§5002. Definitions — Inbound Citations
12 U.S.C. § 5002
Cited by 340 provisions in release 119-102.
Citations to §5002(1)
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(1) A consumer may make a claim for expedited recredit from the bank that holds the account of the consumer with respect to a substitute check, if the consumer asserts in good faith that—(A) the bank charged the consumer’s account for a substitute check that was provided to the consumer;(B) either—(ii) the consumer has a warranty claim with respect to such substitute check;(C) the consumer suffered a resulting loss; and(D) the production of the original check or a better copy of the original check is necessary to determine the validity of any claim described in subparagraph (B).
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(A) the bank charged the consumer’s account for a substitute check that was provided to the consumer;
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(1) To make a claim for an expedited recredit under subsection (a) with respect to a substitute check, the consumer shall provide to the bank that holds the account of such consumer—(A) a description of the claim, including an explanation of—(i) why the substitute check was not properly charged to the consumer’s account; or(ii) the warranty claim with respect to such check;(B) a statement that the consumer suffered a loss and an estimate of the amount of the loss;(C) the reason why production of the original check or a better copy of the original check is necessary to determine the validity of the charge to the consumer’s account or the warranty claim; and(D) sufficient information to identify the substitute check and to investigate the claim.
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(i) why the substitute check was not properly charged to the consumer’s account; or
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(A) The bank shall recredit the consumer’s account for the amount described in paragraph (1) no later than the end of the business day following the business day on which the bank determines the consumer’s claim is valid.
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(B) If the bank has not yet determined that the consumer’s claim is valid before the end of the 10th business day after the business day on which the consumer submitted the claim, the bank shall recredit the consumer’s account for—(i) the lesser of the amount of the substitute check that was charged against the consumer account, or $2,500, together with interest if the account is an interest-bearing account, no later than the end of such 10th business day; and(ii) the remaining amount of the substitute check that was charged against the consumer account, if any, together with interest if the account is an interest-bearing account, not later than the 45th calendar day following the business day on which the consumer submits the claim.
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(i) the lesser of the amount of the substitute check that was charged against the consumer account, or $2,500, together with interest if the account is an interest-bearing account, no later than the end of such 10th business day; and
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(ii) the remaining amount of the substitute check that was charged against the consumer account, if any, together with interest if the account is an interest-bearing account, not later than the 45th calendar day following the business day on which the consumer submits the claim.
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(1) Except as provided in paragraph (2), a bank that provides a recredit to a consumer account under subsection (c) shall make the recredited funds available for withdrawal by the consumer by the start of the next business day after the business day on which the bank recredits the consumer’s account under subsection (c).
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(i) on 6 or more business days during the 6-month period ending on the date on which the consumer submits the claim, the balance in the consumer account was negative or would have become negative if checks or other charges to the account had been paid; or
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(ii) on 2 or more business days during such 6-month period, the balance in the consumer account was negative or would have become negative in the amount of $5,000 or more if checks or other charges to the account had been paid.
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(1) If a bank determines that a substitute check subject to the consumer’s claim was in fact properly charged to the consumer’s account, the bank shall send to the consumer, no later than the business day following the business day on which the bank makes a determination—(A) the original check or a copy of the original check (including an image or a substitute check) that—(i) accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated); or(ii) is otherwise sufficient to determine whether or not the consumer’s claim is valid; and(B) an explanation of the basis for the determination by the bank that the substitute check was properly charged, including a statement that the consumer may request copies of any information or documents on which the bank relied in making the determination.
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(A) the claimant bank (or a bank that the claimant bank has indemnified) has received a claim for expedited recredit from a consumer under section 5006 of this title with respect to a substitute check or would have been subject to such a claim had the consumer’s account been charged;
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(C) production of the original check, another substitute check, or a better copy of the original check is necessary to determine the validity of the charge to the customer account or any warranty claim connected with such substitute check.
