Deck 29: Checks and Electronic Fund Transfers

Question 1

Sometimes the depositary is the same bank as the collecting bank.

Answer 1

True

Question 2

Which of the following is true regarding parties who are related to an order?

A) A drawer, payee, and drawee are all related to an order.
B) A payee and drawer are related to an order, but a drawee is not.
C) A drawee and payee are related to an order, but a drawer is not.
D) A payee is related to an order, but a drawer and a drawee are not.
E) A drawer and a drawee are related to an order, but a payee is not.

Answer 2

A drawer, payee, and drawee are all related to an order.

Question 3

A written stop-payment order is valid for only 30 days.

Answer 3

False

Question 4

Checks are non-negotiable instruments.

Question 5

A bank involved in the check collection process may only be classified as one type of bank during the entire process.

Question 6

A substitute check is a check that is substituted for a lost check.

Question 7

The Federal Reserve has stated that Regulation E applies to e-money transactions.

Question 8

The customer cannot order a stop payment on an electronic fund transfer.

Question 9

Which of the following is the party giving the order to pay on a draft?

A) The drawer.
B) The drawee.
C) The payor.
D) The draftor.
E) The draftee.

Question 10

A[n] ______ is a special draft that orders the bank to pay a fixed amount of money on demand.

A) Note
B) Promissory note
C) Check
D) Acknowledgment draft
E) Promissory draft

Question 11

Which of the following is an instrument whereby one party orders the second party to pay an amount of money to the party listed on the instrument?

A) A draft.
B) A note.
C) A mark.
D) An instrument.
E) A certificate of deposit.

Question 12

Which of the following governs the transfer of checks between banks?

A) Article 1 of the UCC.
B) Article 2 of the UCC.
C) Article 3 of the UCC.
D) Article 4 of the UCC.
E) Article 5 of the UCC.

Question 13

Which of the following is false regarding checks?

A) Because of electronic fund transfers, checks are of little importance in the U.S. today.
B) In 2009, Americans wrote billions of checks.
C) Of all the negotiable instruments regulated by the UCC, checks are the most common type used.
D) Checks are considered negotiable instruments under Article 3 of the UCC.
E) Article 4 creates a framework controlling deposit and checking agreements between banks and customers; and when Articles 3 and 4 conflict, Article 4 is to take precedence.

Question 14

Which of the following is true regarding entities considered banks under the UCC?

A) Savings and loans and trust companies are considered banks, but credit unions are not.
B) Savings and loans and credit unions are considered banks, but trust companies are not.
C) Trust companies and credit unions are considered banks, but savings and loans are not.
D) Savings and loans, credit unions, and trust companies are all considered banks.
E) Only an entity holding itself out as a "bank" is considered a bank under the UCC, and therefore neither savings and loans, credit unions, nor trust companies are considered banks.

Question 15

According to the UCC, a check is a special kind of draft.

Question 16

Which of the following is the party ordered to pay on a draft?

A) The drawer.
B) The drawee.
C) The payee.
D) The draftor.
E) The draftee.

Question 17

Money orders are considered checks under the UCC.

Question 18

Banks are required by the UCC to certify the check if a customer has sufficient funds in the account.

Question 19

Unlike in the United States, in India money orders may be issued only by the post office.

Question 20

The UCC states that a customer can postdate a check and that the customer has no obligations to give the bank notice of the postdated check.

Question 21

A bank may determine that _____ or later is the cutoff hour for handling checks.

A) Noon
B) 1:00 p.m
C) 2:00 p.m
D) 3:00 p.m
E) 4:00 p.m

Question 22

An oral stop payment order is valid for _________ unless the order is later confirmed in writing.

A) 10 Days
B) 14 Days
C) 30 Days
D) 45 Days
E) 90 Days

Question 23

A[n] ______ bank is the first bank that receives the check for payment.

A) Payer
B) Payee
C) Depositary
D) Transfer
E) Acceptor

Question 24

Which of the following is the bank ultimately responsible for granting funds for a check?

A) Depositary.
B) Payor.
C) Collecting.
D) Intermediary.
E) Transferring.

Question 25

Which of the following is a bank receiving a transferred check during a collection process excluding the first bank and the last bank?

A) Depositary.
B) Acknowledging.
C) Collecting.
D) Intermediary.
E) Transferring.

Question 26

A[n] ______ is an institution created to facilitate banks in their exchange of checks and drafts drawn on one another, as well as to enable banks to settle their daily balances.

A) Clearinghouse
B) Transferring institution
C) Facilitating institution
D) Acknowledging institution
E) Approval institution

Question 27

In which of the following types of checks does the bank draw on itself to pay a specific person?

A) Certified.
B) Agreed.
C) Acknowledged.
D) Cashier's.
E) Promise.

Question 28

Under the ____, a bank has a duty to pay checks from a customer's account so long as the check is properly payable.

A) Account rule
B) Properly payable rule
C) Payability in fact regulation
D) Check pay rule
E) There is no such rule.

Question 29

The Federal Reserve System consists of ______ central banks.

A) Six
B) Eight
C) Twelve
D) Twenty
E) Thirty

Question 30

Under the UCC, if the customer does not notify the bank of an unauthorized signature within ______ after the statement has been made available, she cannot hold the bank liable for the payment.

A) 10 Days
B) 20 Days
C) 30 Days
D) 45 Days
E) 60 Days

Question 31

If a check is not presented to a bank within ____________ of its date, the check is considered stale check.

A) 30 Days
B) 90 Days
C) 6 Months
D) 9 Months
E) 1 Year

Question 32

A[n] _____________ check is a check that is drawn by one bank and is usually drawn on another bank.

A) Cashier's
B) Certified
C) Teller's
D) Acknowledged
E) Transferable

Question 33

A[n] ______ check is a check that is accepted at the bank at which it is drawn.

A) Cashier's
B) Certified
C) Acknowledged
D) Transferred
E) Drawee

Question 34

The ______ bank is the bank upon which a check is drawn.

A) Payor
B) Payee
C) Depositary
D) Transfer
E) Acceptor

Question 35

A[n] ______ check is a check for which both the drawer and the drawee are the same bank.

A) Certified
B) Agreed
C) Acknowledged
D) Cashier's
E) Promise

Question 36

When the depositary bank is the same bank as the payor bank, the check is referred to as a[n] ____.

A) On-us item
B) Combined item
C) Condensed item
D) Unitary item
E) Uniform item

Question 37

Which of the following is false regarding certified checks?

A) If a bank refuses to certify a check, the check is considered dishonored.
B) If a bank refuses to certify a check, the check lacks the extra protection of certification.
C) If a bank certifies a check, the drawer of the check is no longer liable for the amount of the check.
D) If a bank certifies a check, the bank has become primarily liable for the check.
E) Once a check is certified, funds of the customer are removed from his or her account and placed in the bank's certified check account.

Question 38

Which of the following is a bank, other than a payor bank, handling the check at any point from the time the check is deposited to the time it reaches the payor bank?

A) Depositary.
B) Acknowledging.
C) Collecting.
D) Intermediary.
E) Transferring.

Question 39

Assuming a proper and timely claim is made, which of the following is true regarding the UCC's allowance of full recovery in the event that certain types of checks are lost, stolen, or destroyed?

A) The UCC allows for full recovery if a cashier's check is lost, stolen, or destroyed; but full recovery is not allowed if a teller's check or certified check is lost, stolen, or destroyed.
B) The UCC allows for full recovery if a cashier's check or certified check is lost, stolen, or destroyed; but full recovery is not allowed if a teller's check is lost, stolen, or destroyed.
C) The UCC allows for full recovery if a cashier's, certified, or teller's check is lost, stolen, or destroyed.
D) The UCC allows for full recovery if a cashier's check is lost, stolen, or destroyed; but in regard to a teller's check or certified check, full recovery is only allowed if the instrument is lost or stolen, not if it is destroyed.
E) Because individuals are expected to properly safeguard checks, the UCC does not allow for recovery if a cashier's, teller's, or certified check is lost, stolen, or destroyed.

Question 40

If a customer makes a deposit over ____, the depositary bank may place an 8-day hold on the funds.

