Deck 19: Checks and Banking in the Digital Age

Question 1

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

Answer 1

False

Question 2

A check orders a bank to pay a fixed amount of money on demand.

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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

Question 5

To transfer checkbook dollars among different banks,each bank acts as an agent of collection for its customer.

Question 6

A bank is subject to a civil suit if its customer writes a bad check.

Question 7

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

Question 8

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

Question 9

A bank's duty to honor its customers' checks is absolute.

Question 10

A stale check is one that has been outstanding for longer than six months.

Question 11

Under the UCC,a bank is "a person engaged in the business of banking."

Question 12

A bank is never liable for failing to honor a customer's stop-payment order.

Question 13

A drawee bank may be liable to its drawer customer if the bank refuses to honor the drawer's check when there are sufficient funds in the account.

Question 14

An oral stop payment order is valid for fourteen days.

Question 15

Generally,a bank has no obligation to pay a customer's overdrafts.

Question 16

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

Question 17

Once a check "bounces," a holder cannot resubmit it for payment.

Question 18

When a bank certifies a check,it immediately charges the drawer's account.

Question 19

A person who writes a bad check is subject to a civil suit only.

Question 20

Banks are required to constantly verify the life and competence of their drawers.

Question 21

Deferred posting is the process of dishonoring checks for insufficient funds.

Question 22

Elmo pays First Star 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 23

Rikki writes a check "pay to the order of Scholar University" drawn on Rikki's account in Town Bank to pay her tuition.Rikki is

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

Question 24

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

Question 25

A customer who fails to examine a bank statement and report a forged signa?ture may be liable for later forgeries by the same wrongdoer.

Question 26

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

Question 27

A payor bank is also a collecting bank.

Question 28

A bank that pays a customer's check with a forged indorsement must recredit the customer's account.

Question 29

A bank is never obligated to recredit a customer's account when it pays a check with the cus?tomer's forged signature.

Question 30

Simplex Wholesalers,Inc. ,asks Theta Purchasing Com?pany to pay for goods with a certified check.A cer?tified check

A)cannot be forged.
B)does not discharge its drawer from liability.
C)does not discharge prior indorsers from liability.
D)is guaranteed by a bank.

Question 31

Digital cash consists of funds stored on microchips.

Question 32

A customer does not need to examine a bank statement and report his or her forged signa?ture to recover from the bank for the forgery.

Question 33

Dill writes a check to Elvira on his account at Flagstone Bank.The bank dishonors the check even though Dill has sufficient funds in his ac?count.The bank is

A)liable to Dill only.
B)liable to Dill and Elvira.
C)liable to Elvira only.
D)not liable to Dill or Elvira.

Question 34

Generally,the funds represented by a deposited local check are available for withdrawal within one business day.

Question 35

Financial institutions are not required to inform customers of their rights and responsibilities with respect to electronic fund transfer systems.

Question 36

Jaqi is the holder and payee of a check drawn by Kerin on Lake City Bank.Jaqi takes the check to the bank to have it certified.After certification

A)Kerin is discharged on the check.
B)Kerin is primarily liable on the check.
C)the bank is discharged on the check.
D)the bank is secondarily liable on the check.

Question 37

Federal laws that prohibit unauthorized access to electronic communica?tions may apply to e-money transactions.

Question 38

Most checks are processed manually.

Question 39

Generally,a cash deposit is available for withdrawal the same business day.

Question 40

A customer has sixty days from the date of receipt of a statement of an electronic transfer to notify the financial institution of any er?rors.

Question 41

Fact Pattern 19-2
Ruth opens a checking account with State Bank.The bank agrees to accept responsibility for the difference between the original amount of any check that Ruth draws on the account and the amount actually paid on the item due to its unauthorized but undetected alteration.
Refer to Fact Pattern 19-2.The agreement between Ruth and State Bank

A)cannot change the effect of the UCC.
B)is in accord with the UCC.
C)violates federal banking regulations.
D)violates the UCC.

Question 42

Fact Pattern 19-3
Ryley draws a check,on his account in Second National Bank in New York,payable to Tuner TV,Inc. ,in San Francisco.Tuner deposits the check in its ac?count at US Bank.US 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 Second National.
Refer to Fact Pattern 19-3.US Bank (Tuner's bank)is

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

Question 43

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

A)Elle,but not the bank.
B)the bank,which cannot recover from Elle.
C)the bank,which can recover from Elle.
D)no one.

