Deck 17: Managing a Business: Making Payments and Recovering Debts

Question 1

What is a 'bill of exchange'?

A)The old name for a cheque
B)An endorsed cheque
C)A written order by the drawer to the drawee instructing them to pay money to a third party
D)A cheque with the words 'not negotiable' written on it

Answer 1

C

Question 2

A cheque made payable to a particular person is called:

A)a bearer cheque.
B)an order cheque.
C)an endorsed cheque.
D)a crossed cheque.

Answer 2

B

Question 3

Which of the following is not expected from a bank customer to meet their obligation to protect their PIN or password?

A)The customer must not tell the PIN or password to another person.
B)The customer should choose a PIN or password that is easy to recall (e.g.their birthdate).
C)The customer must not write the PIN on the card or keep it stored near the card.
D)The customer must not act with extreme carelessness when recording their pin.

Answer 3

B

Question 4

When a customer challenges a credit card transaction that appears on their statement, who bears the onus of proof?

A)The onus is on the merchant to prove that the transaction took place.
B)The onus is on the customer to prove that the transaction did not take place.
C)The onus is on the card issuer to prove that the transaction did not take place.
D)The onus is on the bank to resolve any dispute.

Question 5

What is the legal effect of using a credit card?

A)A cheque is drawn on a financial institution to pay for goods and services purchase by the credit holder.
B)The vendor selling the product advances credit to the purchaser and the debt is later paid by the card issuer.
C)The bank undertakes payment on behalf of the card issuer and the amount becomes a debt payable to the card holder.
D)The card issuer undertakes payment on behalf of the card holder and the amount becomes a debt payable by the card holder to the card issuer.

Question 6

A mortgage is a security for a loan given over the borrower's:

A)real property.
B)personal property.
C)debt capital
D)equity capital.

Question 7

Johnny Little borrows $300 000 from Bank Bigge in exchange for giving the bank a mortgage on his farmland.Bank Bigge is a:

A)debtor.
B)unsecured creditor.
C)secured creditor.
D)guarantor.

Question 8

Legal tender is best defined as:

A)cash payment.
B)currency that cannot be legally refused in payment of a debt.
C)cash, cheques, credit cards or electronic funds transfer payments.
D)currency.

Question 9

What is the effect of 'crossing' a cheque with two parallel lines?

A)The cheque is revoked.
B)The cheque becomes non-transferable.
C)The cheque must be paid into the bearer's, payee's or transferee's own bank account.
D)The cheque becomes not negotiable.

Question 10

What is the effect of marking a cheque 'not negotiable'?

A)The payment figure on the cheque cannot be altered.
B)The cheque must be paid into a bank account
C)A transferee cannot obtain better title than the transferor.
D)The cheque becomes non-transferable.

Question 11

What is 'negotiability'?

A)The name for the principle that means that 'no one gives what one does not have'.
B)A name that describes the fact that something can be transferred and the transferee will obtain good title even if the transferee did not have good title.
C)The name that describes the bargaining room that exists in terms of the type of payment one can make for goods or services.
D)The quality currency has when it cannot be legally refused in payment of a debt.

Question 12

The definition of a cheque under the Cheques Act 1986 (Cth) stipulates that a cheque is really a certain kind of order.The definition does not include a requirement that such an order:

A)is conditional.
B)is addressed by a person to a financial institution.
C)is signed.
D)that requires the financial institution to pay a sum on demand.

Question 13

Which of the following statements about debit cards is true?

A)A debit card uses the funds of the card holder to pay for the transaction.
B)A debit card is similar to a credit card except that it has a lower credit limit.
C)A debit card cannot be used for online transactions.
D)A debit card is another name for a credit card.

Question 14

In which of the following circumstances is a debtor not empowered to apply to a Court for changes to be made to a credit contract?

A)When the debtor is a corporation.
B)When the debtor cannot meet the repayments because they are experiencing hardship.
C)When the credit contract is unjust.
D)When the debtor was unable to pay the amount required under the consumer contract and the creditor could have ascertained this through appropriate enquiries.

Question 15

Which of the following terms is not a name given to of one of the parties to a bill of exchange?

A)Drawer
B)Drafter
C)Drawee
D)Payee

Question 16

Which of the following steps is not one of the usual steps associated with processing credit card transactions?

A)Authorisation
B)Collation
C)Batching
D)Clearing and settlement

Question 17

Which of the following transactions need not be reported to AUSTRAC by a cash dealer?

A)A $15 000 cash deposit by a customer.
B)A request by a customer to transfer $2000 from their account to an account in Hong Kong.
C)A $5000 cash deposit by a customer followed immediately by a second deposit in the amount of $6000.
D)A payment in cash of $8000 by a customer.

Question 18

To which of the following transactions does the EFT code not apply?

