CBT Negotiable Instruments and Check Processing

Question 1

Which federal law governs the check clearing process and establishes the rules for substitute checks in the US?

Accepted Answer

Check Clearing for the 21st Century Act (Check 21)

Answer

Electronic Funds Transfer Act

Answer

Uniform Commercial Code Article 4

Answer

Expedited Funds Availability Act

Question 2

A check that has been signed on the back by the payee to transfer it to another party is called a:

Accepted Answer

Endorsed check

Answer

Certified check

Answer

Cashier's check

Answer

Substitute check

Question 3

What is a 'restrictive endorsement' on a check?

Accepted Answer

Writing 'For Deposit Only' with your account number

Answer

Signing only your name on the back

Answer

Signing the check over to a third party

Answer

Stamping the check as certified

Question 4

Under the Expedited Funds Availability Act (Regulation CC), how quickly must banks make funds from local checks available?

Accepted Answer

Next business day

Answer

Same business day

Answer

Within 2 business days

Answer

Within 5 business days

Question 5

A check drawn on the bank's own funds and signed by a bank officer is called a:

Accepted Answer

Cashier's check

Answer

Money order

Answer

Traveler's check

Answer

Certified check

Question 6

What does it mean when a check is 'postdated'?

Accepted Answer

The check bears a future date and should not be processed before that date

Answer

The check has expired and cannot be cashed

Answer

The check was returned due to insufficient funds

Answer

The check has been certified by the issuing bank