Chapter 29. Bank Deposits, Collections, and Funds Transfers
1. If a depositor in First Bank takes a check written on Valley Bank to First Bank to deposit, it will normally be credited
to the depositor’s account at the time of the transaction. This is called a “provisional” credit.
a. True
b. False
2. If First Bank receives a check for collection on Friday at 4 p.m., it must present the check to the payor bank by
midnight Saturday.
a. True
b. False
3. In most cases, the collecting bank is the same as the payor bank.
a. True
b. False
4. Mark takes his wife’s paycheck to Valley Bank to deposit in their joint account. Valley Bank may deposit the check
without his wife’s indorsement unless the indorsement is expressly required.
a. True
b. False
5. Each provisional settlement made in the collection chain is made final when the next bank takes the check.
a. True
b. False
6. If a payor bank gives the provisional settlement as required, it has until the midnight deadline to return the item.
a. True
b. False
7. If a bank pays on a check even though it has a “stop payment order,” it is liable to the customer only if the customer
can prove a loss because of the payment.
a. True
b. False
8. If a bank pays on a check after the death of its customer, the customer’s estate is not automatically entitled to
reimbursement.
a. True
b. False
9. Banking and the collection process of checks is governed solely by state law, primarily the UCC.
a. True
b. False
10. Point of sale systems permit customers to charge items to a charge account at a bank.
a. True
b. False
11. An ATM transaction is activated with a plastic identification card and a POS.
a. True
b. False
12. Under Article 3 of the Code, collecting banks give to a transferee the same basic warranties as those given by other
parties who transfer commercial paper.
a. True
b. False
13. Banks may not pay checks issued by a customer who has died.
a. True
b. False
14. MICR enables check processing without further human involvement.
a. True
b. False
15. If a bank receives a check on Tuesday, it must take proper action by midnight of Wednesday.
a. True
b. False
16. Caryn deposits a check in her bank at 2:30 on Monday. The bank may, under the Code, treat the check as having
been deposited on Tuesday for purposes of meeting the midnight deadline rule.
a. True
b. False
17. Consumer electronic funds transfers are covered by Article 4A of the UCC, and nonconsumer electronic transfers
are covered by the federal Electronic Fund Transfer Act.
a. True
b. False
18. The payor bank and the drawee bank are two separate banks.
a. True
b. False
19. A payor bank is under an obligation to pay an uncertified check that is nine months old.
a. True
b. False
20. The relationship between the payor bank and its checking account customer is exclusively governed by statute and
leaves no room for contractual modifications.
a. True
b. False
21. A financial institution is liable to its customer if an electronic terminal has insufficient cash for a withdrawal of up to
$100. a.
True b.
False
22. Banks like electronic funds transfers because they eliminate the float time that a drawer enjoys on a checking
account and the paperwork involved in processing checks.
a. True
b. False
23. Darla drew a $100 check on ABC Bank payable “to the order of Pamela.” Pamela cashed the check at First Bank.
First Bank is an agent of Pamela until the drawee bank pays the check.
a. True
b. False
24. An instrument indorsed “pay any bank” may nevertheless have an individual as a holder.
a. True
b. False
25. Under the Competitive Equality Banking Act, a nonlocal check must clear in no more than four intervening business
days.
a. True
b. False
26. An oral stop payment order is binding on the payor bank for 14 calendar days.
a. True
b. False
27. A written stop payment order is effective until revoked in writing.
a. True
b. False
28. The fact that a drawer has filed a stop payment order automatically relieves the drawer of liability on the underlying
obligation.
a. True
b. False
29. David dies an untimely death in a boating accident two days after writing a check to his landlord. When the check is
presented to his bank three weeks later, they refuse to pay. The landlord will have to file a claim in any probate
proceedings if he wishes to collect on the check.
a. True
b. False
30. First Bank pays a forged check on Donald’s account. Donald finds it when, the day he receives it, he is examining
his bank statement for the month. He brings it to the bank the next day to call it to their attention, but they refuse to
credit his account. The bank has an obligation to recredit Donald‘s account.
a. True
b. False
31. If a checking account customer’s funds are insufficient to pay all of the items that the bank receives on that account
on a given day, the bank may charge the items against the account in any order the bank deems convenient without
incurring liability to the customer/drawer for choosing one item over another.
a. True
b. False
32. The Wall Street Reform and Consumer Protection Act of 2010 requires that the amount of any interchange
transaction fee that an issuer may receive or charge with respect to an electronic debit transaction, including those
on debit cards issued by small banks and prepaid reloadable cards, must be reasonable and proportional to the cost
incurred by the issuer, as determined by the Federal Reserve.
a. True
b. False
33. The Check Clearing for the 21st Century Act requires banks to accept checks in electronic form.
a. True
b. False
34. Check 21 permits banks to remove an original paper check from the check collection process and send instead a
substitute check.
a. True
b. False
35. All depositary institutions are required to disclose APY earned and balance information, including how the balance is
calculated, on the periodic statements they must send to customers.
a. True
b. False
36. A preauthorized fund transfer may be made from a consumer‘s account if the authorization is done in advance and in
writing.
a. True
b. False
37. An association of banks created for the purpose of settling accounts with each other on a daily basis is a:
a. payor banking group.
b. clearinghouse.
c. provisional reserve.
d. None of these.
38. For how long is an oral stop payment order valid?
a. 14 calendar days
b. 14 business days
c. One month
d. Six months
39. For how long is a written stop payment order valid?
a. One month
b. Six weeks
c. Six months
d. One year