Deck 27: B: Checks and Banking in the Digital Age

Question 1

No financial institution can disclose nonpublic personal information about a consumer to an unaffiliated third party under any circumstances.

Answer 1

False

Question 2

The first bank to receive a check for payment is the intermediary bank.

Answer 2

False

Question 3

A drawer is liable to the holder of a check if the check is not honored.

Answer 3

True

Question 4

If a bank fails to detect an alteration on a customer's check,it is liable to its customer for the loss.

Question 5

Only a customer or a person authorized to draw on an account can order a bank not to pay a check when it is presented for payment.

Question 6

Bank customers cannot demand that their original canceled checks be returned with their monthly statement.

Question 7

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

Question 8

A check that is presented for payment more than one month from its date is a stale check.

Question 9

Each bank in a collection chain must pass a check on before midnight of the next business day following its receipt.

Question 10

The maximum time that a bank can hold funds from deposited checks be?fore making them available to the depositor will not change.

Question 11

Any local check deposited must be avail?able for withdrawal by check or as cash within one business day from the date of deposit.

Question 12

When a bank pays a check on which the drawer's signature is forged,generally the customer suffers the loss.

Question 13

A certified checks is an instrument that has been accepted for payment by the bank on which it is drawn.

Question 14

The death of a customer immediately revokes a bank's authority to pay an item.

Question 15

Any failure of a bank to honor a check because it would create an over?draft is a wrongful dishonor.

Question 16

A customer has two days to discover and notify the bank of any error on the monthly statement involving an electronic transfer of funds.

Question 17

A customer can escape liability for failing to notify the bank of forged or altered checks when the customer can prove that the bank was negligent.

Question 18

A creditor-debtor relationship can exist between a bank and its customer.

Question 19

A bank that pays a customer's check bearing a forged indorsement is not obligated to recredit the customer's account.

Question 20

A bank that encodes information on an item after the item has been is?sued warrants to any subsequent bank that the encoded information is correct.

Question 21

Paris knowingly divulges to Media Exposure magazine information about Randy's e-money payments to City Bank without the consent of Randy or City Bank.Paris may be in violation of federal law

A)if the e-payments were in transmission at the time.
B)if the e-payments have not yet been made.
C)if the e-payments are not represented by paper checks.
D)under none of these circumstances.

Question 22

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 ac?count "bounce." Most likely liable for the costs to Liu is

A)any party to whom a subsequent check was written.
B)Liu.
C)Marv.
D)National.

Question 23

Fact Pattern 27-1A
Mike loses his National Bank access card.He realizes his loss the next day but waits a week to call National.Meanwhile,Opal finds and uses Mike's card to withdraw $3,000 from Mike's account.
Refer to Fact Pattern 27-1A.Mike is responsible for

A)$0.
B)$50.
C)$500.
D)$3,000.

Question 24

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)the certifier.
B)the drawee.
C)the drawer.
D)the payee.

Question 25

Fact Pattern 27-1A
Mike loses his National Bank access card.He realizes his loss the next day but waits a week to call National.Meanwhile,Opal finds and uses Mike's card to withdraw $3,000 from Mike's account.
Refer to Fact Pattern 27-1A.When Mike receives his National statement,he demands that the bank investigate the matter and recredit his ac?count.The bank

A)has no duty to investigate.
B)must investigate and,if the dispute is not resolved within ten days,recredit Mike's account (at least until the dispute is resolved).
C)must investigate and immediately recredit Mike's account (at least until the dispute is resolved).
D)must investigate but need not recredit Mike's account.

Question 26

eBank,an online financial institution,gives financial information about Frieda and other customers to a federal agency.eBank may be in viola?tion of federal law

A)if the agency did not have a warrant.
B)if the institution is not deemed to be a bank.
C)if the institution did not issue its customers credit or debit cards.
D)under none of these circumstances.

Question 27

Smith & Jones Associates is a business customer of Superior Bank.Under fed?eral law,Smith & Jones cannot demand

A)any proof of payment except Superior's good faith.
B)monthly statements.
C)recrediting of its account on payment of a forged item.
D)the return of its original checks with its monthly statements.

