Question 1

An oral stop payment order is binding on the drawee bank for 14 calendar days.

Accepted Answer

According to the Uniform Commercial Code, an oral stop payment order is binding on the drawee bank for 14 calendar days. After that, the order must be confirmed in writing.

Question 2

Congress enacted the Truth in Savings Act which requires all depositary banks to disclose in great detail to consumers the terms and conditions of their deposit accounts.

Accepted Answer

The Truth in Savings Act was enacted by Congress to require depositary banks to disclose specific information about the terms and conditions of deposit accounts to their consumers.

Question 3

An association of banks and other payors whose members settle accounts with each other on a daily basis is a:

Accepted Answer

A clearinghouse is a financial institution that facilitates the clearing (settlement) of payments, securities, or derivatives transactions. It is an association of banks and other payors who agree to settle accounts with each other on a daily basis, typically using a netting or offsetting process to reduce the number of actual payments that need to be made. This helps to reduce risk, lower costs, and increase efficiency in the financial system. Option A is not a commonly used term, and option C refers to a type of reserve account that banks must maintain with the Federal Reserve. Therefore, the best choice is B.

Question 4

D drew a $100 check on ABC Bank payable "to the order of P." P cashed the check at National Bank.National Bank is an agent of P until the drawee bank pays the check.

Accepted Answer

When P cashes the check at National Bank, National Bank becomes an agent of P until the drawee bank (ABC Bank) pays the check. This is because National Bank is facilitating the transfer of funds from ABC Bank to P, and P has the right to receive the funds from ABC Bank. Once ABC Bank pays the check, the ownership of the funds is transferred from ABC Bank to National Bank, and National Bank becomes an agent of ABC Bank.

Question 5

Doug takes a $500 check drawn by Gail to Gail's drawee bank to cash it.Gail has over $10,000 on deposit in her account.If her bank refuses to pay Doug:

Accepted Answer

The bank has a duty to honor the check as long as there are sufficient funds in the account. In this case, Gail has enough funds to cover the check. By refusing to pay the check, the bank has breached its duty and is liable to Gail for the improper refusal. Doug does not have standing to sue the bank for non-payment since he has no contractual relationship with the bank. The age of the check is not relevant in this scenario. Therefore, only option C is correct.

Question 6

Lane Co.instructs its bank,Second Street Bank,to pay $200,000 to Moffett,Inc.,also a customer of Second Street Bank.The bank executes the payment order by crediting Moffett's account with the $200,000 and notifying Moffett that the credit was made and is available.In this case:

Accepted Answer

Lane Co. is the originator because they instructed the bank to make the payment, but they are also the sender because they are a customer of Second Street Bank. Moffett, Inc. is the beneficiary because they are receiving the payment. The transaction may not be governed by the EFTA (Electronic Fund Transfer Act) depending on the specific circumstances, and there is no information in the question indicating that the payment order had to be communicated electronically or in writing.

Question 7

A written stop payment order is effective indefinitely.

Accepted Answer

A written stop payment order is effective for a limited period of time, usually six months to one year. After that, it needs to be renewed to continue being effective.

Question 8

The Electronic Funds Transfer Act governs electronic transfers between financial institutions,between financial institutions and businesses,and between businesses.

Accepted Answer

The answer of The Electronic Funds Transfer Act governs electronic...

Question 9

Under Revised Article 4,if a bank pays a postdated instrument prior to its date,it will be a proper debit to the drawer's account,unless the drawer had timely informed the drawee that the check was postdated.

Accepted Answer

The answer of Under Revised Article 4,if a bank pays...

Question 10

Under the Competitive Equality Banking Act,a nonlocal check must clear in no more than four intervening business days.

Accepted Answer

The Competitive Equality Banking Act requires that nonlocal checks must clear in no more than four intervening business days.

Question 11

A depositary bank is any bank handling an item for payment.

Accepted Answer

The answer of A depositary bank is any bank handling...

Question 12

If a drawer files a stop payment order on a check,he is automatically relieved of liability for the obligation.

Accepted Answer

Filing a stop payment order does not automatically relieve the drawer of liability for the obligation. The payee may still have legal recourse to collect the funds.

Question 13

David dies an untimely death in a boating accident two days after writing a check to his landlord.The bank finds out about David's death the day after it happens.When the landlord presents the check to the bank two weeks later,the bank must pay it unless David's heirs object.

Accepted Answer

When a bank is notified of a customer's death, it will freeze their accounts and stop all payments, including checks, until it receives instructions from the estate's executor or legal representative.

Question 14

The Code imposes certain affirmative duties on bank customers and fixes time limits within which they must assert their rights.

Accepted Answer

The Code of Bank's Commitment to Customers in India imposes certain affirmative duties on bank customers and fixes time limits within which they must assert their rights.

Question 15

A payor bank is required to dishonor an uncertified check that is more than six months old.

Accepted Answer

The Uniform Commercial Code (UCC) allows payor banks to honor or dishonor checks regardless of their age. However, some banks may have their own policies regarding the acceptance of old checks, and may choose to dishonor checks that are more than six months old as a matter of internal policy.

Question 16

For how long is a written stop payment order valid?

Accepted Answer

A written stop payment order is typically valid for six months.

Question 17

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, eliminating the float time that comes with traditional paper checks. They also reduce the amount of paperwork involved in processing transactions, making them beneficial for banks.

Question 18

Sylvia draws a check on ABC Bank payable "to the order of Ann Smith." Ann indorses it and deposits it in her account at First Bank.First Bank is a:

Accepted Answer

First Bank is the depositary bank because it is the bank that received the deposit of the check after being indorsed by Ann Smith.

Question 19

Under Revised Article 4,a bank customer may encode its own checks,and if it does,the encoder warrants to any subsequent collecting bank and to the payor that information is properly encoded.

Accepted Answer

Under Revised Article 4, a bank customer may encode its own checks, and if it does, the encoder warrants that the information is properly encoded to any subsequent collecting bank and to the payor.

Question 20

ABC Bank sent Joanne,a depositor,her January statement on January 31.Within what length of time after this date will Joanne have to notify ABC bank of any instruments containing alterations or unauthorized signatures included in her January statement?

Accepted Answer

The answer of ABC Bank sent Joanne,a depositor,her January statement...

Quiz 27: Bank Deposits, Collections, and Funds Transfers