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Exam 29: Checks and Electronic Fund Transfers

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Question 41

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Which of the following is false regarding checks?

A) Because of electronic fund transfers, checks are of little importance in the U.S. today.
B) In 2009, Americans wrote billions of checks.
C) Of all the negotiable instruments regulated by the UCC, checks are the most common type used.
D) Checks are considered negotiable instruments under Article 3 of the UCC.
E) Article 4 creates a framework controlling deposit and checking agreements between banks and customers; and when Articles 3 and 4 conflict, Article 4 is to take precedence.

F) A) and B)
G) A) and C)

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Question 42

Multiple Choice

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Assuming a proper and timely claim is made, which of the following is true regarding the UCC's allowance of full recovery in the event that certain types of checks are lost, stolen, or destroyed?

A) The UCC allows for full recovery if a cashier's check is lost, stolen, or destroyed; but full recovery is not allowed if a teller's check or certified check is lost, stolen, or destroyed.
B) The UCC allows for full recovery if a cashier's check or certified check is lost, stolen, or destroyed; but full recovery is not allowed if a teller's check is lost, stolen, or destroyed.
C) The UCC allows for full recovery if a cashier's, certified, or teller's check is lost, stolen, or destroyed.
D) The UCC allows for full recovery if a cashier's check is lost, stolen, or destroyed; but in regard to a teller's check or certified check, full recovery is only allowed if the instrument is lost or stolen, not if it is destroyed.
E) Because individuals are expected to properly safeguard checks, the UCC does not allow for recovery if a cashier's, teller's, or certified check is lost, stolen, or destroyed.

F) A) and B)
G) A) and D)

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Question 43

Multiple Choice

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"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 Trevor's statement that once the check had been dishonored, it could not be presented again?

Which of the following is a bank receiving a transferred check during a collection process excluding the first bank and the last bank?

"Employee Problems." Harold, who is 97 years old, runs a successful hardware store. He never had any trouble with dishonest employees in the past. Unfortunately, he hired an assistant accountant, Renee, who had significant financial problems and began to steal from Harold. Renee came in early and took the rubber stamp of his signature that Harold kept in an unlocked drawer along with some checks and used the signature stamp to create a check payable to her. She then took it to the bank and cashed it. Harold, who was diligent in examining his bank statements, noticed the unauthorized check to Renee. He also noticed an unauthorized check cashed by Susie, another employee. Susie did not know about the stamp in the unlocked drawer and instead broke into Harold's personal office, stole checks from a locked cabinet, and skillfully forged his name. Harold immediately informed his bank about the check involving Renee. He held off, however, on informing the bank about Susie, who was twenty five, because he knew she had incurred some significant vet bills for her Corgi dogs, Baby and Bre. Harold also thought he might ask Susie for a date. Harold, who was honest, told the bank manager what he suspected had happened involving Renee taking his stamp and checks from the unlocked drawer. The bank manager told Harold that the bank was not required to reimburse Harold because Harold was responsible for his own losses. A few weeks later, Harold asked Susie out on a date. She told him that she couldn't go because she had started dating her veterinarian. Harold is very grumpy and tells the bank manager about the unauthorized check to Susie 35 days after he received his bank statement and discovered the forgery. Unfortunately, when Harold opened his next bank statement, it was discovered that after she wrote the first check, there had been several other forgeries by Susie. The bank was notified of those forgeries within 15 days of when Harold received his bank statement. The bank refused to reimburse Harold for the checks written by Susie again claiming that he was responsible for his own losses. Becoming grumpier by the minute, Harold institutes litigation against the bank. -Which of the following is true regarding whether Harold will have to bear the loss on the later forgeries, other than the first one, by Susie?

What items should a stop payment order list?

The customer cannot order a stop payment on an electronic fund transfer.

Which of the following is true regarding types of electronic fund systems?

Which of the following is a bank, other than a payor bank, handling the check at any point from the time the check is deposited to the time it reaches the payor bank?