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

Question 1

A principal-agent relationship is formed between a customer and the bank if a deposit is a check that the bank must collect for the customer.

Answer 1

True

Question 2

When a bank certifies a check,it agrees in advance (1)to accept the check when it is presented for payment and (2)to pay the check out of funds set aside from the customer's account and either placed in a special certified check account or held in the customer's account.

Answer 2

True

Question 3

A check is a note in which the drawee is a bank.

Answer 3

False

Question 4

As a holder,the payee of a check can either demand payment or indorse the check to another person.

Question 5

With a certified check,the certification expires when the check becomes stale.

Question 6

Uniform Commercial Code Section 3-104(f)defines a check as an order by the drawer to the drawee bank to pay a specified sum of money from the drawer's checking account to the named payee (or holder).

Question 7

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was designed to increase competition in the banking system.

Question 8

A check can be indorsed multiple times before being presented for payment.

Question 9

The issuing bank serves as both the drawer and drawee of a cashier's check.

Question 10

When a check is certified,the certification acts as a discharge regarding the drawer's liability on the check.

Question 11

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

Question 12

Prior to the 1920s,the banking system in the United States was subject to strict regulation by the federal government.

Question 13

Article 3 of the Uniform Commercial Code establishes the rules and principles that regulate bank deposit and collection procedures for checking accounts offered by commercial banks.

Question 14

The drawee is the customer who maintains the checking account and writes (draws)checks against the account.

Question 15

Article 4 of the Uniform Commercial Code establishes the requirements for negotiable instruments.

Question 16

Certified checks and cashier's checks are types of "bank checks."

Question 17

The payee is the party to whom a check is written.

Question 18

Promissory notes are the most common form of negotiable instrument used in the United States.

Question 19

Article 4A of the Uniform Commercial Code establishes rules that regulate the creation and collection of and liability for wire transfers.

Question 20

Bank checks are usually considered "as good as cash" because the bank is solely or primarily liable for payment.

Question 21

Certified checks are payable at any time from the date they are issued.

Question 22

Assume a drawer gives an incomplete check to a payee without including the amount of the check,and the payee completes the check by filling in a higher amount than that authorized by the drawer; if the bank pays the check according to the unauthorized terms,the drawer is generally liable for payment of the check as completed.

Question 23

A bank that pays a stale check in good faith may charge the drawer's account.

Question 24

Once a check becomes stale,the bank is no longer obligated to pay it.

Question 25

A bank is not obligated to certify a check.

Question 26

An obligated bank that wrongfully refuses to pay a cashier's check is liable to the person who asserts the right to enforce the check for expenses,loss of interest resulting from non-payment,and consequential damages.

Question 27

A bank's refusal to certify a check constitutes a dishonor of the check.

Question 28

Drawers sometimes write checks that omit certain information,such as the amount of the check or the payee's name,either on purpose or by mistake.These are called "implied-in-law" checks.

Question 29

The drawer can stop payment on a certified check.

Question 30

A check is a certified check when the bank writes or stamps the word "certified" across the face of an ordinary check.

Question 31

Banks are liable for any damages caused by paying any postdated check prior to its date.

Question 32

When a cashier's check is presented for payment,the issuing bank debits its own account.

Question 33

Certified checks can be stopped by the drawer if they notify the drawee before the check has been presented.

Question 34

A check that has been outstanding for more than three (3)months is considered "stale."

Question 35

When a customer opens a checking account at a bank,the customer impliedly agrees to keep sufficient funds in the account to pay any checks written against it.

Question 36

The purchaser of a cashier's check is not required to have a checking account at the issuing bank.

Question 37

Only the drawer can order a stop-payment order.

Question 38

Under UCC 4-401(c),to require a bank to abide by a postdated check,the drawer need only postdate the check to some date in the future.

Question 39

A cashier's check is a cancellable,non-negotiable instrument upon its issue.

Question 40

Certified checks never become stale.

Question 41

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.

Question 42

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

Question 43

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.

Question 44

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

Question 45

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.

Question 46

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

Question 47

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

Question 48

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.

Question 49

A forged check is never "properly payable."

Question 50

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.

Question 51

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

Question 52

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

Question 53

Banks cannot charge interest on the overdrafts of its customers.

Question 54

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.

Question 55

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

Question 56

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.

Question 57

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.

Question 58

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

Question 59

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

Question 60

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.

Question 61

The only wire payment system is the Federal Reserve wire transfer network.

Question 62

If one of the "four legals" is received by a bank,even if the bank has finished its process of posting,the check cannot be paid contrary to the legal notice or action.

