Question 1

E-Bank, an online financial institution, gives financial information about Paula and other customers to a federal agency without the cus?tomers' permission. E-Bank may be liable under

Accepted Answer

The Right to Financial Privacy Act prohibits financial institutions from disclosing a customer's financial information to a federal agency without the customer's permission. Therefore, E-Bank may be liable under this act for disclosing Paula's financial information without her permission. The Federal Trade Commission Act and the Financial Services Modernization Act do not specifically address this situation, and the Uniform Electronic Transactions Act deals with the validity of electronic transactions, not privacy issues.

Question 2

Fact Pattern 27-2A 
Ruth opens an account with State Bank under an agreement in which the bank reserves the right to charge the account for any item returned due to its unau?thorized alteration.
-Refer to Fact Pattern 27-2A. Tom deposits an altered check in Ruth's ac?count. When Unity Bank, the check's drawee bank, re?turns the item due to its alteration, State Bank files a suit against Ruth to recover the amount. The court is most likely to rule that

Accepted Answer

State Bank's account agreement with Ruth gave it the right to charge her account for any item returned due to its unauthorized alteration. Because Tom deposited an altered check in Ruth's account and the drawee bank returned it due to its alteration, State Bank has the right to recover the amount from Ruth under the account agreement. Tom may also be liable for the alteration, but that does not absolve Ruth of her responsibility under the account agreement with State Bank.

Question 3

Trudy forges Uma's signature on a check "payable to the order of Trudy" drawn on Una's account in Verity Bank. Most likely, if the bank pays the check

Accepted Answer

Verity Bank will have to recredit Uma's account because the signature was forged, making the check unauthorized. The bank is responsible for verifying the authenticity of signatures on checks it processes.

Question 4

On Monday morning, Bob deposits into his account at County Bank a $500 check from Dina, who also has an account at County Bank. On that same day, this check is considered

Accepted Answer

The check is provisionally credited because while the funds from Dina's account are set aside to cover the check, the actual transfer of funds may take several days to clear. Therefore, the $500 deposit is not considered paid until the check fully clears.

Question 5

Fact Pattern 27-2A 
Ruth opens an account with State Bank under an agreement in which the bank reserves the right to charge the account for any item returned due to its unau?thorized alteration.
-Refer to Fact Pattern 27-2A. The agreement between Ruth and State Bank

Accepted Answer

The agreement between Ruth and State Bank is in accordance with the UCC, as it is permissible for a bank to reserve the right to charge an account for any item returned due to unauthorized alteration as long as it is clearly stated in the agreement.

Question 6

Dru signs a check "pay to the order of Eppie" drawn on Dru's account in First Federal Bank. Greta forges Eppie's indorsement. First Federal pays the check. Most likely

Accepted Answer

First Federal Bank is liable for paying on a forged indorsement and must recredit Dru's account.

Question 7

First State Bank has fourteen branch offices. First State must establish market areas contiguous to these offices under

Accepted Answer

The Community Reinvestment Act requires banks to serve the credit needs of their entire community, including low- and moderate-income areas. To ensure compliance, banks like First State must establish market areas contiguous to their branch offices.

Question 8

Fact Pattern 27-1B 
Tom draws a check, on his account in State Bank in New York, payable to Digital Computers, Inc., in San Francisco. Digital deposits the check in its ac?count at First National Bank. First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York. That Federal Reserve bank sends the check to State Bank.
-Refer to Fact Pattern 27-1B. Digital's bank is

Accepted Answer

Digital's bank, First National Bank, is the depositary bank as it received the check for deposit into Digital's account.

Question 9

Dina's debit card, issued by Eagle Bank, is stolen and used without Dina's permission. Dina tells Eagle Bank within thirty days. Dina may be re?quired to pay no more than

Accepted Answer

The answer of Dina's debit card, issued by Eagle Bank,...

Question 10

Brandy forges Caleb's signature on a check "payable to the order of Brandy" drawn on Caleb's account in Downtown Bank. Caleb's forged signature is

Accepted Answer

Forgery is illegal and invalid. Therefore, Caleb's forged signature is not effective.

Question 11

Fact Pattern 27-1B 
Tom draws a check, on his account in State Bank in New York, payable to Digital Computers, Inc., in San Francisco. Digital deposits the check in its ac?count at First National Bank. First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York. That Federal Reserve bank sends the check to State Bank.
-Refer to Fact Pattern 27-1B. Tom's bank is

Accepted Answer

Tom's bank, State Bank, is the payor bank because it is the bank on which the check is drawn and is responsible for paying the check.

