Deck 41: Checks and Electronic Fund Transfers

Question 1

If the drawer of a check orders the drawee bank not to pay the check,the drawee bank generally owes the drawer a duty not to certify the check.

Answer 1

True

Question 2

If the drawer is negligent and contributes to the forgery or alteration of a check:

A)the bank can charge the drawer for the amount as the drawer's negligence contributed to the forgery.
B)the bank is liable to the drawer for the amount.
C)the check is not payable from the customer's account because the bank is not following the instructions of the depositor.
D)the bank must pay the instrument out of its own funds.

Answer 2

A
Explanation: If the drawer is negligent and contributes to the forgery or alteration,he may be barred from claiming it as the reason that a particular check should not be charged to his account.

Question 3

If a person stops payment on a check and the bank honors the stop-payment order,the person is not liable to the holder of the check.

Answer 3

False

Question 4

Revised Article 3 recognizes the modern bank practice of retaining checks,and permits the bank to supply only a statement showing the item number,amount,and date of payment.

Question 5

A bank may pay a postdated check unless it has received notice from the customer not to pay until the instrument's date.

Question 6

The bank is primarily liable on a cashier's check.

Question 7

As under the Fair Credit Billing Act,operators under the Electronic Funds Transfer Act are given a maximum of 90 working days to investigate errors or provisionally recredit the customer's account.

Question 8

Any person authorized to sign a check may stop payment on it,even if he/she did not sign the check in question.

Question 9

When issuing a stop-payment order,banks claim that the "reasonable certainty" with which customers must describe the check in question should have the dollar amount exact to the penny because the computers they program require such precision.

Question 10

A bank does not owe a duty to its customer to pay any checks out of the account that are more than six months old.

Question 11

Which of the following best describes a stale check?

A)A check that has been written by the drawer for a date in the future which a bank can honor even before the date on the check.
B)An incomplete check of the customer that is presented to the drawee bank for payment.
C)A check that has been written by the maker dated at some point in the past,which can be paid and charged to the customer's account even at the present date.
D)A check that is more than six months old for which a bank does not owe its customer a duty to pay out of the customer's account.

Question 12

A drawee bank is obligated to certify a check.

Question 13

When a person deposits money in an account at the bank,the bank no longer considers that person the owner of the money; instead,he is a creditor of the bank.

Question 14

Which of the following sources govern(s)the relationship between the depositor and the drawee bank?

A)Only the deposit agreement.
B)The deposit agreement and Article 6 of the UCC.
C)Article 8 of the UCC.
D)The deposit agreement and Articles 3 and 4 of the UCC.

Question 15

Even if the drawer is negligent and contributes to the alteration of a check,he cannot be barred from claiming it as the reason that a particular check should not be charged to his account.

Question 16

The drawee bank does not have the right to charge a payable check to the drawer's account if this will create an overdraft in the account.

Question 17

In the case of a bank that refuses to pay on a check drawn against an account with sufficient funds,which of the following actual damages would the bank be liable for?

A)Charges imposed by retailers for returned checks.
B)Damages for mental disturbance.
C)Injury to the depositor's credit rating that result from the dishonor.
D)Only damages for mental disturbance and injury to honor.

Question 18

A cashier's check is similar to a certified check.

Question 19

The Check Clearing for the 21st Century Act is commonly known as Check 21,and is a federal law that is designed to enable banks to handle more checks manually.

Question 20

If a bank receives a properly drawn and payable check,there are sufficient funds to cover the check,and the bank wrongfully dishonors the check:

A)the bank may be liable to the drawer only for the actual damages suffered by the drawer.
B)the bank may be liable to the drawer only for the consequential damages suffered by the drawer.
C)the bank is not liable for any damages to the drawer unless the bank dishonored the check intentionally,knowing it to be properly drawn and payable.
D)the bank may be liable to the drawer for actual and consequential damages suffered by the drawer.

Question 21

If a drawee bank certifies a check,which of the following is/are discharged of their liability on the check?

A)The drawer only.
B)Only persons who previously indorsed the check.
C)The liability remains as before.
D)Both the drawer and the persons who previously indorsed the check.

Question 22

Under the Revised Article 4:

A)a postdated check is not properly payable by the drawee bank until the date on the check.
B)a postdated check presented for payment before the date on the check may be paid and charged to the customer's account unless he has given notice of it to the bank.
C)postdating checks is illegal.
D)a postdated check presented for payment before the date on the check will be returned to the customer and fees charged to his account.

