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Exam 29: Checks and Electronic Fund Transfers

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Question 21

Multiple Choice

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The Electronic Fund Transfer Act of 1978 sets out which of the following?

A) The rights and liabilities of the parties in electronic fund transfers.
B) How banks must handle transfers between each other.
C) Consumers can sue the banks if funds are misplaced.
D) How banks must transfer money overseas.
E) How merchants transfer funds between each other.

F) A) and B)
G) None of the above

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Question 22

Multiple Choice

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[Bank Statement Woes] While examining her bank statements in July, Ariel found several questionable items and telephoned her bank to sort out the problems. First, Ariel was charged $50 in a recurring direct withdrawal for her yoga class. However, Ariel had notified the bank at 4:30 p.m. the previous day that she wanted to cancel the automatic payment. Second, Ariel noticed two EFT payments in February to a veterinarian in another state, which Ariel is certain she did not authorize, since she does not have a pet. Third, Ariel noticed several EFT payments for a magazine subscription, which Ariel did not authorize and she never received any magazines. Also, Ariel wants to stop payment on an internet order she made two hours ago for an expensive watch. -Is the bank required to stop payment on the internet order for the expensive watch?

A) Yes, a customer may stop a preauthorized payment.
B) Yes, so long as Ariel notifies the bank at least three days before the payment is scheduled.
C) Yes, as long as she does not receive the watch.
D) No, while a customer may stop a preauthorized payment, a customer cannot order a stop payment on an EFT because such transfers occur instantaneously.
E) No, a customer may not stop a preauthorized payment.

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

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Question 23

Multiple Choice

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How many parties are related to an order?

Regardless of the care used in cashing a check by the bank, a customer must report a forgery within ________ from the date the bank statement showing the forgery is available to the customer or the customer will lose the right to recover.

An oral stop payment order is valid for ________ unless the order is later confirmed in writing.

A check that is substituted for a lost check is called a substitute check.

Which of the following banks is the bank that is responsible to either respond to the check by dishonoring it or becoming liable for the face amount of a check.

[Cash Availability] Arturo, who owns a vineyard in Northern California, deposits two checks in his local bank on Monday. One check is from Simon, who lives in the area, and the other is from Zina, who lives in Atlanta. Arturo needs to write a check to a supplier from his local account. -What is the latest date that Arturo will be available to use the funds from both checks?

A ________ bank, besides a payor bank, handles the check during the collection process.

Phillip wrote a check which is considered a(n) ________ that orders the bank to pay a fixed amount of money on demand.

Which of the following is false regarding checks?

[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 cashier's checks, teller's checks, and certified checks?

[Bank Statement Woes] While examining her bank statements in July, Ariel found several questionable items and telephoned her bank to sort out the problems. First, Ariel was charged $50 in a recurring direct withdrawal for her yoga class. However, Ariel had notified the bank at 4:30 p.m. the previous day that she wanted to cancel the automatic payment. Second, Ariel noticed two EFT payments in February to a veterinarian in another state, which Ariel is certain she did not authorize, since she does not have a pet. Third, Ariel noticed several EFT payments for a magazine subscription, which Ariel did not authorize and she never received any magazines. Also, Ariel wants to stop payment on an internet order she made two hours ago for an expensive watch. -Is Ariel correct that the EFT charges for the magazine subscription should be removed because it was not authorized?

First Bank has determined that 2:00 p.m. is the cutoff hour for handling checks, and that all checks received after this deadline will be posted to the customer's account the following day. Ronald, an attorney, is irate about the bank's policy and tells the clerk that its policy violates the UCC. Is he correct?

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

[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 manager's statement that stop-payment orders may not be oral?

[Cash Availability] Arturo, who owns a vineyard in Northern California, deposits two checks in his local bank on Monday. One check is from Simon, who lives in the area, and the other is from Zina, who lives in Atlanta. Arturo needs to write a check to a supplier from his local account. -Are the funds from both checks required to be available at the same time for Arturo to use?

A cashier's check is a check for which

Both commercial and consumer electronic fund transfers are governed by the Electronic Fund Transfer Act.

Tony gives Sonora a check for $500. Sonora deposits it in her local bank, which transfers the check to the Federal Reserve Bank in Chicago, which transfers it to Tony's bank in Wisconsin. What type of bank is the Federal Reserve Bank in this situation?