Question 1

________ allows a consumer to directly transfer funds from a banking account to a merchant.

Accepted Answer

A point-of-sale (POS) system allows consumers to directly transfer funds from their banking account to a merchant at the time of purchase, typically using a debit card.

Question 2

Which of the following was the result on appeal in Merisier v. Bank of America, the case in the text in which the plaintiff sued challenging the bank's determination that based on her involvement, she was not entitled to funds obtained through alleged fraudulent use of her debit card?

Accepted Answer

The appellate court upheld the lower court's decision in favor of the bank, finding no clear error in the determination that the plaintiff was not entitled to the funds due to her involvement.

Question 3

Sam did not keep track of his ATM card. One day he realized that he had not seen the card in a while, and, after looking for it, realized that it was missing. Unfortunately, over $1,000 had been fraudulently purchased using the card by the time Sam reported it missing. The first fraudulent charge was made 45 days before Sam reported to his bank that the card was missing. Which of the following is Sam liable for?

Accepted Answer

Sam is liable for up to $500 if he reports the card missing more than 60 days after the statement is sent. Since he reported it 45 days after the first fraudulent charge, he is liable for up to $500.

Question 4

[Bad Check] Alana, a bank teller, saw that customer Liam did not have sufficient funds in his account to cover a check presented for payment. Alana was new and was confused about what to do with the check. She asked the bank manager, Pedro, about any available options. Pedro told her that the bank was required by law to dishonor the check, the check should be returned to the holder with a notation that it had been dishonored, and that it could not be presented again. Alana asked Pedro if there were any policies the bank could institute to provide customers with overdraft protection, and Pedro answered that those were prohibited by law.
-Which statement is true regarding Pedro's statement that the bank's only choice was to dishonor the check?

Accepted Answer

Pedro is incorrect because under the Uniform Commercial Code (UCC), banks have the option to cover checks even when there are insufficient funds in the account, creating an overdraft. The bank can then charge the account holder for the overdraft amount.

Question 5

A(n) ________ is defined by the UCC as a change, without consent, that nullifies the obligation of a party to the instrument.

Accepted Answer

An alteration, as defined by the Uniform Commercial Code (UCC), is any unauthorized change to a negotiable instrument that modifies the obligation of a party to the instrument. This could include changes to the amount payable, the date of payment, or any other term that affects the duty of a party.

Question 6

Which of the following would be stored electronically on microchips, magnetic strips, or other computer media and would allow for the elimination of physical currency?

Accepted Answer

Digital cash is specifically designed to mimic the functionality of physical cash in an electronic format, allowing for transactions and storage on electronic devices, thereby facilitating the potential elimination of physical currency.

Question 7

The Electronic Fund Transfer Act of 1978 sets out which of the following?

Accepted Answer

The Electronic Fund Transfer Act of 1978 primarily addresses the rights, liabilities, and protections for consumers engaging in electronic fund transfers, ensuring consumers are protected in transactions like ATM withdrawals, direct deposits, and transfers between accounts.

Question 8

What type of e-money uses microchips for storing data that can be used to transfer funds?

Accepted Answer

Smart cards use microchips to store data, including financial information, which can be used to transfer funds securely.

Question 9

Generally, when an endorsement on a check has been forged, which party is the party ultimately liable for the loss?

Accepted Answer

The first party to accept the forged instrument is generally liable because they had the opportunity to verify the authenticity of the endorsement before accepting it.

Question 10

Michael just started a new job at Sheridan Hospital, Inc. Michael's bi-weekly paycheck is deposited into his bank account for him electronically by Sheridan Hospital payroll services. This is known as ________

Accepted Answer

Direct deposit is a method where paychecks are electronically deposited into an employee's bank account by their employer, which is the case with Michael's arrangement with Sheridan Hospital, Inc.

Question 11

Assuming the bank is not negligent, in the case of multiple forgeries by the same wrongdoer, what is the effect of a customer's failure to notify the bank of the first forgery in regard to subsequent forgeries?

Accepted Answer

The customer is barred from recovering on the subsequent forgeries because the failure to notify the bank of the first forgery generally precludes the customer from claiming losses from any subsequent forgeries by the same wrongdoer, assuming the bank was not negligent. This is based on the principle that the customer's notification could have prevented further forgeries by the same individual.

Question 12

If a customer's ATM card is lost or stolen, the customer must notify the bank within ________; if that is done, the customer is then liable for only the first ________ stolen.

Accepted Answer

Under most banking regulations, including the Electronic Fund Transfer Act in the United States, if a customer notifies the bank within two business days after learning of the loss or theft of their ATM card, the customer's liability for unauthorized transactions is limited to $50.

Question 13

Regardless of the care used in cashing a check by the bank, a customer must report a forgery within ________ from the date the bank statement showing the forgery is available to the customer or the customer will lose the right to recover.

Accepted Answer

A customer must report a forgery within 1 year from the date the bank statement showing the forgery is available to the customer, according to the Uniform Commercial Code (UCC).

Question 14

An oral stop payment order is valid for ________ unless the order is later confirmed in writing.

Accepted Answer

An oral stop payment order is valid for 14 days unless it is confirmed in writing, which then extends its validity.

Question 15

Which of the following is true regarding types of electronic fund systems?

Accepted Answer

Automated teller machines (ATMs), pay-by-telephone systems, point-of-sale (POS) systems, and direct deposits are all recognized types of electronic fund transfer systems, facilitating the electronic movement of money from one account to another.

Question 16

________ time is the period between the time a check is written and the time it is presented for final payment, during which time a customer can still use his or her funds.

Accepted Answer

Float time refers to the interval between when a check is written and when it is cleared and settled by the banking system. During this period, the funds are still available in the payer's account for use.

Question 17

Nolan receives his bank statement from his bank on January 5th and notices a check that was cashed from his account for $350. The check was not authorized and Nolan does not let the bank know right away because he leaving that day to go on vacation. Nolan forgets about the unauthorized payment until March 10th. At this point, with regards to the check,

Accepted Answer

Nolan cannot hold the bank liable for the check because he failed to report the unauthorized transaction in a timely manner. Banks typically require customers to report unauthorized transactions within a specific timeframe (often 30 to 60 days from the statement date) to be eligible for reimbursement. Since Nolan waited over two months to report the issue, he has likely missed the window to hold the bank responsible.

Question 18

Lulu received a Christmas check from her Aunt Beatrice. She forgets about the check and finds it the next October. When she goes to cash the check, the bank refuses to honor the check. This check is considered ________.

Accepted Answer

The check is considered "stale" because it was not cashed within a reasonable time frame, typically six months from the date it was issued. After this period, banks may refuse to honor the check.

Question 19

Under the ________, a bank has a duty to pay checks from a customer's account so long as the check is properly payable.

Accepted Answer

The "Properly Payable Rule" is a principle in banking that obligates a bank to honor checks from a customer's account if the checks are properly payable, meaning they are legitimate, correctly filled out, and the account has sufficient funds.

Question 20

A[n] ________ is when money is transferred by an electronic terminal, telephone, or computer.

Accepted Answer

Electronic fund transfer is the correct term for when money is moved via electronic terminals, telephones, or computers.

Quiz 29: Checks and Electronic Fund Transfers