A)Cheque transactions
B)Internet and telephone banking transactions
C)Transactions involving the purchase of products using electronic transfer at the time of sale (EFTPOS)
D)Withdrawals or deposits from an automatic teller machine (ATM)

Question 19

Which of the following is not true of a bank cheque?

A)It is a cheque drawn by a financial institution on itself.
B)It must be handwritten rather than typed.
C)It is seen to be more reliable than a personal cheque.
D)It is often used when a transaction involves a large sum of money.

Question 20

What is the difference between a bill of exchange and a cheque?

A)A cheque is a bill of exchange in which the drawee is a financial institution.
B)A bill of exchange is a form of cheque in which the drawee is a financial institution.
C)A bill of exchange is negotiable whereas a cheque is not.
D)A cheque is negotiable whereas a bill of exchange is not.

Question 21

Under a mortgage of old system land, when is the mortgagee entitled to take possession of the mortgaged property?

A)At any time because the mortgagee is the legal owner of the property.
B)Only when the mortgagor defaults on payment by 2 months.
C)Only when the mortgagor is in breach of a condition of the mortgage.
D)Only after obtaining a court judgement granting them possession.

Question 22

Which of the following obligations is not one that a credit provider must generally comply with if it wishes to enforce a credit contract?

A)To serve a default notice on the debtor.
B)To obtain a court order before repossessing mortgaged goods.
C)To serve appropriate notices after taking possession of goods or selling them.
D)To offer to vary the interest rate and charges to make them more manageable for the debtor.

Question 23

Which of the following terms is not implied into a mortgage at common law?

A)The mortgagee will release the mortgage upon payment of all money due under the mortgage.
B)On default by the mortgagor, the mortgagee can demand payment of the principal and interest in full.
C)All money spent by the mortgagee in maintaining the mortgaged property represents additional charges for which the mortgagor must pay interest.
D)The mortgagee must insure against loss or damage by fire all buildings and improvements on the property.

Question 24

Legal proceedings against a debtor will generally be most appropriate when:

A)the relationship between debtor and creditor has to be preserved.
B)it is cost effective for the debt to be written off.
C)ADR is unsuccessful or inappropriate and the debt is substantial.
D)the debtor must be punished.

Question 25

What is a 'guarantee'?

A)An arrangement in which a secured creditor has the right to sell the charged property on default by the debtor.
B)A type of mortgage.
C)An arrangement in which a person promises to repay a loan in the event that the debtor fails to do so.
D)Security for a loan to a company over a particular asset or class of assets.

Question 26

A customer's credit report does not:

A)include personal references as to the customer's business reputation.
B)provide details of credit applications made in the past.
C)list credit defaults.
D)list information that is already publicly available (e.g.bankruptcy reports).

Question 27

Which of the following matters need not be included in a letter of demand?

A)Details of the outcome that will follow from judgement in favour of the creditor.
B)Details of the outstanding debt.
C)A fixed date by which payment must be made.
D)A statement demanding payment.

Question 28

A 'creditor' is:

A)a banking institution.
B)a lending institution.
C)any person to whom money is owed.
D)an institution that advances credit.

Question 29

A business's credit policy will not generally address:

A)the circumstances and terms on which the business will distribute funds to its creditors.
B)the circumstances in which a client will be given credit.
C)the repayment methods and terms the business will accept.
D)the process for recovering debt and the circumstances in which it will be activated.

Question 30

The form of ADR that occurs when two or more parties put their dispute in the hands of an independent and expert third party in order for that party to resolve the matter is called:

A)delegation.
B)abdication.
C)mediation.
D)arbitration.

Question 31

Which of the following statements is true of a mortgage of old system land?

A)The mortgagee is the legal owner of the real property.
B)The mortgagee is the equitable owner of the real property.
C)The mortgagee is both the legal owner and the equitable owner of the real property.
D)The mortgagee is neither the legal owner nor the equitable owner of the real property.

Question 32

What happens if a guarantor is called upon to satisfy the debtor's obligations?

A)The contract of guarantee is modified so that the guarantor is named as the debtor.
B)The guarantor can recover his funds from the creditor.
C)The rights of the creditor against the debtor are exercisable by the guarantor against the debtor.
D)The guarantee is automatically discharged.

Question 33

Which of the following is not a legal consequence of registering a charge?

A)The charge is enforceable against a liquidator.
B)The lender has priority over the holders of unregistered charges.
C)The lender has priority over all other lenders.
D)The charge is enforceable against third parties.

Question 34

The 'right of redemption' in relation to a mortgage of Torrens system land refers to:

A)the mortgagee's right to insist upon the execution of a registrable release of the mortgage by the mortgagor upon payment of the loan.
B)the mortgagor's right to insist upon the execution of a registrable release of the mortgage by the mortgagee upon payment of the loan.
C)the mortgagor's right to redeem the land in the event of a late payment.
D)the mortgagee's right to redeem the land if all payments were made as contracted.

