Question 1

Caryn deposits a check in her bank at 2:30 on Monday.The bank may, under the Code, treat the check as having been deposited on Tuesday for purposes of meeting the midnight deadline rule.

Accepted Answer

According to the Uniform Commercial Code, a deposit made before the bank's cut-off time may be treated as being made on that same banking day. However, if it is made after the cut-off time, it may be treated as being made on the following banking day. Therefore, if Caryn deposited the check before the bank's cut-off time on Monday, it could be treated as being deposited on Monday for the purposes of meeting the midnight deadline rule.

Question 2

A critical issue in banking law is at what point an item is finally paid.

Accepted Answer

An item is considered finally paid when the funds have been irrevocably credited to the account of the payee and the payment cannot be reversed or revoked by the paying bank. This is an important concept in banking law and can have legal implications for both the payor and payee.

Question 3

A bank is permitted by statute to remove an original paper check from the check collection process and send a substitute check instead.

Accepted Answer

The Check Clearing for the 21st Century Act, also known as Check 21, permits banks to create and present substitute checks in place of original paper checks in order to expedite the check collection process. However, the substitute check must meet certain legal requirements and be the legal equivalent of the original check.

Question 4

Adjudication of drawer's incompetence will not affect the bank's ability to act with respect to the drawer until the bank knows and has a reasonable opportunity to act on this knowledge.

Accepted Answer

Adjudication of drawer's incompetence may affect the bank's ability to act with respect to the drawer, but only after the bank knows and has a reasonable opportunity to act on this knowledge. Until then, the bank can continue to act as if the drawer was competent.

Question 5

A provisional credit occurs at the time a depositary bank permits a customer to draw funds against the deposited check.

Accepted Answer

The answer of A provisional credit occurs at the time...

Question 6

Any unauthorized indorsement must be asserted within one year under the UCC's statute of limitations provision.

Accepted Answer

The Uniform Commercial Code (UCC) does not specify a one-year statute of limitations for asserting claims against unauthorized endorsements. The statute of limitations can vary depending on the type of claim and the jurisdiction.

Question 7

The relationship between the payor bank and its checking account customer is exclusively governed by statute and leaves no room for contractual modifications.

Accepted Answer

While there are statutory provisions governing the relationship between the payor bank and its checking account customer, there is also room for contractual modifications through the account agreement between the two parties.

Question 8

A bank may pay a check after the death of its customer for ten days following the date of his death unless a person claiming an interest in the account orders the bank to stop making such payments.

Accepted Answer

This is known as a "payment against death" rule and is commonly followed by banks. However, there may be variations in the specific number of days allowed and whether or not the rule applies to certain types of accounts or circumstances.

Question 9

Banks like electronic funds transfers because they eliminate the float time that a drawer enjoys on a checking account and the paperwork involved in processing checks.

Accepted Answer

Electronic funds transfers allow for immediate transfer of funds without any physical checks or processing, eliminating the potential for float time and reducing paperwork.

Question 10

If First Bank receives a check for collection on Friday at 4:30 p.m., it does not have to present the check to the payor bank by midnight Saturday.

Accepted Answer

According to the Uniform Commercial Code, banks have until the end of the next banking day to present checks for collection, excluding weekends and holidays. Therefore, if First Bank receives a check for collection on Friday at 4:30 p.m., it has until the end of business on Monday to present the check to the payor bank.

Question 11

Goble, the seller, obtains authority from Meigs, the buyer, to debit Meigs's account after Goble ships the goods.Article 4A covers this transaction.

Accepted Answer

Article 4A of the Uniform Commercial Code (UCC) covers funds transfers, including wire transfers, not transactions involving the shipment of goods and the debiting of a buyer's account by the seller.

Question 12

If a bank receives a check on Tuesday, it must take proper action, such as forwarding or presenting it, by midnight of Wednesday.

Accepted Answer

This is based on the "midnight deadline" concept in banking regulations, where a bank receiving a check for payment typically has until midnight of the next business day to take proper action on the check, such as forwarding it for payment or returning it if necessary.

Question 13

If a bank pays on a check even though it has a "stop payment order," the bank is liable to the customer only if the customer can prove a loss because of the payment.

Accepted Answer

This is known as the "midnight deadline rule" and is a standard practice among banks. The burden of proof is on the customer to show that they suffered a loss as a result of the payment being made despite the stop payment order.

Question 14

Point-of-sale systems permit customers to charge items to a charge account at a bank.

Accepted Answer

Point-of-sale systems facilitate the processing of transactions at retail locations by accepting various forms of payment from customers, such as cash, credit cards, and debit cards, but they do not directly permit customers to charge items to a bank charge account.

Question 15

Article 4 of the UCC, entitled "Bank Deposits and Collections" provides the principal rules governing bank collection practices.

Accepted Answer

Article 4 of the UCC does indeed provide the principal rules governing bank deposits and collections.

Question 16

A payor bank is under no obligation to its customer to pay an uncertified check that is more than six months old.

Accepted Answer

This statement is true according to the Uniform Commercial Code (UCC). Section 4-404(a) of the UCC states that a payor bank is not obligated to pay an item that is presented more than six months after its date of issue, unless the customer has agreed to pay the item despite its staleness.

Question 17

Collecting banks give to a transferee the same basic warranties as those given by other parties who transfer commercial paper, except they also may give encoding warranties.

Accepted Answer

Collecting banks do give transferees the same basic warranties as other parties who transfer commercial paper, but they may also give encoding warranties.

Question 18

Alvero tries to make a $75 withdrawal from an ATM, but the terminal has run out of cash.The bank is liable to Alvero for damages proximately caused by its failure to make the EFT.

Accepted Answer

Under Regulation E, which implements the Electronic Fund Transfer Act, a financial institution is not liable for damages in a situation where the terminal has run out of cash. The regulation provides certain protections and requirements for electronic fund transfers, but it does not hold banks liable for not completing a transaction due to lack of cash in the machine.

Question 19

If a depositor in First Bank takes a check written on Valley Bank to First Bank to deposit, it will not normally be credited to his account until collected from the payor bank.

Accepted Answer

The answer of If a depositor in First Bank takes...

Question 20

The Check Clearing for the 21st Century Act requires banks to accept checks in electronic form.

Accepted Answer

The answer of The Check Clearing for the 21st Century...

Quiz 27: Bank Deposits, Collections, and Funds Transferspart Vi: Agency