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Exam 29: Checks and Electronic Fund Transfers

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Question 1

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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) C) and D)
G) A) and C)

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Question 2

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The bank upon which a check is drawn is the ________ bank.

A) Payor
B) Payee
C) Depositary
D) Transfer
E) Acceptor

F) None of the above
G) D) and E)

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Question 3

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What are the six requirements for a check to be considered properly payable?

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

Which of the following is true about electronic check presentment?

A ________ check is a check that is drawn by one bank and usually drawn on another bank.

________ time 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.

[Bad Check] Alana, a bank teller, saw that customer Liam did not have sufficient funds in his account to cover a check presented for payment. Alana was new and was confused about what to do with the check. She asked the bank manager, Pedro, about any available options. Pedro told her that the bank was required by law to dishonor the check, the check should be returned to the holder with a notation that it had been dishonored, and that it could not be presented again. Alana asked Pedro if there were any policies the bank could institute to provide customers with overdraft protection, and Pedro 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?

Under the UCC, money orders are considered checks.

In India, unlike in the United States, money orders may be issued only by the post office.

[Employee Theft] Tom operates a hardware store. Tom hired an assistant bookkeeper, Emma, who began to steal from him. Emma came into work early one day and took some checks and the rubber stamp of Tom's signature that he kept in an unlocked drawer, and she used the signature stamp to create a check payable to herself. She then took the check to the bank and cashed it. Tom, who was diligent in examining his bank statements, noticed the unauthorized check to Emma. He also noticed an unauthorized check cashed by Rose, another employee. Rose did not know about the stamp in the unlocked drawer. Instead, she broke into a locked cabinet, stole some checks, and skillfully forged Tom's name. Tom immediately informed his bank about the check involving Emma. He held off, however, on informing the bank about Rose, as she had only stolen fifty dollars and he didn't want to lose both employees at once. Tom told the bank manager what he suspected had happened involving Emma taking his stamp and checks from the unlocked drawer. The bank manager told Tom that the bank was not required to reimburse him because Tom was responsible for his own losses. Tom tells the bank manager about the unauthorized check to Rose 35 days after he received his bank statement and discovered the forgery. To his surprise, when Tom opened his next bank statement, he discovered that after Rose wrote the first check for fifty dollars, she had forged more checks for larger amounts. The bank was notified of those forgeries within 15 days of when Tom received his bank statement. The bank refused to reimburse Tom for the checks written by Rose, again claiming that he was responsible for his own losses. Tom institutes litigation against the bank. -Which statement is true about traveler's checks?

Sam did not keep track of his ATM card. One day he realized that he had not seen the card in a while, and, after looking for it, realized that it was missing. Unfortunately, over $1,000 had been fraudulently purchased using the card by the time Sam reported it missing. The first fraudulent charge was made 45 days before Sam reported to his bank that the card was missing. Which of the following is Sam liable for?

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

Which of the following is an institution created to facilitate the exchange of checks and drafts drawn by banks on one another, as well as to enable banks to settle their daily balances?

[Diamond Earrings] Lena ordered a pair of diamond earrings from Uptown 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, Lena found out from a friend of hers that Uptown Jewelry Store was in financial trouble. Lena was concerned and immediately called her bank and issued a stop-payment order on the check she wrote to Uptown 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, Uptown Jewelry Store went bankrupt, and Lena was unable to get either her money or the earrings from Uptown Jewelry Store. Lena asked the bank manager 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 Lena that the bank was a holder in due course, and that Lena is liable for any damages sustained by Uptown Jewelry Store or the bank based upon her attempt to stop payment on the check. -Which statement is true regarding the bank manager saying that the bank could not incur any liability for damages for the failure to stop payment on a check?

A check is a special kind of draft, according to the UCC.

In which of the following types of checks does the bank draw on itself to pay a specific person?

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

The businesses community considers cashier checks to be the near equivalent of cash.

A ________ is the party that give the order and the ________ is the party that must obey that order.