Question 23

A check drawn by a credit union on its account at a bank is a:

A)personal check.
B)teller's check.
C)certified check.
D)stale check.

Question 24

A written stop-payment order:

A)is valid for only 14 days and cannot be extended further even if written instructions are given to the bank by the customer.
B)is valid for only six months unless confirmed in writing.
C)is invalid.
D)is valid for six months,and can be extended for another six months if written instructions are given by the customer.

Question 25

On August 1,1990,Lisa wrote a check for $100 payable to the order of her sister,Marcia.Marcia misplaced the check and found it in May 1991,when she attempted to cash it.Under these circumstances:

A)the bank must honor the check.
B)the bank cannot pay the check out of Lisa's account without Lisa's written permission.
C)the bank may,in good faith,pay the check and charge it to Lisa's account.
D)the check is no longer valid because it is a stale check.

Question 26

The time requirements for notice of postdated checks are similar to those required for:

A)automatic transfers.
B)stop-payment orders.
C)drawer-depositor accounts.
D)stale checks.

Question 27

A person may stop payment on a check:

A)as long as he/she is authorized to draw a check from the account in question.
B)as long as he/she is authorized to draw a check from the account in question and he/she is the party who signed the check in question.
C)as long as he/she has sufficient funds to cover any liability an erroneous stop-payment order would incur.
D)after a month of the deposit of the check.

Question 28

Bob purchased a new washing machine from a local department store.He paid for the washing machine by check.Two days later,Bob discovered that the washing machine did not work.Bob telephoned the bank and issued an oral stop-payment order on the check.Which of the following will be true for an oral stop-payment order?

A)An oral stop-payment is not valid for more than 24 hours.
B)An oral stop-payment is valid for only 14 days unless Bob confirms it in writing during that time.
C)An oral stop-payment is not valid for more than 48 hours.
D)An oral stop-payment order is valid for 6 months and can be extended for another 6 months by giving the bank instructions to continue.

Question 29

A check on which a bank is both the drawer and the drawee is a:

A)cashier's check.
B)stale check.
C)certified check.
D)personal check.

Question 30

The Electronic Funds Transfer Act (EFTA)now addresses many of the issues that arise out of consumer use of EFT systems,while _____ of the Uniform Commercial Code deal/s with the funds transfers that are outside the EFTA.

A)Article 4A
B)Regulation E
C)Articles 3 and 4A of the UCC
D)Article 3 and Regulation E The Electronic Funds Transfer Act (EFTA)now addresses many of the issues that arise out of consumer use of EFT systems while Article 4A (Funds Transfers)of the Uniform Commercial Code deals with the funds transfers that are outside the EFTA.

Question 31

Which of the following is true of the Check 21 Act?

A)It is a time-consuming and costly process.
B)It is designed to enable banks to handle more checks electronically.
C)It completely discourages check truncation.
D)It requires banks to retain a legible copy of checks for fifteen years.

Question 32

Walt draws a check for $1,500 on Town Bank.The check is made payable to the order of Stephanie.Stephanie endorses and sells the check to Nita.At Nita's request,Town Bank certifies the check.Which of the following is a true statement?

A)Stephanie is secondarily liable.
B)Walt is secondarily liable.
C)Town Bank is primarily liable.
D)Walt is primarily liable.

Question 33

If a bank pays a check that bears a forged signature of the drawer,the transaction will be treated as one in which:

A)the bank paid out of the depositor's funds under Article 3 of the Uniform Commercial Code.
B)the bank paid out of its own funds under Article 3 of the Uniform Commercial Code.
C)the bank paid out of its own funds under Article 4 of the Uniform Commercial Code.
D)the bank paid out of the depositor's funds under Article 4 of the Uniform Commercial Code.

Question 34

A bank that knows of a customer's death:

A)cannot pay checks written by the customer.
B)can pay checks written by the customer for a period of 10 days.
C)can pay checks written by the customer for a period of 14 days.
D)cannot pay checks written by the customer till authorized by the heirs.

Question 35

Callie drew a check payable to the order of Janice on American Bank.Janice indorsed the check and sold it to Ned,who took the check to American Bank and requested that the bank certify the check.The bank did so.Later,Ned presented the check for payment,but American Bank refused to pay.Which other parties may Ned sue?