Question 44

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

A)forgery.
B)fraud.
C)negligence.
D)robbery.

Question 45

Quimby writes a check to Rico on May 1 that is drawn on Quimby's ac?count at Seven Seas Bank.Rico presents the check on December 15.The bank is

A)not obligated to pay the check under any circumstances.
B)not obligated to pay the check unless Rico can show he is an HDC.
C)obligated to pay the check if there are sufficient funds in Quimby's account.
D)obligated to pay the check under any circumstances.

Question 46

On Monday,Oona deposits in her account at Pinky Bank a local check for $500.After 5:00 p.m.on Friday,Oona can withdraw no more than

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

Question 47

Fact Pattern 19-3
Ryley draws a check,on his account in Second National Bank in New York,payable to Tuner TV,Inc. ,in San Francisco.Tuner deposits the check in its ac?count at US Bank.US 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 Second National.
Refer to Fact Pattern 19-3.When US 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 48

Jon writes a check to Keyes as payment for a DVD player but soon discov?ers the player is broken.Jon goes to the drawee bank and orally author?izes Larry,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 49

After Ben's death,his heir Cathy asks his assistant Erin to no?tify Ben's bank,First National Bank.On being notified,the bank can pay or certify checks drawn by Ben,on or before the date of his death,unless Cathy asks to stop all payments,for

A)an indefinite period.
B)sixty days after the date of death.
C)ten days after the date of death.
D)thirty days after the date of death.

Question 50

Esau writes a check drawn on Flex Bank to pay Grey Office Supply for six filing cabinets.Later,Esau discovers defects in the goods and orders the bank to stop payment on the check.Esau does not renew the order,and the bank clears the check eight months later.The bank

A)must recredit Esau's account and substitute acceptable goods.
B)must recredit Esau's account or substitute acceptable goods.
C)must substitute acceptable goods but not recredit Esau's account.
D)need not recredit Esau's account or substitute acceptable goods.

Question 51

First Neighborly Bank agrees to honor Glen's checks even when his ac?count has insufficient funds.Later,the bank refuses to pay an item pay?able to Holly that would create an overdraft.The bank is

A)liable to Glen only.
B)liable to Glen and Holly.
C)liable to Holly only.
D)not liable to Glen or Holly.

Question 52

Fact Pattern 19-1
Viva takes her car to We-Can-Fix-It,Inc. ,which repairs the car and bills her for $500.She writes a check drawn on Xenon Bank,but later,believing that We-Can-Fix-It did not repair the car properly,issues a stop-payment order.
Refer to Fact Pattern 19-1.Xenon Bank

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

Question 53

Clearwater Bank agrees to honor Dockside Boatbuilders,Inc.'s checks even when its account has insufficient funds.Edna,Dockside's bookkeeper,writes the checks.Later,the bank refuses to pay an item payable to Fleet Supply Company that would create an overdraft.This is

A)a wrongful dishonor.
B)Dockside's liability.
C)Edna's responsibility.
D)Fleet's loss.

Question 54

Fact Pattern 19-3
Ryley draws a check,on his account in Second National Bank in New York,payable to Tuner TV,Inc. ,in San Francisco.Tuner deposits the check in its ac?count at US Bank.US 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 Second National.
Refer to Fact Pattern 19-3.Second National Bank (Ryley's bank)is

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

Question 55

Freetown Bank pays a check on which has been forged the signature of the drawer,Greg,who is a Freetown customer.The bank must recredit Greg's account for the entire amount of the check if

A)the amount of the check was less than $1,000.
B)the amount of the check was more than $2,500.
C)the bank's negligence substantially contributed to the forg?ery.
D)Greg's negligence substantially contributed to the forg?ery.

Question 56

Fact Pattern 19-1
Viva takes her car to We-Can-Fix-It,Inc. ,which repairs the car and bills her for $500.She writes a check drawn on Xenon Bank,but later,believing that We-Can-Fix-It did not repair the car properly,issues a stop-payment order.
Refer to Fact Pattern 19-1.Xenon Bank pays the check.The bank

A)can sue Viva for a wrongful stop-payment order.
B)can sue We-Can-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 Viva's loss due to the wrongful payment.