Question 35

A 'debtor' is:

A)a person who is bankrupt or insolvent.
B)a person whose liabilities exceed their assets.
C)a person who owes money to another.
D)a person to whom money is owed under a mortgage agreement.

Question 36

Which of the following is not a condition that must be satisfied before a mortgagee can exercise their power of sale?

A)A default must be made by the mortgagor.
B)A notice of exercise of power of sale must be served upon the mortgagor.
C)30 days must pass after service of the notice without payment or rectification.
D)The mortgagor must agree to the sale price.

Question 37

Jake takes a loan and provides his vintage Ford Cortina as security.This arrangement is known as a:

A)personal property security.
B)fixed charge.
C)bill of lading.
D)real property mortgage.

Question 38

Which of the following events will not have the effect of automatically discharging a guarantee?

A)Full payment of the debt.
B)Modification of the loan contract by the creditor without the consent of the guarantor.
C)Destruction of the security for the loan by the creditor.
D)Alteration of the loan contract by the debtor without the consent of the creditor.

Question 39

In relation to a mortgage of old system of land, the mortgagor's interest in the land is protected by:

A)the fact that they are the legal owner.
B)a signed release document.
C)a covenant in the deed of conveyance.
D)a caveat on the register.

Question 40

The form of ADR that takes place when a third party helps two or more parties to a dispute to reach their own agreement about how a legal matter can be resolved is called:

A)counselling.
B)mediation
C)arbitration.
D)litigation.

Question 41

What kind of documentation is a credit provider not obliged to provide to a debtor under the National Credit Code?

A)A copy of the credit policy of the business
B)A written contract
C)A pre-contractual statement
D)An information statement

Question 42

A writ of execution which allows an officer of the court to seize the debtor's assets is also known as:

A)a warrant of execution.
B)a search warrant.
C)an executory writ of summons.
D)a garnishee summons.

Question 43

A plaintiff will be entitled to default judgement in circumstances where:

A)the plaintiff is successful at the Court hearing.
B)the defendant is successful at the Court hearing.
C)there is no Court hearing because the debtor has failed to respond to the statement of claim.
D)the defendant files a defence that is not accepted by the Court.

Question 44

Which of the following is not one of the consequences for a business of breaching the National Credit Code?

A)A civil suit
B)Civil penalties
C)Criminal penalties
D)The appointment of a receiver

Question 45

Which of the following is not an obligation that is imposed by the National Credit Code on credit providers when advertising?

A)Not to engage in misleading and deceptive advertising.
B)To include a comparison rate in certain advertisements to help debtors work out the true cost of a loan.
C)To include the annual percentage rate of the loan and statements of applicable fees and charges.
D)Not to engage in unconscionable conduct or gross negligence.

Question 46

To which of the following transactions does the National Credit Code apply?

A)A retailer who allows their customer to pay for goods and services on credit.
B)A creditor who offers short term credit where the creditor's fees and charges are less than 5% of the loan and the interest rate is less than 24%
C)An employer who offers his employee a loan.
D)A creditor who offers a housing loan.

Question 47

The National Credit Code seeks to protect debtors by creating uniform requirements regarding:

A)consumer rights and bankruptcy.
B)the recovery of debts in the courts.
C)the ADR processes applicable to debt recovery matters.
D)credit arrangements and recovery of outstanding debts.

Question 48

A document that describes the way a notice or document was brought to the attention of another party to Court proceedings is called:

A)an affidavit.
B)an affidavit of service.
C)an affidavit of debt.
D)a writ of execution.

Question 49

When the Court directs a third party, who owes money to the judgement creditor, to pay that money directly to the judgement creditor, it is called:

A)a warrant of execution.
B)a garnishee order.
C)a warrant cheque.
D)an affidavit of execution.

Question 50

'Responsible lending' under the National Credit Code encompasses obligations on the part of the licensed credit provider not to provide credit that is:

A)high interest and short term.
B)unlikely to generate a good return for the lender.
C)unsuitable for the consumer.
D)in fact low-doc or payday lending.

Question 51

The National Credit Code imposes on all holders of an Australian credit license an obligation to engage in:

A)Charitable lending
B)Responsible lending
C)Payday lending
D)Conservative lending

Question 52

An 'examination summons' is:

A)a statement of claim.
B)an order directing a sheriff to search or examine a debtor's premises or documents.
C)a process by which a Court examines a debtor's financial position to ascertain their ability to pay a debt.
D)an order directing a third party who owes money to the judgement debtor the pay it directly to the judgement creditor.