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

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

The drawer can stop payment on a certified check.

Conrad,who grew up in a safe rural area with no need to lock his door,moved to a more dangerous city area.Despite the risk,however,he still often forgot to lock his doors.On one of those "forgetful" days,someone came into his home and stole,among other items,his checkbook and debit card.Conrad only writes a few checks a month,so he did not know until two weeks later that his checkbook and debit card were missing.Conrad had partially filled out a check,which he had planned to use to make final payment to a carpenter who was to do some work the following week in Conrad's condominium.Conrad had signed the check and filled in the carpenter's name,but had not filled in the amount,because he did not know the carpenter's charges.It turns out that the thief was in fact the carpenter,who had noticed that Conrad did not keep his door locked when he went to Conrad's one day to estimate the job.The thief filled out the amount on the signed check as $1,500.In addition to the incomplete check made to him,the thief forged three other checks,and deposited them.Finally,when Conrad and the carpenter agreed on the work,Conrad wrote a $200 check to the carpenter that had not been paid when Conrad discovered the thefts.Immediately upon discovering the loss,Conrad notified the bank of the theft of the checks,that there was an incomplete check that should not be honored,and that the debit card had been stolen.Conrad also placed a valid stop payment order with his bank on the $200 check as soon as he discovered the loss,but the bank nevertheless paid this check five days later.All of the other checks were also paid by Conrad's bank.In addition,the thief used the debit card for a $3,000 transaction.Discuss the liabilities of the parties.

The following are commonly used terms to describe banks in the collection system except:

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.

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

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

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.

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

In January 2010,Fred had a cocktail party for his co-workers.The following day,after cleaning up,Fred noticed that a check had been stolen from his checkbook.Fred immediately called his bank and issued a stop- payment order on the check.One week later,the check was received by the bank,and the bank paid it.Fred's signature was forged on the check.Fred never followed his oral stop- payment order with a written stop- payment order.Fred received his bank statement and cancelled checks,including the forged check,on January 30,2010.Because Fred was notoriously sloppy with his personal financial affairs,Fred did not notice that the bank had paid the check until he was preparing his income tax return in April 2011.Can Fred recover from the bank?

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

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.

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.

Boomer,a New York State resident,is selling his New York home.His mortgage,held by a California bank,must be paid in full.Since interest accrues at almost $50 per day until the payoff is received,he wants to get the money to the mortgage company as quickly as possible.What UCC-authorized method of payment would be best for him to require the settlement agent to utilize?

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

If a party presents a check containing a forged signature to a bank for payment that the bank pays,from whom can the bank collect,assuming the bank is given appropriate notice when the drawer discovers the forgery?

A bank is not obligated to certify a check.

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

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

Stop- payment orders: