Asked by Hassan ibrahim on Jun 09, 2024
Verified
Which statement is true regarding Pedro's statement that the bank's only choice was to dishonor the check?
A) Pedro is correct.
B) Pedro is incorrect because under the UCC, the bank could have created an overdraft by paying the check and later charging the account the amount short.
C) Pedro is incorrect because under the UCC, the bank could have created a subsequent draft by paying the check, and the bank would then have needed to seek the customer's permission to charge his account the amount short.
D) Pedro is incorrect because under the UCC, the bank could have created a secondary draft by paying the check and charging the account the amount short.
E) Pedro is incorrect because under the UCC, the bank could have created an excessive draft by paying the check and closing the account at which point, the customer would be free to open a new account.
Overdraft Protection
Overdraft protection is a banking service that prevents checks, ATM withdrawals, and other transactions from causing an account's balance to fall below zero by advancing money or covering the shortfall.
UCC
Uniform Commercial Code; a comprehensive set of laws governing commercial transactions in the United States.
Dishonor
In financial contexts, the refusal or inability of a party to pay a debt when due or to accept a bill of exchange when presented.
- Gain insight into the legal ramifications stemming from actions like fraud, forgery, and unauthorized transactions in the field of banking.
Verified Answer
LS
Logan SmithJun 10, 2024
Final Answer :
B
Explanation :
Pedro is incorrect because under the Uniform Commercial Code (UCC), banks have the option to cover checks even when there are insufficient funds in the account, creating an overdraft. The bank can then charge the account holder for the overdraft amount.
Learning Objectives
- Gain insight into the legal ramifications stemming from actions like fraud, forgery, and unauthorized transactions in the field of banking.