Question 63

A check where the drawer and payee have accounts at different banks is known as an "on them" item.

Question 64

When a bank ________ a check,it agrees in advance (1)to accept the check when it is presented for payment and (2)to pay the check out of funds set aside from the customer's account.

A) ratifies
B) acknowledges
C) certifies
D) notarizes
E) processes

Question 65

When a customer makes a deposit into a bank,a ________ relationship is formed.

A) principal-agent
B) trustee-beneficiary
C) donor-donee
D) creditor-debtor
E) creditor-donor

Question 66

One major benefit of using a wire transfer is the speed of the transaction.

Question 67

The drawer's bank is also known as the payer bank.

Question 68

Which of the following is characteristic of both cashier's checks and traveler's checks?

A) requirement of a countersignature when used
B) usually available only in certain fixed denominations
C) must be certified before they can be negotiated
D) They are frequently issued by companies other than banks.
E) The same party serves as both the drawee and the drawer.

Question 69

Certified checks and cashier's checks are also known as ________ checks.

A) bank
B) blank
C) traveler's
D) non-negotiable
E) accepted

Question 70

When a wire transfer is involved,a bank that issues an erroneous payment order has the burden of recovering the payment from the improper beneficiary.

Question 71

A principal-agency relationship is created between a customer and a bank:

A) only if the customer deposits a check that the bank must collect for the customer.
B) any time the customer deposits an amount into the customer's checking account.
C) only when the customer writes a check against her account.
D) if the customer deposits a check that the bank must collect for the customer, or if the customer writes a check against his or her account.
E) if the customer has an overdraft and the bank needs to collect.

Question 72

Commercial or wholesale wire transfers may be used to transfer payments between businesses and financial institutions.

Question 73

The Dodd-Frank Wall Street Reform and Consumer Protection Act is the greatest overhaul of the United States financial system since major banking laws were enacted during the Great Depression of the 1930s.

Question 74

Which of the following is not a party to a check?

A) the drawer
B) the drawee
C) the maker
D) the payee
E) the payer bank

Question 75

There are three (3)parties to an ordinary check: (1)the ________,the customer who maintains the checking account and writes checks against the account; (2)the ________,the bank on which the check is drawn; and (3)the ________,the party to whom a check is written.

A) payee; drawer; drawee
B) payee; drawee; drawer
C) drawer; payee; drawee
D) drawee; payee; drawer
E) drawer; drawee; payee

Question 76

When the payee of a check indorses a check to another person (the indorsee),what is true about the indorsee?

A) The indorsee must get the consent of the drawer to further transfer the check.
B) In order to collect on the check, the indorsee must present the check for payment at the drawee bank.
C) The indorsee cannot indorse the check to another indorsee.
D) The indorsee becomes a holder, who can either demand payment, or indorse the check to yet another indorsee.
E) The indorsee must join with the payee of the check when seeking payment.

Question 77

What options does a payee have who is holding a check payable to her?

A) She must seek payment directly from the drawee bank.
B) She must seek payment on the check, either directly from the drawee bank or by depositing the check in her account at her own bank.
C) She may seek payment form the drawee bank, seek payment by depositing the check in her account at her own bank, or she may indorse the check to another person, so long as the indorsement has been approved by the drawer.
D) She may seek payment from the drawee bank, seek payment by depositing the check in her account at her own bank, or she may indorse the check to another person, so long as the indorsement has been approved by the drawee.
E) She may seek payment from the drawee bank, seek payment by depositing the check in her account at her own bank, or she may indorse the check to another person, and such indorsement does not need the approval of the drawer or drawee.

Question 78

A(n)________ check is a two-party check for which (1)the issuing bank serves as both the drawer and the drawee and (2)the holder serves as payee.

A) certified
B) accepted
C) cashier's
D) dishonored
E) ratified

Question 79

Which of the following is correct about the Uniform Commercial Code?

A) Article 3 covers negotiable instruments, while Article 4 covers bank deposits and collections.
B) Article 2 covers negotiable instruments as well as bank deposits and collections.
C) Article 4 and 4A are the only articles that affect the banking system.
D) It does not apply to the banking collection and deposit process because negotiable instruments are not considered "goods."
E) Article 1 is the only section that applies to banking collection and deposit processes.

Question 80

The Dodd-Frank Wall Street Reform and Consumer Protection Act reorganizes federal government supervision of the banking system,regulates previously unregulated financial products and institutions,and adds a new consumer protection agency to protect consumers from abusive lending and banking practices.