UCC Articles 3 & 4 - Law of Checks and Share Drafts

Question 1

The primary purpose of the Uniform Commercial Code’s Articles 3 & 4 (the law of checks and drafts) is to?

Answer 1

Encourage commerce (people and businesses) to use and rely on checks

Question 2

What rule includes:
1. Provides commerce with recourse against the member-drawer for nonpayment of the check.
2. protects the member-drawer against alterations.
3. protects the member-drawer against forged instruments
4. protects the member-drawer against forged drawer’s signatures
5. incents member-drawers to use and rely upon checking and share draft accounts.

Answer 2

The Properly Payable Rule

Question 3

T or F
A check made payable to “John Doe, Jane Doe” with out “and” in between the names is payable to either John or Jane?

Answer 3

True

Question 4

What is a post dated check?

Answer 4

One written with a future date indicated on it.

Question 5

T or F
It is illegal to write a postdated check?

Answer 5

False

Question 6

T or F
If you just sign (endorse) your name on the back of the check, that endorsement is referred to as a “blank endorsement” and anyone who is in possession of that check is in rightful possession of the check.

Answer 6

True

Question 7

T or F
When the credit union encodes a check it warrants (promise by law) to all other financial institutions that take the check after it that the check has been encoded correctly.

Answer 7

True

Question 8

T or F
The UCC’s Articles 3 & 4 require a credit union to return a check that it will not pay by its “midnight deadline,” which means that the check must be returned by midnight of the next banking day after the banking day the check is received.

Answer 8

True

Question 9

T or F
Writing “paid in full” on a check to a creditor for an amount less than owed for a debt in the hope that the creditor won’t notice the language will fail to discharge the drawer’s obligation because such payment is not made in good faith.

Answer 9

True

Question 10

T or F
When a member loses your cashier’s or teller’s check, once she or he makes a claim for a refund for the lost check the credit union must immediately give her or him a replacement check?

Answer 10

False

Question 11

Can we make the member wait 90+ days for the replacement?

Answer 11

Yes

Question 12

T or F
A credit union must pay a member’s check that is more than 6 months old upon presentment.

Answer 12

False

Question 13

T or F
Under the UCC 3 & 4 a negotiable instrument is a check or share draft, and is not an EFT or ACH under Regulation E, a transaction account under Regulation D, or a term share account under the Truth in Savings Act.

Answer 13

True

Question 14

T or F
The reason it is important to understand the nonpayment and fraud issues under State and Federal check law is because checks for large amounts will continue to be presented for payment and offered for deposit to all credit unions.

Answer 14

True

Question 15

T or F
A check is the only form of payment that allows a person (the drawer) to completely control - 1. who gets paid (payee) 2. when the payee will get paid (the date), and 3. how much the payee will get paid (the amount).

Answer 15

True

Question 16

T or F
The reason that checks are still used as a form of payment is because a check (and a image of a check) is proof of payment forever for a person (as a drawer), and NOT because numerous consumers do not know how to use electronic access devices for payment, or because Regulation E and ESIGN do not mandate the use of EFTs and ACHs.

Answer 16

True

Question 17

Simply by looking at their checking or share draft account statements, member-drawers can (and should) notify the credit union about?

Answer 17

Alterations, Forged Drawer’s Signature and Counterfeit Checks