Deck 27: A: Checks,the Banking System,and E-Money

Question 1

When a customer's negligence contributes to a forgery,the bank normally is obligated to recredit the customer's account for the amount of the check.

Answer 1

False

Question 2

Whenever a bank-customer relationship is established,certain contractual rights and duties arise.

Answer 2

True

Question 3

A drawer must have a valid legal ground for issuing a stop-payment order,or the holder can sue the drawer for payment.

Answer 3

True

Question 4

A customer has a right to stop payment on a check that has been certified.

Question 5

The bank on which a check is drawn is the depositary bank.

Question 6

A bank is not obligated to pay an uncertified check presented more than six months from its date.

Question 7

UCC Articles 3 and 4 govern issues relating to checks.

Question 8

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

Question 9

No one can refuse to accept a substitute check as proof of payment.

Question 10

Under Check 21,the maximum time that a bank can hold funds from deposited checks before making them available to the depositor will increase.

Question 11

Any local check deposited must be avail?able for withdrawal by check or as cash within not more than five business days from the date of deposit.

Question 12

Gaining unauthorized access to an electronic fund transfer system constitutes a federal felony.

Question 13

A bank that has certified a check is under no obligation to accept it.

Question 14

When a bank properly dishonors a check for insufficient funds,it has no liability to the customer.

Question 15

A bank has no right to charge a customer's account for the amount of a stale check.

Question 16

A check is a special type of draft.

Question 17

A forged signature on a check has no legal effect as the signature of a drawer.

Question 18

If a customer's debit card is lost or stolen and used without permission,the customer shall be required to pay no more than $50 in any event.

Question 19

A bank may charge a postdated check against a customer's account.

Question 20

At the present time,it is not clear which,if any,laws apply to the security of e-money issuers' financial records.

Question 21

Fact Pattern 27-1B
Echo takes her car to Fix-It,Inc. ,which repairs the car and bills Echo for $500.Echo writes out a check drawn on Capital Bank,but later,believing that Fix-It did not repair the car properly,issues a stop-payment order.
Refer to Fact Pattern 27-1B.If Capital Bank pays the check,Capital

A)can sue Echo for a wrongful stop-payment order.
B)can sue Fix-It for breach of contract.
C)can sue no one because it paid a check that was not properly payable.
D)is liable for Echo's loss due to the wrongful payment.

Question 22

Kirk presents an instrument that states "pay to the order of Liv" to Metro Bank for payment.This is a special type of draft drawn on a bank,ordering the bank to pay a fixed amount of money on demand.This is

A)a certificate of deposit.
B)a check.
C)a debit card transaction receipt.
D)a trade acceptance.

Question 23

Delilah's debit card,issued by Encarta Bank,is stolen and used without Delilah's permission.Delilah tells the bank within thirty days.Delilah may be re?quired to pay no more than

A)$5.
B)$50.
C)$500.
D)$5,000.

Question 24

Fact Pattern 27-2B
Thom draws a check,on his account in State Bank in New York,payable to Digital Computers,Inc. ,in San Francisco.Digital deposits the check in its ac?count at First National Bank.First National deposits the check in the Federal Reserve Bank of San Francisco,which transfers it to the Federal Reserve Bank of New York.That Federal Reserve Bank sends the check to State Bank.
Refer to Fact Pattern 27-2B.Thom's bank is

A)the cashing bank.
B)the depositary bank.
C)the intermediary bank.
D)the payor bank.

Question 25

Brendan signs a check "pay to the order of City College Bookstore" drawn on his account in Delmar Bank to pay for his current semester's textbooks.The bookstore deposits the check in its account in Evergreen Bank.Like most checks,this check is

A)a one-party instrument.
B)a four-party instrument.
C)a three-party instrument.
D)a two-party instrument.

Question 26

Steve steals one of Tricia's checks and forges her signature.Tricia's bank,Unity Bank,pays the check.Tricia can recover from

A)Steve,but not Unity Bank.
B)Unity Bank,which cannot recover from Steve.
C)Unity Bank,which can recover from Steve.
D)no one.

Question 27

Taki forges Uriel's signature on a check "payable to the order of Taki" drawn on Uriel's account in Verity Bank.Most likely,if the bank pays the check

A)the Federal Reserve will reimburse all parties for their costs.
B)the loss will be covered by Verity's insurance policy.
C)Uriel will be liable for the amount.
D)Verity will have to recredit Uriel's account.

Question 28

Cornucopia Bank receives a check drawn on the account of Get-Rich Industries,Inc. ,one of the bank's customers,at 3 p.m.Friday.Harry,the pre?senter of the check,is not one of the bank's customers.The bank uses de?ferred posting with a 2 p.m.cutoff hour.If it decides to dis?honor the check,it must do so by midnight

A)Saturday.
B)Sunday.
C)Monday.
D)Tuesday.

Question 29

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

A)$100.
B)$400.
C)$500.
D)$600.

