I don't think that this is a deal-breaker though. In my opinion the best response you could give in this situation is: "I would use <Library function> [showing

I don't think that this is a deal-breaker though. In my opinion the best response you could give in this situation is: "I would use <Library function> [showing you know libraries], however if this was not available I would implement it operating on characters as follows... [showing you understand algorithms]". A good interviewer isn't going to huff because you have "foiled his master plan to trick you", since they are exploring the limits of your understanding.