A) $1,000
B) $2,000
C) $3,000
D) $4,000
E) $5,000

Question 41

Which of the following was the result on appeal in Merisier v. Bank of America, the case in the text in which the plaintiff sued challenging the bank's determination that based on her involvement, she was not entitled to funds obtained through alleged fraudulent use of her debit card?

A) On the basis that it was not clearly erroneous, the court on appeal upheld the lower court's decision in favor of the bank.
B) Although recognizing that no deference was due the trial court's decision in favor of the defending bank, the appellate court ruled in favor of the defending bank based on its own review of the facts.
C) The appellate court ruled in favor of the defending bank on the basis that because the plaintiff's PIN number was used, she had no right to recover for alleged fraudulent transactions.
D) The appellate court ruled in favor of the plaintiff because the decision of the lower court in favor of the defending bank was clearly erroneous.
E) Recognizing that no deference was due the trial court's decision in favor of the defending bank, the appellate court ruled in favor of the plaintiff because the evidence preponderated in her favor.

Question 42

When money is transferred by an electronic terminal, telephone, or computer, this transfer is called a[n] ____.

A) Automatic fund transfer
B) Electronic fund transfer
C) Computer generated transfer
D) Wire transfer
E) Consumer electronic transfer

Question 43

Regardless of the care used in cashing a check by the bank, a customer must report a forgery within ________ from the date the bank statement showing the forgery is available to the customer or the customer will lose the right to recover.

A) 90 Days
B) 120 Days
C) 180 Days
D) 9 Months
E) 1 Year

Question 44

"Missing Earrings." Elaine ordered a pair of diamond stud earrings from BIG Jewelry Store. She paid in advance because the sales clerk told her that the store would have to pay the supplier before the earrings could be shipped. Later that day, Elaine found out from a friend of hers that BIG Jewelry Store was in financial trouble. Elaine was concerned and immediately called her bank and issued a stop-payment order on the check she wrote to BIG Jewelry Store. She gave the bank all of the correct information orally needed to stop-payment on the check. The bank, however, did not stop payment on the check. The check was paid, BIG Jewelry Store went bankrupt, and Elaine was unable to get either her money or the earrings from BIG Jewelry Store. Elaine asked the bank manager of the bank for a refund of the check amount. The bank manager told her that the stop-payment order was not good because it was oral and that in any event, under the UCC, banks are not liable for failing to stop payment on a check. The bank manager further told Elaine that the bank was a holder in due course, and that Elaine is liable for any damages sustained by BIG Jewelry Store or the bank based upon her attempt to stop payment on the check.

-Which of the following is correct regarding the manager's statement that stop-payment orders may not be oral?

A) The manager is incorrect because under the UCC, a stop-payment order may be given orally.
B) It depends on the amount of the check because oral stop-payment orders may only be given for checks in an amount over $500.
C) It depends on the amount of the check because oral stop-payment orders may only be given for checks in an amount under $500.
D) It depends on the amount of the check because oral stop-payment orders may only be given for checks in an amount under $1,000.
E) The manager is correct.

Question 45

"Missing Earrings." Elaine ordered a pair of diamond stud earrings from BIG Jewelry Store. She paid in advance because the sales clerk told her that the store would have to pay the supplier before the earrings could be shipped. Later that day, Elaine found out from a friend of hers that BIG Jewelry Store was in financial trouble. Elaine was concerned and immediately called her bank and issued a stop-payment order on the check she wrote to BIG Jewelry Store. She gave the bank all of the correct information orally needed to stop-payment on the check. The bank, however, did not stop payment on the check. The check was paid, BIG Jewelry Store went bankrupt, and Elaine was unable to get either her money or the earrings from BIG Jewelry Store. Elaine asked the bank manager of the bank for a refund of the check amount. The bank manager told her that the stop-payment order was not good because it was oral and that in any event, under the UCC, banks are not liable for failing to stop payment on a check. The bank manager further told Elaine that the bank was a holder in due course, and that Elaine is liable for any damages sustained by BIG Jewelry Store or the bank based upon her attempt to stop payment on the check.

-Which of the following is true regarding the bank manager's statement that the bank could not incur any liability for damages for the failure to stop payment on a check?