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(B) a statement that the claimant bank has suffered a loss or is obligated to recredit the consumer’s account under section 5006 of this title, together with an estimate of the amount of the loss or recredit;
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(2) the consumer recredit rights established under section 5006 of this title when a consumer believes in good faith that a substitute check was not properly charged to the account of the consumer.
Citations to §5002(2)
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(1) In the Expedited Funds Availability Act [12 U.S.C. 4001 et seq.], enacted on August 10, 1987, the Congress directed the Board of Governors of the Federal Reserve System to consider establishing regulations requiring Federal reserve banks and depository institutions to provide for check truncation, in order to improve the check processing system.
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(a) A person may deposit, present, or send for collection or return a substitute check without an agreement with the recipient, so long as a bank has made the warranties in section 5004 of this title with respect to such substitute check.
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(c) A bank shall ensure that the substitute check for which the bank is the reconverting bank bears all endorsements applied by parties that previously handled the check (whether in electronic form or in the form of the original paper check or a substitute check) for forward collection or return.
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(d) A bank shall identify itself as a reconverting bank on any substitute check for which the bank is a reconverting bank so as to preserve any previous reconverting bank identifications in conformance with generally applicable industry standards.
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A bank that transfers, presents, or returns a substitute check and receives consideration for the check warrants, as a matter of law, to the transferee, any subsequent collecting or returning bank, the depositary bank, the drawee, the drawer, the payee, the depositor, and any endorser (regardless of whether the warrantee receives the substitute check or another paper or electronic form of the substitute check or original check) that—
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(2) no depositary bank, drawee, drawer, or endorser will receive presentment or return of the substitute check, the original check, or a copy or other paper or electronic version of the substitute check or original check such that the bank, drawee, drawer, or endorser will be asked to make a payment based on a check that the bank, drawee, drawer, or endorser has already paid.
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(a) A reconverting bank and each bank that subsequently transfers, presents, or returns a substitute check in any electronic or paper form, and receives consideration for such transfer, presentment, or return shall indemnify the transferee, any subsequent collecting or returning bank, the depositary bank, the drawee, the drawer, the payee, the depositor, and any endorser, up to the amount described in subsections (b) and (c), as applicable, to the extent of any loss incurred by any recipient of a substitute check if that loss occurred due to the receipt of a substitute check instead of the original check.
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(2) The production of the original check, a substitute check, or a copy under paragraph (1) by an indemnifying bank shall not absolve the bank from any liability on a warranty established under this chapter or any other provision of law.
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(2) A bank that indemnifies a party under this section may attempt to recover from another party based on a warranty or other claim.
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(1) A consumer may make a claim for expedited recredit from the bank that holds the account of the consumer with respect to a substitute check, if the consumer asserts in good faith that—(A) the bank charged the consumer’s account for a substitute check that was provided to the consumer;(B) either—(ii) the consumer has a warranty claim with respect to such substitute check;(C) the consumer suffered a resulting loss; and(D) the production of the original check or a better copy of the original check is necessary to determine the validity of any claim described in subparagraph (B).
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(A) the bank charged the consumer’s account for a substitute check that was provided to the consumer;
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(1) To make a claim for an expedited recredit under subsection (a) with respect to a substitute check, the consumer shall provide to the bank that holds the account of such consumer—(A) a description of the claim, including an explanation of—(i) why the substitute check was not properly charged to the consumer’s account; or(ii) the warranty claim with respect to such check;(B) a statement that the consumer suffered a loss and an estimate of the amount of the loss;(C) the reason why production of the original check or a better copy of the original check is necessary to determine the validity of the charge to the consumer’s account or the warranty claim; and(D) sufficient information to identify the substitute check and to investigate the claim.
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(A) The bank holding the consumer account that is the subject of a claim by the consumer under subsection (a) may, in the discretion of the bank, require the consumer to submit the information required under paragraph (1) in writing.
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(B) A bank that requires a submission of information under subparagraph (A) may permit the consumer to make the submission electronically, if the consumer has agreed to communicate with the bank in that manner.