Question 30

London knowingly divulges to BreakingNews.com information about Neandro's e-money payments to Oracle Oil Corporation without the consent of Neandro or Oracle.London may be in violation of federal law

A)if the e-payments were in electronic storage at the time.
B)if the e-payments were legitimate.
C)if the e-payments are not represented by physical evidence.
D)under none of these circumstances.

Question 31

Fact Pattern 27-1B
Echo takes her car to Fix-It,Inc. ,which repairs the car and bills Echo for $500.Echo writes out a check drawn on Capital Bank,but later,believing that Fix-It did not repair the car properly,issues a stop-payment order.
Refer to Fact Pattern 27-1B.Capital Bank

A)is liable to Fix-It for the amount of the check.
B)must stop payment if Capital has a reasonable time to act.
C)need not stop payment unless Echo had a valid reason to act.
D)need not follow Echo's order unless the check was certified.

Question 32

Fact Pattern 27-2B
Thom draws a check,on his account in State Bank in New York,payable to Digital Computers,Inc. ,in San Francisco.Digital deposits the check in its ac?count at First National Bank.First National deposits the check in the Federal Reserve Bank of San Francisco,which transfers it to the Federal Reserve Bank of New York.That Federal Reserve Bank sends the check to State Bank.
Refer to Fact Pattern 27-2B.When Digital's bank received the check,it was required to pass it on

A)before midnight of the next banking day.
B)before midnight of the next day,whether or not it was a "banking" day.
C)before noon of the next banking day.
D)within five business days.

Question 33

Fact Pattern 27-2B
Thom draws a check,on his account in State Bank in New York,payable to Digital Computers,Inc. ,in San Francisco.Digital deposits the check in its ac?count at First National Bank.First National deposits the check in the Federal Reserve Bank of San Francisco,which transfers it to the Federal Reserve Bank of New York.That Federal Reserve Bank sends the check to State Bank.
Refer to Fact Pattern 27-2B.Digital's bank is

A)the cashing bank.
B)the depositary bank.
C)the intermediary bank.
D)the payor bank.

Question 34

Daria writes a check for $100 drawn on Estimable Bank and presents it to Fast Cash,Inc. ,for payment.If the check is not backed by sufficient funds,Daria may be prosecuted for

A)forgery.
B)fraud.
C)negligence.
D)nothing.

Question 35

Daisy writes a check to Elvita on her account at First Savings Bank.The bank dishonors the check even though Daisy has sufficient funds in her ac?count.The bank is

A)liable to Daisy.
B)liable to itself.
C)liable to the next payee on one of Daisy's checks.
D)not liable.

Question 36

Ian buys a cell phone in Jiffy Mart,using the means that accounts for more retail payments than any other.This means of payment is

A)a commercial check.
B)a debit card.
C)a personal check.
D)a trade acceptance.

Question 37

Clay issues a check payable to Discount Mart.Ernestina,Discount's cashier,forges the store's indorsement and deposits the check in her bank ac?count.Clay's bank,First Friendly Bank,pays the check.Clay can recover from

A)Ernestina,who can recover from First Friendly Bank.
B)First Friendly Bank,which cannot recover from Ernestina.
C)First Friendly Bank,which can recover from Ernestina.
D)no one.

Question 38

Sullivan signs a check "pay to the order of Tilly" drawn on Sullivan's account in Universal Bank.Velma forges Tilly's indorsement,Washington Bank cashes the check.Velma disappears.Universal pays Washington and debits Sullivan's account.Most likely,the ultimate loss will fall on

A)Sullivan.
B)Tilly.
C)Universal Bank.
D)Washington Bank.

Question 39

Jen signs a check "pay to the order of Key" drawn on Jen's account in Lakeland Bank to buy Key's car.Jen asks Lakeland Bank to indicate on the face of the check that it will accept it when Key presents it for payment.If the bank agrees,this will be

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

Question 40

Pippi,the manager of Quik Mart,deposits the store's receipts in its account at Regional Bank.As to the receipts,the relation?ship between Quik Mart and the bank is

A)attorney and client.
B)creditor and debtor.
C)guardian and ward.
D)trustee and beneficiary.

Question 41

Joy steals a check from Kyle,forges his signature,and transfers the check to Loco Loans,Inc. ,for value.Unaware that the signature is not Kyle's,Loco Loans presents the check to Metro Bank,the drawee,which cashes the check.Kyle discovers the forgery and insists that Metro recredit his account.Can Metro refuse? If not,from whom can the bank recover?

Question 42

Tiny authorizes United Bank to make transfers from his account to make payments on his debt to Vic's Auto Dealership,which sold Tiny the car that serves as collateral for the debt.After three payments,Vic's repos?sesses the car and refuses to return it.Tiny phones the bank to stop the payments and follows up with a confirm?ing letter.The bank fails to stop the next two payments,and Vic's refuses to refund anything.Can Tiny get his money from the bank? Explain.