Question 57

Fact Pattern 19-2
Ruth opens a checking account with State Bank.The bank agrees to accept responsibility for the difference between the original amount of any check that Ruth draws on the account and the amount actually paid on the item due to its unauthorized but undetected alteration.
Refer to Fact Pattern 19-2.Ruth writes a check for $50 "payable to the order of Tom." Tom alters the amount to $5,000 and cashes the altered check at State Bank.State Bank files a suit against Ruth to recover $4,950.The court is most likely to rule that

A)Ruth does not have to pay because State Bank can afford the loss.
B)Ruth must pay $4,950 but she can recover the amount from Tom.
C)State Bank can recover $5,000 from Ruth.
D)State Bank is responsible for the amount under its agreement.

Question 58

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

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

Question 59

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

A)Kip in a civil suit.
B)Kip in a criminal prosecution.
C)Liberty Bank in an administrative proceeding.
D)neither Kip nor Local Liberty.

Question 60

Leda orders 1,000 imprinted pens from Mark-It Promotions for which she draws a check on N Bank for $100.Leda accepts the first shipment of 100 pens,refuses to accept future shipments,and issues a stop-payment or?der.The bank pays the check.Leda can recover from the bank

A)$0.
B)$10.
C)$90.
D)$100.

Question 61

Fleece 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 62

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

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

Question 63

Fact Pattern 19-3
Ryley draws a check,on his account in Second National Bank in New York,payable to Tuner TV,Inc. ,in San Francisco.Tuner deposits the check in its ac?count at US Bank.US 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 Second National.
Refer to Fact Pattern 21-3.If Second National Bank failed to meet its deadline for dishonoring or returning the check,it would be accountable for

A)neither the amount of the check nor the cost of its transfer be?tween banks.
B)the amount of the check and the transfer cost.
C)the amount of the check but not the transfer cost.
D)the transfer cost only.

Question 64

City Bank mistakenly transfers $1,000 from the account of Deanna,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 Deanna'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 violation of the Electronic Fund Transfer Act.How might the court rule?

Question 65

Cubby's debit card,issued by Downstate Bank,is stolen and used without Cubby's permission.Cubby tells the bank within a day and a half.Cubby may be re?quired to pay no more than

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

Question 66

E-Bank,an online financial institution,gives financial information about Paula and other customers to a federal agency without the cus?tomers' permission.E-Bank may be liable under

A)the Federal Trade Commission Act.
B)the Financial Services Modernization Act.
C)the Right to Financial Privacy Act.
D)the Uniform Electronic Transactions Act.

Question 67

Five-Star Bank has certain obligations with respect to consumer data and privacy under

A)Article E of the Uniform Commercial Code.
B)the Electronic Fund Transfer Act.
C)the Federal Trade Commission Act.
D)the Financial Services Modernization Act.

Question 68

On Monday,Seth deposits into his account at TriCounty Bank a $500 check from Ubie,who also has an account at TriCounty.On that same day,this check is considered

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

Question 69

Online Community Bank,an online financial institution,sells nonpublic personal information about Pinto and other customers to E-Marketers,Inc. ,an unaffiliated third party,without permission.The bank may be li?able under

A)the Federal Trade Commission Act.
B)the Financial Services Modernization Act.
C)the Right to Financial Privacy Act.
D)the Uniform Electronic Transactions Act.

Question 70

Ladd knowingly divulges to Media Exposure magazine information about Niki's e-money payments to Omni Bank.The payments were in trans?mission to Omni Bank when Ladd,without the consent of Niki or the bank,discovered and revealed them.This may be a violation of

A)the Electronic Communications Privacy Act.
B)the Federal Reserve Board's Regulation E.
C)the Right to Financial Privacy Act.
D)the Uniform Electronic Transactions Act.

Question 71

Grande Bank has fourteen branch offices.Grande must establish market areas next to these offices under

A)the Community Reinvestment Act.
B)the Federal Reserve Board's Regulation E.
C)the Federal Trade Commission Act.
D)the Home Mortgage Disclosure Act.

Question 72

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?