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(1) The bank shall recredit a consumer account in accordance with paragraph (2) for the amount of a substitute check that was charged against the consumer account if—(A) a consumer submits a claim to the bank with respect to that substitute check that meets the requirement of subsection (b); and(B) the bank has not—(i) provided to the consumer—(I) the original check; or(II) a copy of the original check (including an image or a substitute check) that accurately represents all of the information on the front and back of the original check, as of the time at which the original check was truncated; and(ii) demonstrated to the consumer that the substitute check was properly charged to the consumer account.
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(A) a consumer submits a claim to the bank with respect to that substitute check that meets the requirement of subsection (b); and
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(B) the bank has not—(i) provided to the consumer—(I) the original check; or(II) a copy of the original check (including an image or a substitute check) that accurately represents all of the information on the front and back of the original check, as of the time at which the original check was truncated; and(ii) demonstrated to the consumer that the substitute check was properly charged to the consumer account.
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(A) The bank shall recredit the consumer’s account for the amount described in paragraph (1) no later than the end of the business day following the business day on which the bank determines the consumer’s claim is valid.
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(B) If the bank has not yet determined that the consumer’s claim is valid before the end of the 10th business day after the business day on which the consumer submitted the claim, the bank shall recredit the consumer’s account for—(i) the lesser of the amount of the substitute check that was charged against the consumer account, or $2,500, together with interest if the account is an interest-bearing account, no later than the end of such 10th business day; and(ii) the remaining amount of the substitute check that was charged against the consumer account, if any, together with interest if the account is an interest-bearing account, not later than the 45th calendar day following the business day on which the consumer submits the claim.
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(1) Except as provided in paragraph (2), a bank that provides a recredit to a consumer account under subsection (c) shall make the recredited funds available for withdrawal by the consumer by the start of the next business day after the business day on which the bank recredits the consumer’s account under subsection (c).
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(2) A bank may delay availability to a consumer of a recredit provided under subsection (c)(2)(B)(i) until the start of either the business day following the business day on which the bank determines that the consumer’s claim is valid or the 45th calendar day following the business day on which the consumer submits a claim for such recredit in accordance with subsection (b), whichever is earlier, in any of the following circumstances:(A) The claim is made during the 30-day period beginning on the business day the consumer account was established.(B) Without regard to the charge that is the subject of the claim for which the recredit was made—(i) on 6 or more business days during the 6-month period ending on the date on which the consumer submits the claim, the balance in the consumer account was negative or would have become negative if checks or other charges to the account had been paid; or(ii) on 2 or more business days during such 6-month period, the balance in the consumer account was negative or would have become negative in the amount of $5,000 or more if checks or other charges to the account had been paid.
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(3) No bank that, in accordance with paragraph (2), delays the availability of a recredit under subsection (c) to any consumer account may impose any overdraft fees with respect to drafts drawn by the consumer on such recredited amount before the end of the 5-day period beginning on the date notice of the delay in the availability of such amount is sent by the bank to the consumer.
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(e) A bank may reverse a recredit to a consumer account if the bank—(1) determines that a substitute check for which the bank recredited a consumer account under subsection (c) was in fact properly charged to the consumer account; and(2) notifies the consumer in accordance with subsection (f)(3).
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(1) determines that a substitute check for which the bank recredited a consumer account under subsection (c) was in fact properly charged to the consumer account; and
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(1) If a bank determines that a substitute check subject to the consumer’s claim was in fact properly charged to the consumer’s account, the bank shall send to the consumer, no later than the business day following the business day on which the bank makes a determination—(A) the original check or a copy of the original check (including an image or a substitute check) that—(i) accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated); or(ii) is otherwise sufficient to determine whether or not the consumer’s claim is valid; and(B) an explanation of the basis for the determination by the bank that the substitute check was properly charged, including a statement that the consumer may request copies of any information or documents on which the bank relied in making the determination.
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(B) an explanation of the basis for the determination by the bank that the substitute check was properly charged, including a statement that the consumer may request copies of any information or documents on which the bank relied in making the determination.