A)American Bank
B)Callie
C)Janice
D)Callie and Janice

Question 36

Under Revised Article 3,when multiple forgeries are made by the same wrongdoer,the customer generally cannot hold the bank responsible for paying,in good faith,any such checks after an alteration was available to the customer for a reasonable period,not exceeding:

A)10 working days.
B)30 calendar days.
C)60 calendar days.
D)14 working days.

Question 37

If a bank pays a check after it is given a stop-payment order:

A)it acquires all the rights of its customer against the person to whom it originally made payment.
B)it acquires no rights of the person to whom it made payment.
C)it acquires partial rights of its customer against the person to whom it originally made payment.
D)the customer to whom payment was made retains all the rights.

Question 38

Bill purchased a new car from Friendly Fred's Autos.Fred indorsed the check to Shirley for value.Shirley presented the check to the bank,and the bank cashed the check.Later,Bill attempted to place a stop-payment order on the check because the car he purchased from Fred was defective.Under these circumstances:

A)the bank is liable to Bill for paying the amount of the check to Shirley.
B)Bill has no remedy against Shirley or the bank.
C)Shirley must return the funds to the bank.
D)Bill can prove that he has sustained a loss.

Question 39

Check 21 contains a special refund procedure,called "expedited recredit",for a customer who suffers a loss because of:

A)the original check.
B)a fraudulent check.
C)a substitute check.
D)a cashier's check.

Question 40

Bob makes a check for $100 in a way that makes it possible for someone to easily alter it to read $1,100,and it is so altered.Under these circumstances:

A)If the drawee bank pays the check to a holder in good faith,it can charge the $1,100 to Bob's account if Bob's negligence contributed to the alteration.
B)A drawee bank can charge the $100 to Bob's account and will be liable for the rest of the altered amount.
C)The drawee bank is completely liable to Bob for accepting the altered check even if Bob's negligence contributed to the alteration.
D)The person who altered the check is liable to the drawee bank and the bank cannot charge the $1,100 to Bob's account.

Question 41

Which of the following is an electronic funds transfer system?

A)Check truncation.
B)Point-of-sale terminals.
C)Expedited recredit..
D)Check 21.

Question 42

Describe the provisions of the Electronic Funds Transfer Act.

Question 43

The EFTA differs from the FCBA regarding:

A)consumer's liability when the EFT card is stolen.
B)bank's liability if it makes unauthorized transfers.
C)the consumer's liability for unauthorized electronic funds transfers.
D)the financial institution's liability to the consumer for failure to make or stop payments. The EFT Act does differ from the Fair Credit Billing Act in a number of important respects.For example,under the EFT Act,the operators of EFT systems are given a maximum of 10 working days to investigate errors or provisionally recredit the consumer's account,whereas issuers of credit cards are given a maximum of 60 days under the FCBA.The consumer's liability if an EFT card is lost or stolen also differs from his liability if a credit card is lost or stolen.

Question 44

What are the different electronic funds transfer systems utilized by consumers?

Question 45

Which of the following statements is true of wire transfers?

A)Article 4A,which covers wire transfers,includes consumer payments that are covered by EFTA.
B)International wire transfer systems are known as " Fedwire."
C)The Federal Reserve operates a domestic wire transfer system that can be made through CHIPS.
D)Electronic funds transfers between business and financial institutions are generally referred to as wholesale wire transfers.

Question 46

Will a drawee bank be liable to the drawer of the check while a stop-payment order is in effect? If yes,under what circumstances will the drawee bank be liable?

Question 47

For improper execution or failure to execute payment orders,banks can be liable:

A)to the originators,for their expenses in the transaction along with incidental expenses and interest losses.
B)to the beneficiaries,for their incidental expenses.
C)to the originators,for consequential damages.
D)to both the originators and beneficiaries,for consequential damages even though the written agreement of the receiving bank does not provide for it.

Question 48

Describe the limitations on the bank's right or duty to charge the depositor's account for the check.

Question 49

Which article of the Uniform Commercial Code covers electronic funds transfers between businesses and financial institutions?

A)Article 1A
B)Article 4A
C)Article 3A
D)Article 2A

Question 50

Explain the difference between a certified check,a cashier's check,and a teller's check.