Question 28

Roald writes a check for $700 to Savannah.Savannah indorses the check in blank and transfers it to Twitchell,who alters the check to read $7,000 and presents it to Union Bank,the drawee,for payment.The bank cashes it.Roald discovers the alter?ation and files a suit against the bank.Roald can recover

A)$7,000.
B)$6,300.
C)$700.
D)0.

Question 29

Darwin signs a check "pay to the order of Eva Marie" drawn on Darwin's account in First Funds Bank and dates the check "April 1." Eva Marie presents the check to the bank for payment on November 12.This is

A)a stop-payment order.
B)an overdraft.
C)a postdated check.
D)a stale check.

Question 30

Elmer can write checks on his account at Finance City Bank.Gina steals the checks,forges Elmer's signature,and cashes the checks at Finance City.The bank is excused from any liability if,after receipt of the first forged check,Elmer fails to report the forgeries within

A)five days.
B)fourteen days.
C)one year.
D)three years.

Question 31

On Monday morning,Bob deposits into his account at County Bank a $500 check from Dyna,who also has an account at County Bank.On that same day,this check is considered

A)cashiered.
B)certified.
C)paid.
D)provisionally credited.

Question 32

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

A)Drew will be liable for the amount.
B)Eppie will have to pay Drew for the amount.
C)Fidelity will have to recredit Drew's account.
D)the Federal Reserve will reimburse all parties for their costs.

Question 33

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

A)Kareem in a civil suit.
B)Kareem in a criminal prosecution.
C)Liberty Bank in an administrative proceeding.
D)the Federal Reserve.

Question 34

First Community Bank agrees to accept a check by setting aside suffi?cient funds to cover the amount.This check is considered

A)cashed.
B)certified.
C)deposited.
D)provisionally credited.

Question 35

Johnny writes a check to Katie as payment for a 3D DVD player but soon discov?ers the player is broken.He goes to the drawee bank and orally author?izes Sissy,a bank officer,to stop payment on the check.This order is valid for

A)fourteen days.
B)fourteen months.
C)six days.
D)six months.

Question 36

Brandy forges Caleb's signature on a check "payable to the order of Brandy" drawn on Caleb's account in Delphi Bank.Caleb's forged signa?ture is

A)effective if an innocent third party accepts the check.
B)effective to the degree that it matches Caleb's genuine signature.
C)effective to the extent that Downtown Bank debits Caleb's account.
D)not effective.

Question 37

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

A)a cashier's check.
B)a certified check.
C)a trade acceptance.
D)a traveler's check.

Question 38

Thelma signs a check "pay to the order of Uri" drawn on Thelma's ac?count in Verity Bank.Thelma has $400 in her account but the amount of the check is $500,which the bank pays.This is

A)a dishonored check.
B)an overdraft.
C)a postdated check.
D)a stale check.

Question 39

Shakira issues a check drawn on Thrifty Bank to United Office Supply to pay for six computer desks.Later,Shakira discovers defects in the goods 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)must recredit Shakira's account.
B)must obtain funds from United to cover the amount of the check.
C)must substitute acceptable goods.
D)need not recredit Shakira's account.

Question 40

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

A)a certificate of deposit.
B)a check.
C)a note.
D)a trade acceptance.

Question 41

Hoppy steals two checks from Eagle Retail Stores,Inc.: a blank check and a check payable to the order of General Supplies Company (GSC),drawn on Eagle's account with First National Bank.Hoppy forges Eagle's sig?na?ture on the blank check and makes it payable to himself.Hoppy forges GSC's indorsement on the back of the check payable to GSC,and adds "Pay to the order of Hoppy." At Friendly Credit,Inc. ,Hoppy indorses the back of both checks with his own name and gives them to Friendly for cash.Friendly does not know about the theft or the forged signatures and presents the checks to First National,which pays them.Eagle,which was not negli?gent,discovers the forgeries and asks First National to recredit its ac?count.Who suffers the loss on each check?

Question 42

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 in violation of the Electronic Fund Transfer Act.How might the court rule?