A) The manager is correct.
B) The manager is incorrect, and the bank will incur liability or damages suffered by a customer due to the failure to stop payment when a stop-payment order was properly provided.
C) The manager is incorrect, and the bank will incur liability or damages suffered by a customer due to the failure to stop payment when a stop-payment order was properly provided, but only up to $500.
D) The manager is incorrect, and the bank will incur liability or damages suffered by a customer due to the failure to stop payment when a stop-payment order was properly provided, but only up to $1,000.
E) The manager is incorrect, and the bank will incur liability or damages suffered by a customer due to the failure to stop payment when a stop-payment order was properly provided, but only up to $1,500.

Question 46

"Bad Check." Mindy, a bank teller, saw that customer Fred did not have sufficient funds in his account to cover a check presented for payment. Mindy was new and was confused about what to do with the check. She asked the bank manager, Trevor, about any available options. Trevor told her that the bank was required by law to dishonor the check, that the check should be returned to the holder with a notation that it had been dishonored, and that it could not be presented again. Mindy asked Trevor if there were any policies the bank could institute to provide customers with overdraft protection, and Trevor answered that those were prohibited by law.

-Which of the following is true regarding what a bank may do to offer overdraft protection to customers?

A) In regard to overdraft protection a bank may (1) credit a customer's checking account although federal law prohibits charging for this service, (2) link a checking account to the customer's savings account to cover the overdraft, and (3) link a checking account to the customer's credit card to cover the overdraft.
B) In regard to overdraft protection a bank may (1) credit a customer's checking account and charge for this service, (2) link a checking account to the customer's savings account to cover the overdraft, and (3) link a checking account to the customer's credit card to cover the overdraft.
C) In regard to overdraft protection a bank has only two options (1) link a checking account to the customer's savings account to cover the overdraft, and (2) link a checking account to the customer's credit card to cover the overdraft.
D) Under federal law, the only option open to a bank in the event of a customer's overdraft is to credit the customer's account although no charge may be made for the service.
E) Under federal law, the only option open to a bank in the event of a customer's overdraft is to credit the customer's account, and a charge may be made for the service.

Question 47

Which of the following governs consumer fund transactions in electronic fund transfers?

A) The Electronic Fund Transfer Act of 1978.
B) The Automated Transfer Act of 1990.
C) The Electronic Banking Act of 2000.
D) The Automated Fund Transfer Regulation of 2002.
E) The Uniform Money Services Business Act of 1990.

Question 48

"Bad Check." Mindy, a bank teller, saw that customer Fred did not have sufficient funds in his account to cover a check presented for payment. Mindy was new and was confused about what to do with the check. She asked the bank manager, Trevor, about any available options. Trevor told her that the bank was required by law to dishonor the check, that the check should be returned to the holder with a notation that it had been dishonored, and that it could not be presented again. Mindy asked Trevor if there were any policies the bank could institute to provide customers with overdraft protection, and Trevor answered that those were prohibited by law.

-Which of the following is true regarding Trevor's statement that the bank's only choice was to dishonor the check?

A) Trevor is correct.
B) Trevor is incorrect because under the UCC, the bank could have created an overdraft by paying the check and later charging the account the amount short.
C) Trevor is incorrect because under the UCC, the bank could have created a subsequent draft by paying the check, and the bank would then have needed to seek the customer's permission to charge his account the amount short.
D) Trevor is incorrect because under the UCC, the bank could have created a secondary draft by paying the check and charging the account the amount short.
E) Trevor is incorrect because under the UCC, the bank could have created an excessive draft by paying the check and closing the account at which point, the customer would be free to open a new account.

Question 49

Assuming the bank is not negligent, in the case of multiple forgeries by the same wrongdoer, what is the effect of a customer's failure to ever notify the bank of the first forgery in regard to subsequent forgeries?

A) There is no effect because each forgery stands on its own.
B) The customer is barred from recovering on the subsequent forgeries.
C) The customer may recover on a subsequent forgery if it is reported to the bank within 5 days after the statement showing the subsequent forgery is received by the customer.
D) The customer may recover on a subsequent forgery if it is reported to the bank within 10 days after the statement showing the subsequent forgery is received by the customer.
E) The customer may recover on a subsequent forgery if it is reported to the bank within 15 days after the statement showing the subsequent forgery is received by the customer.

