Question 1

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

Accepted Answer

A)   payor banking group.
B)   clearinghouse.
C)   provisional reserve.
D)   credit union. B

Question 2

If Harriet makes out a check for $127.50 when she has only $10 in her account, her bank:

Accepted Answer

A)   must refuse to pay the check.
B)   must pay the check.
C)   may only bill Harriet for $117.50 plus a service charge.
D)   may choose any of these options. D

Question 3

Emma calls her bank to issue an oral stop payment order on a check on March 1st. She then leaves town for two weeks to visit her mother. When she returns, she goes to the bank to sign a written stop payment order, but finds the bank has already paid the check. What recourse does she have? Explain.

Accepted Answer

She may not have any recourse if she ordered the stop payment after the check had cleared the bank, or if it was paid more than 14 days after she ordered the stop payment orally. If the stop payment order was received in time for the bank to act, and if the check was paid within 14 days of March 1st, the bank must reimburse Emma for the amount she can establish as a loss as a result of the bank's payment over her stop payment order.

Question 4

Which of the following is true with regard to the federal Electronic Funds Transfer Act?

Accepted Answer

A)   It is primarily a regulatory statute.
B)   It gives the same protections to customers that are found in Article 4.
C)   It limits a customer's liability for unauthorized transfers to $50 if the consumer notifies the financial institution within two days after learning of the loss or theft.
D)   It primarily regulates transfers between financial institutions.

Question 5

What is the effect of a payor bank's dishonor of a check?

Accepted Answer

A)   It returns the check.
B)   The provisional credits must be reversed.
C)   The customer who deposited the item for collection must cover the item and seek recovery from the drawer or indorsers.
D)   All of these will occur.

Question 6

Article 4 of the UCC, entitled "Bank Deposits and Collections" provides the principal rules governing bank collection practices.

Accepted Answer

A) True 
 B)False

Question 7

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

A)   Doug can sue the bank and demand payment.
B)   if the check is over 30 days old, the bank has a right to refuse payment.
C)   the bank has incurred a liability to Gail for its improper refusal to pay the check.
D)   Gail must write a new check to Doug and precertify it with the bank.

Question 8

A system for electronic funds transfers (EFT) in which machines are located in a merchant's store and are activated by the consumer's identification card and code is:

Accepted Answer

A)   POS.
B)   RAM.
C)   EFTA.
D)   DOS.

Question 9

Sue deposits in her account at First Bank a $50 check drawn on Valley Bank. First Bank transfers the check to Second Bank, which in turn forwards it to Valley Bank, which pays the item. Valley Bank is the:

Accepted Answer

A)   payor bank.
B)   drawee bank.
C)   collecting bank.
D)   The payor bank and also the drawee bank.

Question 10

Barry presents to Wake Bank for deposit in his account a check for $100 made out to him by Richard. Wake Bank provisionally credits Barry's account on Monday. When is payment final?

Accepted Answer

A)   Automatically at the end of the third business day.
B)   Midnight Tuesday.
C)   When the amount of the check is collected from Richard's bank.
D)   When Richard's bank receives the check.

Question 11

Which of the following is true about UCC Article 4A?

Accepted Answer

A)   It is designed to overlap coverage of the Electronic Funds Transfer Act.
B)   It covers both credit and debit transactions.
C)   It covers wholesale funds transfers.
D)   It does not allow parties to vary their rights and obligations by agreement.

Question 12

An objective of the Check 21 Act is to:

Accepted Answer

A)   require banks to accept checks in electronic form, thereby reducing paperwork.
B)   make the check collection process faster by transferring files digitally.
C)   enhance fraud detection by allowing electronic comparison of signatures and endorsements.
D)   All of these are objectives.

Question 13

A critical issue in banking law is at what point an item is finally paid.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Goble, the seller, obtains authority from Meigs, the buyer, to debit Meigs's account after Goble ships the goods. Article 4A covers this transaction.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

A bank is permitted by statute to remove an original paper check from the check collection process and send a substitute check instead.

Accepted Answer

A) True 
 B)False

Question 19

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

A)   drawee bank.
B)   payee bank.
C)   depositary bank.
D)   payor bank.

Question 20

If a bank pays on a check even though it has a "stop payment order," the bank is liable to the customer only if the customer can prove a loss because of the payment.

Accepted Answer

A) True 
 B)False

Exam 27: Bank Deposits Collections and Funds Transfers

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

If Harriet makes out a check for $127.50 when she has only $10 in her account, her bank:

Emma calls her bank to issue an oral stop payment order on a check on March 1st. She then leaves town for two weeks to visit her mother. When she returns, she goes to the bank to sign a written stop payment order, but finds the bank has already paid the check. What recourse does she have? Explain.

Which of the following is true with regard to the federal Electronic Funds Transfer Act?

What is the effect of a payor bank's dishonor of a check?

Article 4 of the UCC, entitled "Bank Deposits and Collections" provides the principal rules governing bank collection practices.

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:

A system for electronic funds transfers (EFT) in which machines are located in a merchant's store and are activated by the consumer's identification card and code is:

Sue deposits in her account at First Bank a $50 check drawn on Valley Bank. First Bank transfers the check to Second Bank, which in turn forwards it to Valley Bank, which pays the item. Valley Bank is the:

Barry presents to Wake Bank for deposit in his account a check for $100 made out to him by Richard. Wake Bank provisionally credits Barry's account on Monday. When is payment final?

Which of the following is true about UCC Article 4A?

An objective of the Check 21 Act is to:

A critical issue in banking law is at what point an item is finally paid.

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

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

Goble, the seller, obtains authority from Meigs, the buyer, to debit Meigs's account after Goble ships the goods. Article 4A covers this transaction.

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

A bank is permitted by statute to remove an original paper check from the check collection process and send a substitute check instead.

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:

If a bank pays on a check even though it has a "stop payment order," the bank is liable to the customer only if the customer can prove a loss because of the payment.