Uniform Commercial Code Articles 3 and 4

Question 1

The UCC divides negotiable, instruments into two categories list these two categories, and give an example of each one

Answer 1

Draft-an order to pay such as a check or a Shared draft

Notes-a promise to pay such as a loan

Question 2

If a check is made payable to John Doe , Jane doe who can cash the check

Answer 2

Either John Doe or Jane Doe can cash the check

Question 3

There are three types of endorsements discussed in UCC articles 3- special endorsement, blank, endorsement and restrictive endorsement. Give an example of each of these.

Answer 3

1. Special endorsement.-the check is payable to John Doe, who endorses the check with his name and adds pay to the order of Jane doe.
2. Blank endorsement.-the check is payable to John Doe and he endorses it John Doe
3. Restrictive endorsement.-the check is endorsed pay Jane doe only.

Question 4

If a member claims that a Teller’s check cashiers check or certified check purchased from your credit union has been lost stolen or destroyed. What rights does that member have in regard to replacing that check and how soon can a replacement be given to that member

Answer 4

The member must make a claim on a declaration of loss statement that reasonably describes the check, it must be received in time to act on the claim before the check is received at the credit union, and the member must provide proper identification, if requested

Question 5

Mary member prepared a written document for one of her clients and excepted a check for payment without noticing that the memo line on the check contains the words payment in full Mary deposited the check and now wants to know if she has to accept this as full payment, since the amount of the check was only half the amount owed to her what one exception under accord and satisfaction must be met before the lesser amount must be excepted as full payment of the debt

Answer 5

Before a lesser amount must be accepted as full payment under accord and satisfaction. The debtor must have in good faith, raised a bona fide dispute over the amount billed for the services.

Question 6

Because the UCC varies from state to state which states code governs, when ABC credit union honors a check written on a financial institution in another state

Answer 6

The code of the state ABC credit union is located in

Question 7

Credit unions are subject to the encoding and retention warranties of UCC article 4 when a credit Union in encodes a check what is the warranty given to any subsequent banks concerning that check

Answer 7

Encoding a check warrants to any subsequent collecting bank and to the payor bank, that the information is correct, and must promptly provide credit for the error on demand

Question 8

I was saying, describe a credit unions midnight deadline UCC ARTICLE 4

Answer 8

Midnight deadline- an item that will not be paid must be returned by midnight of the next banking day. After the banking day, the item is received.

Question 9

Explain a credit unions, rights and responsibilities when a member postdates a check

Answer 9

Article 3 (3-113) provides checks can be post dated, however article 4 gives a credit union, the right to ignore that date. Article 4 also states that if a member notifies the credit union of a post dated check before that date, and in time for the credit union to act this notice must be treated as a stop payment notice and should be honored

Question 10

The two major problems that can occur with checks are

Answer 10

Wrong payment, and non-payment

Question 11

The primary purpose of the Uniform Commercial Code’s articles, 3 and 4 (the law checks in drafts) is to

Answer 11

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

Question 12

The properly payable rule

Answer 12

1. Provide 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 endorsements.
4. Protects the member-drawer against forged drawers, signatures.
5. Incents member-drawers to use and rely upon checking and share draft accounts.

Question 13

If you just sign, endorse your name on the back of the check, the 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 13

True

Question 14

When the credit union in encodes a check, it warrant ( promises by law ) to all other financial institutions that take the check after it that the check has been encoded correctly

Answer 14

True

Question 15

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 15

True

Question 16

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 drawers obligation, because such payment is not made in good faith

Answer 16

True

Question 17

When a member loses your cashiers or tellers check once she, or he makes a claim for a refund the loss check the credit union must immediately give her or him a replacement check

Answer 17

False

Question 18

Can we make the member wait 90 days?

Answer 18

Yes

Question 19

A credit union must pay members check that is more than six months old up on presentment

Answer 19

False

Question 20

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 and savings act

Answer 20

True

Question 21

The reason it is important to understand the non-payment and fraud issues under state and federal check law is because for large amounts will continue to be presented for payment and offered for deposit to all credit union

Answer 21

True

Question 22

A check is the only form of payment that allows a person the drawer to completely control who gets paid the payee when the payee will get paid the date, and how much the payee will get paid the amount

Answer 22

True

Question 23

The reason that checks are still used as a form of payment is because a check, and an 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 23

True

Question 24

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

Answer 24

Alterations

Question 25

How long do members have to report their chicks with?

Answer 25

Alterations-
Forged endorsements -
Forged drawl or signatures -

3 years

Question 26

How long do credit unions have to return members checks with
alterations
forged endorsements
Forged draw signatures

Answer 26

Three years

Question 27