Question 1

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

Accepted Answer

A)   The drawer.
B)   The first party to accept the forged instrument.
C)   The first endorser of the instrument.
D)   The bank of the first party to accept the forged instrument.
E)   The bank of the drawer even if proper notice was given of the forgery.F) B) and D)
G) C) and D)

Question 2

Under the UCC, if the customer does not notify the bank of an unauthorized signature within ______ after the statement has been made available, she cannot hold the bank liable for the payment.

Accepted Answer

A)   10 Days
B)   20 Days
C)   30 Days
D)   45 Days
E)   60 DaysF) A) and E)
G) A) and B)

Question 3

"Missing Earrings." Elaine ordered a pair of diamond stud earrings from BIG Jewelry Store. She paid in advance because the sales clerk told her that the store would have to pay the supplier before the earrings could be shipped. Later that day, Elaine found out from a friend of hers that BIG Jewelry Store was in financial trouble. Elaine was concerned and immediately called her bank and issued a stop-payment order on the check she wrote to BIG Jewelry Store. She gave the bank all of the correct information orally needed to stop-payment on the check. The bank, however, did not stop payment on the check. The check was paid, BIG Jewelry Store went bankrupt, and Elaine was unable to get either her money or the earrings from BIG Jewelry Store. Elaine asked the bank manager of the bank for a refund of the check amount. The bank manager told her that the stop-payment order was not good because it was oral and that in any event, under the UCC, banks are not liable for failing to stop payment on a check. The bank manager further told Elaine that the bank was a holder in due course, and that Elaine is liable for any damages sustained by BIG Jewelry Store or the bank based upon her attempt to stop payment on the check.
-Which of the following is correct regarding the manager's statement that stop-payment orders may not be oral?

Accepted Answer

A)   The manager is incorrect because under the UCC, a stop-payment order may be given orally.
B)   It depends on the amount of the check because oral stop-payment orders may only be given for checks in an amount over $500.
C)   It depends on the amount of the check because oral stop-payment orders may only be given for checks in an amount under $500.
D)   It depends on the amount of the check because oral stop-payment orders may only be given for checks in an amount under $1,000.
E)   The manager is correct.F) B) and D)
G) All of the above

Question 4

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

Accepted Answer

A)   In regard to overdraft protection a bank may (1)  credit a customer's checking account although federal law prohibits charging for this service, (2)  link a checking account to the customer's savings account to cover the overdraft, and (3)  link a checking account to the customer's credit card to cover the overdraft.
B)   In regard to overdraft protection a bank may (1)  credit a customer's checking account and charge for this service, (2)  link a checking account to the customer's savings account to cover the overdraft, and (3)  link a checking account to the customer's credit card to cover the overdraft.
C)   In regard to overdraft protection a bank has only two options (1)  link a checking account to the customer's savings account to cover the overdraft, and (2)  link a checking account to the customer's credit card to cover the overdraft.
D)   Under federal law, the only option open to a bank in the event of a customer's overdraft is to credit the customer's account although no charge may be made for the service.
E)   Under federal law, the only option open to a bank in the event of a customer's overdraft is to credit the customer's account, and a charge may be made for the service.F) D) and E)
G) C) and D)

Question 5

Which of the following is the party ordered to pay on a draft?

Accepted Answer

A)   The drawer.
B)   The drawee.
C)   The payee.
D)   The draftor.
E)   The draftee.F) B) and E)
G) C) and D)

Question 6

The Federal Reserve has stated that Regulation E applies to e-money transactions.

Accepted Answer

A) True 
 B)False

Question 7

Bill did not keep a close watch on his ATM card. He discovered, however, when he started to purchase some presents for his girlfriend that it was missing. Unfortunately, over $1,000 had been fraudulent purchased using the card by the time he reported it missing. The first fraudulent charge was made 45 days before Bill reported to his bank that the card was missing. Bill is liable for which of the following?