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(2) If a bank recredits a consumer account under subsection (c), the bank shall send to the consumer, no later than the business day following the business day on which the bank makes the recredit, a notice of—(A) the amount of the recredit; and(B) the date the recredited funds will be available for withdrawal.
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(3) In addition to the notice required under paragraph (1), if a bank reverses a recredited amount under subsection (e), the bank shall send to the consumer, no later than the business day following the business day on which the bank reverses the recredit, a notice of—(A) the amount of the reversal; and(B) the date the recredit was reversed.
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(g) Providing a recredit in accordance with this section shall not absolve the bank from liability for a claim made under any other law, such as a claim for wrongful dishonor under the Uniform Commercial Code, or from liability for additional damages under section 5005 or 5009 of this title.
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(1) A bank may make a claim against an indemnifying bank for expedited recredit for which that bank is indemnified if—(A) the claimant bank (or a bank that the claimant bank has indemnified) has received a claim for expedited recredit from a consumer under section 5006 of this title with respect to a substitute check or would have been subject to such a claim had the consumer’s account been charged;(B) the claimant bank has suffered a resulting loss or is obligated to recredit a consumer account under section 5006 of this title with respect to such substitute check; and(C) production of the original check, another substitute check, or a better copy of the original check is necessary to determine the validity of the charge to the customer account or any warranty claim connected with such substitute check.
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(A) the claimant bank (or a bank that the claimant bank has indemnified) has received a claim for expedited recredit from a consumer under section 5006 of this title with respect to a substitute check or would have been subject to such a claim had the consumer’s account been charged;
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(B) the claimant bank has suffered a resulting loss or is obligated to recredit a consumer account under section 5006 of this title with respect to such substitute check; and
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(2) Any claim under paragraph (1) may be submitted by the claimant bank to an indemnifying bank before the end of the 120-day period beginning on the date of the transaction that gave rise to the claim.
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(1) To make a claim under subsection (a) for an expedited recredit relating to a substitute check, the claimant bank shall send to the indemnifying bank—(A) a description of—(i) the claim, including an explanation of why the substitute check cannot be properly charged to the consumer account; or(ii) the warranty claim;(B) a statement that the claimant bank has suffered a loss or is obligated to recredit the consumer’s account under section 5006 of this title, together with an estimate of the amount of the loss or recredit;(C) the reason why production of the original check, another substitute check, or a better copy of the original check is necessary to determine the validity of the charge to the consumer account or the warranty claim; and(D) information sufficient for the indemnifying bank to identify the substitute check and to investigate the claim.
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(B) a statement that the claimant bank has suffered a loss or is obligated to recredit the consumer’s account under section 5006 of this title, together with an estimate of the amount of the loss or recredit;
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(2) If the information submitted by a claimant bank pursuant to paragraph (1) in connection with a claim for an expedited recredit includes a copy of any substitute check for which any such claim is made, the claimant bank shall take reasonable steps to ensure that any such copy cannot be—(A) mistaken for the legal equivalent of the check under section 5003(b) of this title; or(B) sent or handled by any bank, including the indemnifying bank, as a forward collection or returned check.
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(B) sent or handled by any bank, including the indemnifying bank, as a forward collection or returned check.
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(A) An indemnifying bank may, in the discretion of the bank, require the claimant bank to submit the information required by paragraph (1) in writing, including a copy of the written or electronically submitted claim, if any, that the consumer provided in accordance with section 5006(b) of this title.
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(B) An indemnifying bank that requires a submission of information under subparagraph (A) may permit the claimant bank to make the submission electronically, if the claimant bank has agreed to communicate with the indemnifying bank in that manner.
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(1) No later than 10 business days after the business day on which an indemnifying bank receives a claim under subsection (a) from a claimant bank with respect to a substitute check, the indemnifying bank shall—(A) provide, to the claimant bank, the original check (with respect to such substitute check) or a copy of the original check (including an image or a substitute check) that—(i) accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated); or(ii) is otherwise sufficient to determine the bank’s claim is not valid; and(B) recredit the claimant bank for the amount of the claim up to the amount of the substitute check, plus interest if applicable; or(C) provide information to the claimant bank as to why the indemnifying bank is not obligated to comply with subparagraph (A) or (B).