Question 12

First National Bank receives a check drawn on the account of Get-Rich Industries, Inc., one of the bank's customers, at 3 p.m. Friday. Harry, the pre?senter of the check, is not one of the bank's customers. The bank uses de?ferred posting with a 2 p.m. cutoff hour. If it decides to dis?honor the check, it must do so by midnight

Accepted Answer

The answer of First National Bank receives a check drawn...

Question 13

On Monday, Eve deposits in her account at First State Bank a local check for $500. After 5:00 p.m. on Friday, from these funds, Eve can withdraw no more than

Accepted Answer

The answer of On Monday, Eve deposits in her account...

Question 14

Clyde issues a check payable to Discount Mart. Elle, Discount's cashier, forges the store's indorsement and deposits the check in her bank ac?count. Clyde's bank, First State Bank, pays the check. Clyde can recover from

Accepted Answer

When Elle forged the indorsement, she committed a fraudulent act and is liable for the damages caused. However, since Clyde's bank, First State Bank, paid the check in good faith and without any reason to suspect fraud, they are protected under the Uniform Commercial Code (UCC) and are not liable. However, First State Bank can still recover the money from Elle, who committed the fraudulent act. Therefore, Clyde can recover from both Elle and possibly First State Bank through their right to subrogation, but only if First State Bank is able to recover the money from Elle.

Question 15

Pete knowingly divulges to Media Exposure magazine information about Randy's e-money payments to City Bank. The payments were in trans?mission to City Bank when Pete, without the consent of Randy or City Bank, discovered and revealed them. This may be a violation of

Accepted Answer

The Electronic Communications Privacy Act (ECPA) prohibits the unauthorized interception and disclosure of electronic communications, which would apply to Pete's actions in revealing Randy's e-money payments.

Question 16

Fact Pattern 27-1B 
Tom draws a check, on his account in State Bank in New York, payable to Digital Computers, Inc., in San Francisco. Digital deposits the check in its ac?count at First National Bank. First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York. That Federal Reserve bank sends the check to State Bank.
-Refer to Fact Pattern 27-1B. When Digital's bank received the check, it was required to pass it on

Accepted Answer

According to the Uniform Commercial Code (UCC), a depositary bank (Digital's bank) must send the check on to the next bank in the collection process before the end of the following banking day after it received the check. Therefore, choice A is correct.

Question 17

Ed can write checks on his account at First City Bank. Gina steals the checks, forges Ed's signature, and cashes the checks at First City. The bank is excused from any liability if, after receipt of the first forged check, Ed fails to report the forgeries within

Accepted Answer

Under the Uniform Commercial Code (UCC), a bank customer must report any unauthorized signatures or alterations on their account statement within one year from the time the statement is made available to them. If they fail to do so, the bank is excused from liability for any subsequent forgeries.

Question 18

Fact Pattern 27-3A 
Mike loses his National Bank access card. He realizes his loss the next day but waits a week to call National. Meanwhile, Opal finds and uses Mike's card to withdraw $3,000 from Mike's account.
-Refer to Fact Pattern 27-3A. Mike is responsible for

Accepted Answer

Under the Electronic Fund Transfer Act, if a consumer reports a lost or stolen card within two business days, their liability is limited to $50. If reported after two business days but within 60 days, the liability increases to $500. Since Mike waited a week, he is responsible for up to $500.

Question 19

Fact Pattern 27-3A 
Mike loses his National Bank access card. He realizes his loss the next day but waits a week to call National. Meanwhile, Opal finds and uses Mike's card to withdraw $3,000 from Mike's account.
-Refer to Fact Pattern 27-3A. When Mike receives his National statement, he demands that the bank investigate the matter and recredit his ac?count. The bank

Accepted Answer

Under the Electronic Fund Transfer Act, the bank must investigate the unauthorized transaction and if it is not resolved within ten business days, the bank must provisionally recredit the account until the investigation is complete.

Question 20

Simon signs a check "pay to the order of Tilly" drawn on Simon's account in United Bank. Vela forges Tilly's indorsement, First Federal Bank cashes the check, and Vela disappears. United pays First Federal and debits Simon's account. Most likely, the ultimate loss will fall on

Accepted Answer

The answer of Simon signs a check "pay to the...

Quiz 27: Checks, the Banking System, and E-Money