Accepted Answer

A)   $0
B)   $50
C)   $300
D)   $500
E)   $1,000F) All of the above
G) D) and E)

Question 8

Which of the following 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

A)   Transfer time.
B)   Electronic time.
C)   Chargeable time.
D)   Float time.
E)   Usable time.F) All of the above
G) B) and E)

Question 9

"Missing Earrings." Elaine ordered a pair of diamond stud earrings from BIG Jewelry Store. She paid in advance because the sales clerk told her that the store would have to pay the supplier before the earrings could be shipped. Later that day, Elaine found out from a friend of hers that BIG Jewelry Store was in financial trouble. Elaine was concerned and immediately called her bank and issued a stop-payment order on the check she wrote to BIG Jewelry Store. She gave the bank all of the correct information orally needed to stop-payment on the check. The bank, however, did not stop payment on the check. The check was paid, BIG Jewelry Store went bankrupt, and Elaine was unable to get either her money or the earrings from BIG Jewelry Store. Elaine asked the bank manager of the bank for a refund of the check amount. The bank manager told her that the stop-payment order was not good because it was oral and that in any event, under the UCC, banks are not liable for failing to stop payment on a check. The bank manager further told Elaine that the bank was a holder in due course, and that Elaine is liable for any damages sustained by BIG Jewelry Store or the bank based upon her attempt to stop payment on the check.
-Which of the following is true regarding the bank manager's statement that the bank was a holder in due course, and that stop-payment orders could not affect the right of a holder in due course to collect?

Accepted Answer

A)   The bank manager is wrong.
B)   The bank manager is correct only if he can establish that the bank employee who actually paid the check had no knowledge of the stop-payment order.
C)   The bank manager is correct unless Elaine can affirmatively prove that the bank employee who actually paid the check had knowledge of the stop-payment order.
D)   The bank manager is correct unless Elaine can prove fraud in the factum on the part of BIG Jewelry.
E)   The bank manager is correct unless Elaine can prove fraud in the factum on the part of BIG Jewelry and that the bank was aware of the fraud.F) A) and B)
G) B) and E)

Question 10

Which of the following is a card containing microchips for storing data that can be used to transfer funds?

Accepted Answer

A)   Stored-value cards.
B)   Smart cards.
C)   Intel cards.
D)   Transfer cards.
E)   Electronic cards.F) A) and D)
G) None of the above

Question 11

A[n] _____________ check is a check that is drawn by one bank and is usually drawn on another bank.

Accepted Answer

A)   Cashier's
B)   Certified
C)   Teller's
D)   Acknowledged
E)   TransferableF) C) and D)
G) B) and E)

Question 12

Checks are non-negotiable instruments.

Accepted Answer

A) True 
 B)False

Question 13

A[n] ______ check is a check for which both the drawer and the drawee are the same bank.

Accepted Answer

A)   Certified
B)   Agreed
C)   Acknowledged
D)   Cashier's
E)   PromiseF) A) and C)
G) B) and D)

Question 14

A[n] ______ is an institution created to facilitate banks in their exchange of checks and drafts drawn on one another, as well as to enable banks to settle their daily balances.

Accepted Answer

A)   Clearinghouse
B)   Transferring institution
C)   Facilitating institution
D)   Acknowledging institution
E)   Approval institutionF) B) and D)
G) B) and E)

Question 15

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

Accepted Answer

A)   5 Days; $50
B)   3 Days; $100
C)   2 Days; $50
D)   7 Days; $100
E)   10 Days; $500F) C) and E)
G) A) and B)

Question 16

As set forth in the text, what does the Financial Services Modernization Act, also known as the Gramm-Leach Bliley Act provide regarding financial institutions and customer privacy?

Accepted Answer

Financial institutions are prohibited fr...

Question 17

Sometimes the depositary is the same bank as the collecting bank.

Accepted Answer

A) True 
 B)False

Question 18

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

A)   On the basis that it was not clearly erroneous, the court on appeal upheld the lower court's decision in favor of the bank.
B)   Although recognizing that no deference was due the trial court's decision in favor of the defending bank, the appellate court ruled in favor of the defending bank based on its own review of the facts.
C)   The appellate court ruled in favor of the defending bank on the basis that because the plaintiff's PIN number was used, she had no right to recover for alleged fraudulent transactions.
D)   The appellate court ruled in favor of the plaintiff because the decision of the lower court in favor of the defending bank was clearly erroneous.
E)   Recognizing that no deference was due the trial court's decision in favor of the defending bank, the appellate court ruled in favor of the plaintiff because the evidence preponderated in her favor.F) A) and B)
G) A) and D)

Question 19

A bank involved in the check collection process may only be classified as one type of bank during the entire process.