Question 50

Which of the following is the period between the time a check is written and the time it is presented for final payment, during which time a customer can still use his or her funds?

A) Transfer time.
B) Electronic time.
C) Chargeable time.
D) Float time.
E) Usable time.

Question 51

"Bad Check." Mindy, a bank teller, saw that customer Fred did not have sufficient funds in his account to cover a check presented for payment. Mindy was new and was confused about what to do with the check. She asked the bank manager, Trevor, about any available options. Trevor told her that the bank was required by law to dishonor the check, that the check should be returned to the holder with a notation that it had been dishonored, and that it could not be presented again. Mindy asked Trevor if there were any policies the bank could institute to provide customers with overdraft protection, and Trevor answered that those were prohibited by law.

-Which of the following is true regarding Trevor's statement that once the check had been dishonored, it could not be presented again?

A) He was correct.
B) The holder can attempt to resubmit the check at a later date.
C) The holder may attempt to resubmit the check at a later date only if all endorsers of the check have been notified of the dishonor.
D) The holder may resubmit the check only if notice is given to the drawer.
E) The check may be presented again for payment only if notice has been given both to endorsers and the drawer.

Question 52

Which of the following is a deposit that is preauthorized and performed on a customer's account through an electronic terminal?

A) A point-of-sale.
B) An authorized deposit.
C) A transferred deposit.
D) A direct deposit.
E) An approved deposit.

Question 53

Which of the following is defined by the UCC as a change, without consent, that nullifies the obligation of a party to the instrument?

A) An alteration.
B) A defacement.
C) A material addition.
D) A transformation.
E) A reformation.

Question 54

Which of the following would be stored electronically on microchips, magnetic strips, or other computer media and would allow for the elimination of physical currency?

A) Electronic funds.
B) Electronic medium.
C) Digital cash.
D) Digital resources.
E) Electronic resources.

Question 55

Bill did not keep a close watch on his ATM card. He discovered, however, when he started to purchase some presents for his girlfriend that it was missing. Unfortunately, over $1,000 had been fraudulent purchased using the card by the time he reported it missing. The first fraudulent charge was made 45 days before Bill reported to his bank that the card was missing. Bill is liable for which of the following?

A) $0
B) $50
C) $300
D) $500
E) $1,000

Question 56

Generally, when an endorsement on a check has been forged, which party is the party ultimately liable for the loss?

A) The drawer.
B) The first party to accept the forged instrument.
C) The first endorser of the instrument.
D) The bank of the first party to accept the forged instrument.
E) The bank of the drawer even if proper notice was given of the forgery.

Question 57

If a customer's ATM card is lost or stolen, the customer must notify the bank within _____ and if that is done, the customer is then liable for only the first _____ stolen.

A) 5 Days; $50
B) 3 Days; $100
C) 2 Days; $50
D) 7 Days; $100
E) 10 Days; $500

Question 58

Which of the following allows a consumer to directly transfer funds from a banking account to a merchant?

A) An electronic authorized system.
B) A direct pay system.
C) An authorized direct pay system.
D) A point-of-sale system.
E) A pay-by-electronics system.

Question 59

Which of the following is a card containing microchips for storing data that can be used to transfer funds?

A) Stored-value cards.
B) Smart cards.
C) Intel cards.
D) Transfer cards.
E) Electronic cards.

Question 60

Which of the following is true regarding types of electronic fund systems?

A) Automated teller machines, pay-by-telephone systems, point-of-sale systems, and direct deposits are all types of electronic fund systems.
B) An automated teller machine is a type of electronic fund system; but pay by telephone systems, point-of-sale systems, and direct deposits are not types of electronic fund systems.
C) Automated teller machines and pay-by-telephone systems are types of electronic fund systems; but point-of-sale systems, and direct deposit systems are not types of electronic fund systems.
D) Automated teller machines and point-of-sale systems are types of electronic fund systems; but neither a direct deposit system nor a pay-by-telephone system is a type of electronic fund system.
E) Automated teller machines, point-of-sale systems, and direct deposits are all types of electronic fund systems; but a pay-by-telephone system is not a type of electronic fund system.

Question 61

"Missing Earrings." Elaine ordered a pair of diamond stud earrings from BIG Jewelry Store. She paid in advance because the sales clerk told her that the store would have to pay the supplier before the earrings could be shipped. Later that day, Elaine found out from a friend of hers that BIG Jewelry Store was in financial trouble. Elaine was concerned and immediately called her bank and issued a stop-payment order on the check she wrote to BIG Jewelry Store. She gave the bank all of the correct information orally needed to stop-payment on the check. The bank, however, did not stop payment on the check. The check was paid, BIG Jewelry Store went bankrupt, and Elaine was unable to get either her money or the earrings from BIG Jewelry Store. Elaine asked the bank manager of the bank for a refund of the check amount. The bank manager told her that the stop-payment order was not good because it was oral and that in any event, under the UCC, banks are not liable for failing to stop payment on a check. The bank manager further told Elaine that the bank was a holder in due course, and that Elaine is liable for any damages sustained by BIG Jewelry Store or the bank based upon her attempt to stop payment on the check.

-Which of the following is true regarding the bank manager's statement that the bank was a holder in due course, and that stop-payment orders could not affect the right of a holder in due course to collect?

A) The bank manager is wrong.
B) The bank manager is correct only if he can establish that the bank employee who actually paid the check had no knowledge of the stop-payment order.
C) The bank manager is correct unless Elaine can affirmatively prove that the bank employee who actually paid the check had knowledge of the stop-payment order.
D) The bank manager is correct unless Elaine can prove fraud in the factum on the part of BIG Jewelry.
E) The bank manager is correct unless Elaine can prove fraud in the factum on the part of BIG Jewelry and that the bank was aware of the fraud.

Question 62

What items should a stop payment order list?

Question 63

"Missing Earrings." Elaine ordered a pair of diamond stud earrings from BIG Jewelry Store. She paid in advance because the sales clerk told her that the store would have to pay the supplier before the earrings could be shipped. Later that day, Elaine found out from a friend of hers that BIG Jewelry Store was in financial trouble. Elaine was concerned and immediately called her bank and issued a stop-payment order on the check she wrote to BIG Jewelry Store. She gave the bank all of the correct information orally needed to stop-payment on the check. The bank, however, did not stop payment on the check. The check was paid, BIG Jewelry Store went bankrupt, and Elaine was unable to get either her money or the earrings from BIG Jewelry Store. Elaine asked the bank manager of the bank for a refund of the check amount. The bank manager told her that the stop-payment order was not good because it was oral and that in any event, under the UCC, banks are not liable for failing to stop payment on a check. The bank manager further told Elaine that the bank was a holder in due course, and that Elaine is liable for any damages sustained by BIG Jewelry Store or the bank based upon her attempt to stop payment on the check.

-Which of the following is correct regarding whether the bank will legally have to accept responsibility for the check presented by Renee?

A) The bank has no responsibility to repay Harold on the basis that because Renee was an employee, the check was not considered forged.
B) The bank will be required to repay Harold because the check was forged.
C) Harold will have to bear the loss because the check was paid before the bank had notice of the forgery.
D) Harold will not have to bear the loss because the forgeries were by an employee; otherwise, he would have had to bear the loss.
E) The bank will likely not be required to repay Harold because Harold's negligence in leaving the rubber stamp with his signature readily available likely substantially contributed to the forged signature.

Question 64

"Employee Problems." Harold, who is 97 years old, runs a successful hardware store. He never had any trouble with dishonest employees in the past. Unfortunately, he hired an assistant accountant, Renee, who had significant financial problems and began to steal from Harold. Renee came in early and took the rubber stamp of his signature that Harold kept in an unlocked drawer along with some checks and used the signature stamp to create a check payable to her. She then took it to the bank and cashed it. Harold, who was diligent in examining his bank statements, noticed the unauthorized check to Renee. He also noticed an unauthorized check cashed by Susie, another employee. Susie did not know about the stamp in the unlocked drawer and instead broke into Harold's personal office, stole checks from a locked cabinet, and skillfully forged his name. Harold immediately informed his bank about the check involving Renee. He held off, however, on informing the bank about Susie, who was twenty five, because he knew she had incurred some significant vet bills for her Corgi dogs, Baby and Bre. Harold also thought he might ask Susie for a date. Harold, who was honest, told the bank manager what he suspected had happened involving Renee taking his stamp and checks from the unlocked drawer. The bank manager told Harold that the bank was not required to reimburse Harold because Harold was responsible for his own losses. A few weeks later, Harold asked Susie out on a date. She told him that she couldn't go because she had started dating her veterinarian. Harold is very grumpy and tells the bank manager about the unauthorized check to Susie 35 days after he received his bank statement and discovered the forgery. Unfortunately, when Harold opened his next bank statement, it was discovered that after she wrote the first check, there had been several other forgeries by Susie. The bank was notified of those forgeries within 15 days of when Harold received his bank statement. The bank refused to reimburse Harold for the checks written by Susie again claiming that he was responsible for his own losses. Becoming grumpier by the minute, Harold institutes litigation against the bank.