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(A) provide, to the claimant bank, the original check (with respect to such substitute check) or a copy of the original check (including an image or a substitute check) that—(i) accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated); or(ii) is otherwise sufficient to determine the bank’s claim is not valid; and
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(ii) is otherwise sufficient to determine the bank’s claim is not valid; and
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(B) recredit the claimant bank for the amount of the claim up to the amount of the substitute check, plus interest if applicable; or
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(C) provide information to the claimant bank as to why the indemnifying bank is not obligated to comply with subparagraph (A) or (B).
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(2) Providing a recredit under this subsection to a claimant bank with respect to a substitute check shall not absolve the indemnifying bank from liability for claims brought under any other law or from additional damages under section 5005 or 5009 of this title with respect to such check.
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(3) If a claimant bank reverses, in accordance with section 5006(e) of this title, a recredit previously made to a consumer account under section 5006(c) of this title, or otherwise receives a credit or recredit with regard to such substitute check, the claimant bank shall promptly refund to any indemnifying bank any amount previously advanced by the indemnifying bank in connection with such substitute check.
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(d) If the indemnifying bank provides the claimant bank with the original check or a copy of the original check (including an image or a substitute check) under subsection (c)(1)(A), section 5005(d) of this title shall govern any right of the indemnifying bank to any repayment of any funds the indemnifying bank has recredited to the claimant bank pursuant to subsection (c).
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A delay by a bank beyond the time limits prescribed or permitted by this chapter shall be excused if the delay is caused by interruption of communication or computer facilities, suspension of payments by another bank, war, emergency conditions, failure of equipment, or other circumstances beyond the control of a bank and if the bank uses such diligence as the circumstances require.
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(b) Except as provided in subsection (c), unless a person gives notice of a claim to the indemnifying or warranting bank within 30 days after the person has reason to know of the claim and the identity of the indemnifying or warranting bank, the indemnifying or warranting bank is discharged from liability in an action to enforce a claim under this chapter to the extent of any loss caused by the delay in giving notice of the claim.
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(a) Each bank shall provide, in accordance with subsection (b), a brief notice about substitute checks that describes—(1) how a substitute check is the legal equivalent of an original check for all purposes, including any provision of any Federal or State law, and for all persons, if the substitute check—(A) accurately represents all of the information on the front and back of the original check as of the time at which the original check was truncated; and(B) bears the legend: “This is a legal copy of your check. You can use it in the same way you would use the original check.”; and(2) the consumer recredit rights established under section 5006 of this title when a consumer believes in good faith that a substitute check was not properly charged to the account of the consumer.
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(1) With respect to consumers who are customers of a bank on the effective date of this chapter and who receive original checks or substitute checks, a bank shall provide the notice described in subsection (a) to each such consumer no later than the first regularly scheduled communication with the consumer after the effective date of this chapter.
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(2) A bank shall provide the notice described in subsection (a) to each consumer who will receive original checks or substitute checks, other than existing customers referred to in paragraph (1), at the time at which the customer relationship is initiated.
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(4) Notice shall be provided to each consumer of the bank that requests a copy of a check and receives a substitute check, at the time of the request.
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(1) Before the end of the 9-month period beginning on October 28, 2003, the Board shall publish model forms and clauses that a bank may use to describe each of the elements required by subsection (a).
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(A) A bank shall be treated as being in compliance with the requirements of subsection (a) if the bank’s substitute check notice uses a model form or clause published by the Board and such model form or clause accurately describes the bank’s policies and practices.
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(B) A bank may delete any information in the model form or clause that is not required by this chapter or rearrange the format.
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(a) Any provision of section 5007 of this title may be varied by agreement of the banks involved.
