immediately picked it up. As soon as the scammer got his information, he started purchasing clothing from an online store totaling over $6000.00 in just a few hours, emptying John's checking account. The next day, John attempted to use his debit card and it was denied. He inquired into it and found out about the scam and immediately notified his bank. Which statement below is correct?

A) John will not be liable for any amount that he did not specifically authorize.
B) John will be liable for the purchases made until he notifies his bank.
C) John's liability will be capped at $50.00.
D) John will be liable for half the amount unauthorized.

Question 37

Which example below would it be considered "timely notice" for someone to notify their bank of a stolen or lost debit card?

A) Bob's wallet, containing his debit card, was stolen on Monday and he reported it to his bank on Tuesday.
B) Mary lost her debit card on Wednesday but had to leave on vacation the next day and therefore notified her bank immediately upon return from her trip the following Wednesday.
C) Joe lost his wallet with his debit card on Tuesday and left a message on his bank's answering service on Friday about his loss.
D) Tom's debit card went missing on his 50^th birthday and he realized it on his 51^st birthday and immediately reported it then.

Question 38

According to the Federal Reserve Bank's Regulations, home much time does a person have to report a lost or stolen debit card to be considered "timely notice?"

A) Two days
B) Two business days
C) Three days
D) Three business days

Question 39

Which statement below is true about the introduction of the "chip system" introduced on credit cards?

A) The chip-based system allows merchants to track trends in purchases for marketing purposes.
B) The chip-based system requires that the banks issuing the card be exclusively liable for any fraudulent transactions with their card.
C) The chip-based system shifts the liability to the merchant if they fail to use the more secure system.
D) The chip-based system has thus far been a failure according the banking industry.

Question 40

Missouri Bank, located in St. Louis, Missouri honors a forged check by Wrett Wickline who resides in Montana but was visiting family in St. Louis when he forged the check. According to this fact pattern, which law would the courts use to determine who will assume liability for the forged check?

A) Federal Reserve law
B) Federal UCC law
C) UCC Missouri adopted law
D) UCC Montana adopted law

Question 41

The EMV standard

A) Requires merchants to provide electronic transfer of funds options to purchase goods.
B) Requires bank to keep a scanned copy image of all checks written from their bank.
C) Requires a bank to reserve an emergency measured value of funds to cover reasonably anticipated credit charges.
D) Requires a card user to insert a chip-enabled card in to merchant's card reader terminal.

Question 42

The process of negotiating a check by signing the check and making it payable to someone else is called

A) Endorsement
B) Indorsement
C) Reindorsement
D) Undorsement

Question 43

Juan writes a check out payable to the order of Mavis from his checking account at Bonus Banks. Mavis cashes the check at her bank, Minus Bank. In this situation, who is the depositor?

A) Juan
B) Minus Bank
C) Mavis
D) Bonus Bank

Question 44

Shirley writes a check out to Reid from her checking account at UMDBank. Reid deposits the check in his checking account at ABC Banking Services. Which party is the depository bank?

A) UMDBank
B) ABC Banking Services
C) Shirley
D) Reid

Question 45

Explain the parties on a check including the drawer, payee, drawee bank and the signature and how they are shown on a check.

Question 46

Compare and contrast checks to cashier's checks to certified checks and why someone may want to use one method over another.

Question 47

Explain the role that technology has aided in facilitating methods of payments beyond basic check writing.

Question 48

Johnna is starting a landscaping business that appeals to young technologically savvy cliental. Johnna is also extremely environmentally conscience and strives to leave as little of a carbon imprint as possible in her business transactions. Therefore, if you were to advise her about options to both appeal to her clients and to achieve her goal, what types of payment options would you suggest she consider in running her business?

Question 49

Evaluate the fact pattern below to determine, according to general rules and principals of the UCC who would be liable in this transaction and which law would generally apply.Kinslee Jones, owner of Wicklinn's Ranch, writes a check to Wiley "Coyote" Smith, a ranch hand that assists in the running of the ranch located in Malta, Montana for the amount of the check of $100.00. The bank Kinslee Jones has her checking account for ranch related checking at is Highlander Bank, also a Montana bank. Wiley is an unscrupulous individual and alters the amount of the check from $100.00 to $1000.00 and presents the check to Jacobi Bank in Billings, Montana who cashes the check for Wiley. Shortly thereafter, Wiley skips town to pursue a life as an interior designer in Los Angeles, California for Jamie Interiors. After several months, authorities track down Wiley "Coyote" Smith who is absolutely broke as his interior decorating skills are deplorable and no one seeks his services. Kinslee Jones wants her money back and pursues legal action.