Accepted Answer

A) True 
 B)False

Question 20

"Missing Earrings." Elaine ordered a pair of diamond stud earrings from BIG Jewelry Store. She paid in advance because the sales clerk told her that the store would have to pay the supplier before the earrings could be shipped. Later that day, Elaine found out from a friend of hers that BIG Jewelry Store was in financial trouble. Elaine was concerned and immediately called her bank and issued a stop-payment order on the check she wrote to BIG Jewelry Store. She gave the bank all of the correct information orally needed to stop-payment on the check. The bank, however, did not stop payment on the check. The check was paid, BIG Jewelry Store went bankrupt, and Elaine was unable to get either her money or the earrings from BIG Jewelry Store. Elaine asked the bank manager of the bank for a refund of the check amount. The bank manager told her that the stop-payment order was not good because it was oral and that in any event, under the UCC, banks are not liable for failing to stop payment on a check. The bank manager further told Elaine that the bank was a holder in due course, and that Elaine is liable for any damages sustained by BIG Jewelry Store or the bank based upon her attempt to stop payment on the check.
-Which of the following is true regarding the bank manager's statement that the bank could not incur any liability for damages for the failure to stop payment on a check?

Accepted Answer

A)   The manager is correct.
B)   The manager is incorrect, and the bank will incur liability or damages suffered by a customer due to the failure to stop payment when a stop-payment order was properly provided.
C)   The manager is incorrect, and the bank will incur liability or damages suffered by a customer due to the failure to stop payment when a stop-payment order was properly provided, but only up to $500.
D)   The manager is incorrect, and the bank will incur liability or damages suffered by a customer due to the failure to stop payment when a stop-payment order was properly provided, but only up to $1,000.
E)   The manager is incorrect, and the bank will incur liability or damages suffered by a customer due to the failure to stop payment when a stop-payment order was properly provided, but only up to $1,500.F) B) and C)
G) D) and E)

Exam 29: Checks and Electronic Fund Transfers

A bank involved in the check collection process may only be classified as one type of bank during the entire process.

Correct Answer
verified

Sometimes the depositary is the same bank as the collecting bank.

Correct Answer
verified

Correct Answer
verified

Which of the following 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?

Correct Answer
verified

Under the UCC, if the customer does not notify the bank of an unauthorized signature within ______ after the statement has been made available, she cannot hold the bank liable for the payment.

Correct Answer
verified

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?

Correct Answer
verified

Which of the following is the party ordered to pay on a draft?

Correct Answer
verified

A[n] _____________ check is a check that is drawn by one bank and is usually drawn on another bank.

Correct Answer
verified

Correct Answer
verified

A[n] ______ check is a check for which both the drawer and the drawee are the same bank.

Correct Answer
verified

A[n] ______ is an institution created to facilitate banks in their exchange of checks and drafts drawn on one another, as well as to enable banks to settle their daily balances.

Correct Answer
verified

The Federal Reserve has stated that Regulation E applies to e-money transactions.

Correct Answer
verified

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

Correct Answer
verified

As set forth in the text, what does the Financial Services Modernization Act, also known as the Gramm-Leach Bliley Act provide regarding financial institutions and customer privacy?

Correct Answer
verified
Financial institutions are prohibited fr...
View Answer

Correct Answer
verified

Checks are non-negotiable instruments.

Correct Answer
verified

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

Correct Answer
verified

Which of the following is a card containing microchips for storing data that can be used to transfer funds?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exam 29: Checks and Electronic Fund Transfers

A bank involved in the check collection process may only be classified as one type of bank during the entire process.

Correct AnswerverifiedShow Answer

Sometimes the depositary is the same bank as the collecting bank.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following 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?

Correct AnswerverifiedShow Answer

Under the UCC, if the customer does not notify the bank of an unauthorized signature within ______ after the statement has been made available, she cannot hold the bank liable for the payment.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Which of the following is the party ordered to pay on a draft?

Correct AnswerverifiedShow Answer

A[n] _____________ check is a check that is drawn by one bank and is usually drawn on another bank.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A[n] ______ check is a check for which both the drawer and the drawee are the same bank.

Correct AnswerverifiedShow Answer

A[n] ______ is an institution created to facilitate banks in their exchange of checks and drafts drawn on one another, as well as to enable banks to settle their daily balances.

Correct AnswerverifiedShow Answer

The Federal Reserve has stated that Regulation E applies to e-money transactions.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

As set forth in the text, what does the Financial Services Modernization Act, also known as the Gramm-Leach Bliley Act provide regarding financial institutions and customer privacy?

Correct AnswerverifiedFinancial institutions are prohibited fr...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Checks are non-negotiable instruments.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a card containing microchips for storing data that can be used to transfer funds?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
Financial institutions are prohibited fr...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified