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Exam 29: Checks and Electronic Fund Transfers

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Question 31

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[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 regarding whether the bank will legally have to accept responsibility for the check presented by Emma?

A) The bank has no responsibility to repay Tom on the basis that because Emma was an employee, the check was not considered forged.
B) The bank will be required to repay Tom because the check was forged.
C) Tom will have to bear the loss because the check was paid before the bank had notice of the forgery.
D) Tom will not have to bear the loss because the forgeries were by an employee; otherwise, he would have had to bear the loss.
E) The bank will likely not be required to repay Tom because Tom's negligence in leaving the rubber stamp with his signature readily available likely substantially contributed to the forged signature.

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

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Question 32

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There are ________ central banks that make up the Federal Reserve System.

A) one
B) five
C) ten
D) twelve
E) twenty

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

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Question 33

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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 Ariel correct that the EFT charge to the veterinarian should be removed because it was not authorized?

[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 of the following types of checks may a bank refuse to sell to an individual?

A stop payment order should list which five items?

As set forth in the text, what does the Financial Services Modernization Act, also known as the Gramm-Leach Bliley Act provide regarding financial institutions and customer privacy?

[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 was the court's ruling in Fambrough v. Wal-Mart Stores, Inc., the case in the text regarding an effort by users of an ATM machine to recover fees charged when using the machine at Wal-Mart stores?

[Three Checks] On January 1, Jerome writes two checks and dates them January 15, as he is waiting for a large deposit to clear on January 5. The first check is to Rhea, and the second check is to Treya. Treya deposits her check on January 2, but she is notified that the check is dishonored for insufficient funds. On February 1, Jerome writes a check for $50 to Kaleb. Kaleb adds a "0" to the check amount and scratches out the word "Fifty" and writes "Five Hundred" and deposits the check. Jerome dies on April 1. Rhea deposits her check on April 15, but the bank dishonors Rhea's check. -Who is responsible for the check to Kaleb?

Henry buys Frank's used car for $5,000. The car is in great shape and Henry leaves town in it. Henry paid Frank with a cashier's check, but later decided that he would rather not pay at all. Accordingly, Henry told the bank the check was stolen. What rights, if any, does Frank have, and what liabilities and other problems, if any, does Henry face?

Every bank in the United States has at least one account with the Federal Reserve.

Lulu received a Christmas check from her Aunt Beatrice. She forgets about the check and finds it the next October. When she goes to cash the check, the bank refuses to honor the check. This check is considered ________.

________ allows a consumer to directly transfer funds from a banking account to a merchant.

Under the ________, a bank has a duty to pay checks from a customer's account so long as the check is properly payable.

[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. -Arturo's bank tells him they have placed an eight-day hold on the funds. Arturo tells them they cannot do so. Is he correct?

What type of e-money uses microchips for storing data that can be used to transfer funds?

[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 recurring charge for the yoga class should be removed because she had notified the bank to cancel the automatic payment?

Adrian writes Mauldin a $500 check for the work that he performed on Adrian's computer. Adrian and Mauldin have accounts at the same bank. In this situation, since Adrian and Mauldin's accounts are at the same bank, the bank will issue a(n) ________ credit to the Mauldin's account, and, if the bank does not dishonor the check, the credit will become an actual payment.

A[n] ________ is when money is transferred by an electronic terminal, telephone, or computer.

Which of the following is false regarding certified checks?

Belinda brings a check into First American Bank. The check is written by Tolin and is drawn on First American Bank. This is an example of a(n) ________.