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In the annual report prepared by the Board for the first full calendar year after October 28, 2003, and in each of the 9 subsequent annual reports by the Board, the Board shall include the amount of operating costs attributable to, and an estimate of the Federal Reserve banks’ imputed revenues derived from, the transportation of commercial checks between Federal Reserve bank check processing centers.
Citations to §5002(3)(B)
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A bank that transfers, presents, or returns a substitute check and receives consideration for the check warrants, as a matter of law, to the transferee, any subsequent collecting or returning bank, the depositary bank, the drawee, the drawer, the payee, the depositor, and any endorser (regardless of whether the warrantee receives the substitute check or another paper or electronic form of the substitute check or original check) that—
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(2) no depositary bank, drawee, drawer, or endorser will receive presentment or return of the substitute check, the original check, or a copy or other paper or electronic version of the substitute check or original check such that the bank, drawee, drawer, or endorser will be asked to make a payment based on a check that the bank, drawee, drawer, or endorser has already paid.
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(a) A reconverting bank and each bank that subsequently transfers, presents, or returns a substitute check in any electronic or paper form, and receives consideration for such transfer, presentment, or return shall indemnify the transferee, any subsequent collecting or returning bank, the depositary bank, the drawee, the drawer, the payee, the depositor, and any endorser, up to the amount described in subsections (b) and (c), as applicable, to the extent of any loss incurred by any recipient of a substitute check if that loss occurred due to the receipt of a substitute check instead of the original check.
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(3) the length of time within which depositary banks learn of the nonpayment of local and nonlocal checks;
Citations to §5002(3)(C)
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(1) the percentage of total checks cleared in which the paper check is not returned to the paying bank;
Citations to §5002(3)(D)(i)
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A bank that transfers, presents, or returns a substitute check and receives consideration for the check warrants, as a matter of law, to the transferee, any subsequent collecting or returning bank, the depositary bank, the drawee, the drawer, the payee, the depositor, and any endorser (regardless of whether the warrantee receives the substitute check or another paper or electronic form of the substitute check or original check) that—
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(a) A reconverting bank and each bank that subsequently transfers, presents, or returns a substitute check in any electronic or paper form, and receives consideration for such transfer, presentment, or return shall indemnify the transferee, any subsequent collecting or returning bank, the depositary bank, the drawee, the drawer, the payee, the depositor, and any endorser, up to the amount described in subsections (b) and (c), as applicable, to the extent of any loss incurred by any recipient of a substitute check if that loss occurred due to the receipt of a substitute check instead of the original check.
Citations to §5002(4)
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(1) In the Expedited Funds Availability Act [12 U.S.C. 4001 et seq.], enacted on August 10, 1987, the Congress directed the Board of Governors of the Federal Reserve System to consider establishing regulations requiring Federal reserve banks and depository institutions to provide for check truncation, in order to improve the check processing system.
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(B) directed that the exercise of such authority by the Board superseded any State law, including the Uniform Commercial Code, as in effect in any State.
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(3) Check truncation is no less desirable in 2003 for both financial service customers and the financial services industry, to reduce costs, improve efficiency in check collections, and expedite funds availability for customers than it was over 15 years ago when Congress first directed the Board to consider establishing such a process.
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(1) Before the end of the 9-month period beginning on October 28, 2003, the Board shall publish model forms and clauses that a bank may use to describe each of the elements required by subsection (a).
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(A) A bank shall be treated as being in compliance with the requirements of subsection (a) if the bank’s substitute check notice uses a model form or clause published by the Board and such model form or clause accurately describes the bank’s policies and practices.
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(a) In order to evaluate the implementation and the impact of this chapter, the Board shall conduct a study of—(1) the percentage of total checks cleared in which the paper check is not returned to the paying bank;(2) the extent to which banks make funds available to consumers for local and nonlocal checks prior to the expiration of maximum hold periods;(3) the length of time within which depositary banks learn of the nonpayment of local and nonlocal checks;(4) the increase or decrease in check-related losses over the study period; and
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(b) Before the end of the 30-month period beginning on the effective date of this chapter, the Board shall submit a report to the Congress containing the results of the study conducted under this section, together with recommendations for legislative action.
