Question 1

Federal currency reporting laws require financial institutions to report the receipt in a single transaction or a series of related transactions of cash in an amount greater than $5,000.

Accepted Answer

Federal currency reporting laws require financial institutions to report transactions involving cash amounts greater than $10,000, not $5,000.

Question 2

Banks must credit all customers' deposits to their accounts on the same day that the deposits are received.

Accepted Answer

While banks strive to credit deposits on the same day they are received, there is no legal requirement for them to do so. The Federal Reserve only requires that banks make funds available within a certain time frame, which varies depending on the type of deposit and method of depositing.

Question 3

If a bank does not honor a check when there are sufficient funds in a drawer's account to pay a properly payable check,it is liable for wrongful dishonor.

Accepted Answer

This is known as the "wrongful dishonor rule" and it holds the bank liable for damages if they wrongfully refuse to honor a properly payable check.

Question 4

When a bank wrongfully dishonors a check,both the drawer and the payee can recover reasonable damages from the bank.

Accepted Answer

The drawer can recover damages for wrongful dishonor, but the payee cannot, as the bank's duty is to the drawer, not the payee.

Question 5

If the same wrongdoer engages in a series of forgeries or alterations on the same account,the customer must report that to the payer bank within a reasonable period of time,not exceeding one (1)year from the date that the bank statement was made available to the customer.

Accepted Answer

The answer of If the same wrongdoer engages in a...

Question 6

Written stop-payment orders are renewable for 90-day periods after the initial order expires.

Accepted Answer

Written stop-payment orders are typically valid for six months and can be renewed for additional six-month periods, not 90-day periods.

Question 7

The Uniform Commercial Code places the risk of loss of an incomplete check on the payee.

Accepted Answer

According to the Uniform Commercial Code, the risk of loss of an incomplete check falls on the drawer, not the payee. However, if the check is completed and then lost or destroyed, the risk of loss typically falls on the party who last had possession of the check.

Question 8

When a payee or holder receives a check,he or she can either go to the payer bank and present the check for payment in cash,or deposit the check into the depository bank.

Accepted Answer

This statement is true. A payee or holder can either receive cash by presenting the check at the payer bank, or deposit the check into their own depository bank for future use.

Question 9

A forged check is never "properly payable."

Accepted Answer

A forged check is not authorized by the account holder and therefore cannot be considered a valid payment from their account. As a result, a bank cannot properly pay out on a forged check.

Question 10

If a bank pays a check with a forged drawer's signature,the bank has a duty to credit the drawer's account if given timely notification.

Accepted Answer

According to the Uniform Commercial Code, if a bank pays a check with a forged drawer's signature, the bank is liable for any resulting loss and has a duty to credit the drawer's account if given timely notification.

Question 11

The collection process is governed by Article 2 of the Uniform Commercial Code.

Accepted Answer

Article 2 of the Uniform Commercial Code governs the sale of goods, not the collection process. The collection process is typically governed by Article 9, which deals with secured transactions.

Question 12

A banking day is any day that the particular bank is open to the public for carrying on substantially all banking functions.

Accepted Answer

A banking day is indeed any day that the particular bank is open to the public for carrying on substantially all banking functions.

Question 13

Banks cannot charge interest on the overdrafts of its customers.

Accepted Answer

Banks are allowed to charge interest on the overdrafts of its customers. The interest rates charged vary from bank to bank and can be quite high.

Question 14

A bank cannot pay a drawer's check if sufficient funds are not in the drawer's account,unless prior arrangements,such as an overdraft protection line of credit,have been made.

Accepted Answer

The answer of A bank cannot pay a drawer's check...

Question 15

An oral stop-payment order is effective for seven days.

Accepted Answer

An oral stop-payment order is typically effective for 14 days, not seven, unless confirmed in writing within that period.

Question 16

The drawer's failure to report a forged or altered check to the bank within one year of receiving the bank statement and cancelled checks containing it relieves the bank of any liability for paying the instrument.

Accepted Answer

According to the Uniform Commercial Code (UCC), specifically section 4-406, if the drawer fails to report a forged or altered check to the bank within one year of receiving the bank statement and cancelled checks containing it, the bank is relieved of liability for paying the instrument.

Question 17

When a customer deposits a check into a checking account for collection,the depository bank does not have to pay the customer the amount of the check until the check "clears," which is when final settlement occurs.

Accepted Answer

This is correct, the depository bank typically puts a hold on the funds until the check fully clears, which can take several business days or more depending on the amount and issuer of the check. During this time, the customer's account balance may reflect the deposited amount, but the funds are not actually available for withdrawal until after the check clears.

Question 18

A written stop-payment order is effective for one (1)year.

Accepted Answer

A written stop-payment order typically remains effective until the payment is stopped, the check expires, or the account is closed. There is no specific time limit of one year.

Question 19

If a payer bank wrongfully dishonors a check,it is liable to the drawer for damages caused by criminal prosecution.

Accepted Answer

If a payer bank wrongfully dishonors a check, it could be liable for damages caused by criminal prosecution as well as damages due to harm caused to the reputation of the drawer.

Question 20

When the amount of a check has been wrongfully altered to a higher amount than it was originally for,the drawer is generally liable only for the original amount of the check,assuming the drawer gives appropriate notice of the alteration to the bank.

Accepted Answer

This is known as the "fictitious payee rule." As long as the drawer reports the alteration to the bank in a timely manner, they will only be liable for the original amount of the check, not the altered amount. However, if the drawer was negligent in protecting the check or failed to report the alteration in a timely manner, they may be held liable for the full amount of the altered check.

Quiz 22: Banking System, E-Money, and Financial Reform