-Which of the following is true regarding whether Harold will have to bear the loss on the first forged check by Susie?

A) Harold will not have to bear the loss because the forgeries were by an employee; otherwise, he would have had to bear the loss.
B) Harold will not have to bear the loss because the check was forged.
C) Harold will have to bear the loss because he did not notify the bank of the forgery within the time limit required.
D) Harold will have to bear the loss because the check was cashed before he notified the bank.
E) Harold will have to bear the loss because the check was forged.

Question 65

Bruce buys a used car from Tony for $5,000. The car is in great shape and Bruce leaves town in it. Bruce paid Tony with a cashier's check, but decided that he would rather not pay at all. Accordingly, he told the bank the check was stolen. What rights, if any, would Tony have and what liabilities and other problems, if any, would Bruce have?

Question 66

Set forth the characteristics that a traveler's check must have.

Question 67

"Employee Problems." Harold, who is 97 years old, runs a successful hardware store. He never had any trouble with dishonest employees in the past. Unfortunately, he hired an assistant accountant, Renee, who had significant financial problems and began to steal from Harold. Renee came in early and took the rubber stamp of his signature that Harold kept in an unlocked drawer along with some checks and used the signature stamp to create a check payable to her. She then took it to the bank and cashed it. Harold, who was diligent in examining his bank statements, noticed the unauthorized check to Renee. He also noticed an unauthorized check cashed by Susie, another employee. Susie did not know about the stamp in the unlocked drawer and instead broke into Harold's personal office, stole checks from a locked cabinet, and skillfully forged his name. Harold immediately informed his bank about the check involving Renee. He held off, however, on informing the bank about Susie, who was twenty five, because he knew she had incurred some significant vet bills for her Corgi dogs, Baby and Bre. Harold also thought he might ask Susie for a date. Harold, who was honest, told the bank manager what he suspected had happened involving Renee taking his stamp and checks from the unlocked drawer. The bank manager told Harold that the bank was not required to reimburse Harold because Harold was responsible for his own losses. A few weeks later, Harold asked Susie out on a date. She told him that she couldn't go because she had started dating her veterinarian. Harold is very grumpy and tells the bank manager about the unauthorized check to Susie 35 days after he received his bank statement and discovered the forgery. Unfortunately, when Harold opened his next bank statement, it was discovered that after she wrote the first check, there had been several other forgeries by Susie. The bank was notified of those forgeries within 15 days of when Harold received his bank statement. The bank refused to reimburse Harold for the checks written by Susie again claiming that he was responsible for his own losses. Becoming grumpier by the minute, Harold institutes litigation against the bank.

-Which of the following is true regarding whether Harold will have to bear the loss on the later forgeries, other than the first one, by Susie?

A) Harold will not likely have to bear the loss because there was no delay in bank notification.
B) Harold will not have to bear the loss because forgeries were involved.
C) Harold will not have to bear the loss because the forgeries were by an employee; otherwise, he would have had to bear the loss.
D) Harold will have to bear the loss because the checks were cashed before he notified the bank.
E) Harold will have to bear the loss because he did not notify the bank about the first forgery by Susie within 30 days.

Question 68

As set forth in the text, what does the Financial Services Modernization Act, also known as the Gramm-Leach Bliley Act provide regarding financial institutions and customer privacy?

Question 69

Set forth the requirements for a check to be considered properly payable.