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In the annual report prepared by the Board for the first full calendar year after October 28, 2003, and in each of the 9 subsequent annual reports by the Board, the Board shall include the amount of operating costs attributable to, and an estimate of the Federal Reserve banks’ imputed revenues derived from, the transportation of commercial checks between Federal Reserve bank check processing centers.
Citations to §5002(5)
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(A) The bank shall recredit the consumer’s account for the amount described in paragraph (1) no later than the end of the business day following the business day on which the bank determines the consumer’s claim is valid.
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(B) If the bank has not yet determined that the consumer’s claim is valid before the end of the 10th business day after the business day on which the consumer submitted the claim, the bank shall recredit the consumer’s account for—(i) the lesser of the amount of the substitute check that was charged against the consumer account, or $2,500, together with interest if the account is an interest-bearing account, no later than the end of such 10th business day; and(ii) the remaining amount of the substitute check that was charged against the consumer account, if any, together with interest if the account is an interest-bearing account, not later than the 45th calendar day following the business day on which the consumer submits the claim.
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(i) the lesser of the amount of the substitute check that was charged against the consumer account, or $2,500, together with interest if the account is an interest-bearing account, no later than the end of such 10th business day; and
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(ii) the remaining amount of the substitute check that was charged against the consumer account, if any, together with interest if the account is an interest-bearing account, not later than the 45th calendar day following the business day on which the consumer submits the claim.
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(1) Except as provided in paragraph (2), a bank that provides a recredit to a consumer account under subsection (c) shall make the recredited funds available for withdrawal by the consumer by the start of the next business day after the business day on which the bank recredits the consumer’s account under subsection (c).
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(2) A bank may delay availability to a consumer of a recredit provided under subsection (c)(2)(B)(i) until the start of either the business day following the business day on which the bank determines that the consumer’s claim is valid or the 45th calendar day following the business day on which the consumer submits a claim for such recredit in accordance with subsection (b), whichever is earlier, in any of the following circumstances:(A) The claim is made during the 30-day period beginning on the business day the consumer account was established.(B) Without regard to the charge that is the subject of the claim for which the recredit was made—(i) on 6 or more business days during the 6-month period ending on the date on which the consumer submits the claim, the balance in the consumer account was negative or would have become negative if checks or other charges to the account had been paid; or(ii) on 2 or more business days during such 6-month period, the balance in the consumer account was negative or would have become negative in the amount of $5,000 or more if checks or other charges to the account had been paid.
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(A) The claim is made during the 30-day period beginning on the business day the consumer account was established.
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(i) on 6 or more business days during the 6-month period ending on the date on which the consumer submits the claim, the balance in the consumer account was negative or would have become negative if checks or other charges to the account had been paid; or
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(ii) on 2 or more business days during such 6-month period, the balance in the consumer account was negative or would have become negative in the amount of $5,000 or more if checks or other charges to the account had been paid.
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(1) If a bank determines that a substitute check subject to the consumer’s claim was in fact properly charged to the consumer’s account, the bank shall send to the consumer, no later than the business day following the business day on which the bank makes a determination—(A) the original check or a copy of the original check (including an image or a substitute check) that—(i) accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated); or(ii) is otherwise sufficient to determine whether or not the consumer’s claim is valid; and(B) an explanation of the basis for the determination by the bank that the substitute check was properly charged, including a statement that the consumer may request copies of any information or documents on which the bank relied in making the determination.
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(2) If a bank recredits a consumer account under subsection (c), the bank shall send to the consumer, no later than the business day following the business day on which the bank makes the recredit, a notice of—(A) the amount of the recredit; and(B) the date the recredited funds will be available for withdrawal.
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(3) In addition to the notice required under paragraph (1), if a bank reverses a recredited amount under subsection (e), the bank shall send to the consumer, no later than the business day following the business day on which the bank reverses the recredit, a notice of—(A) the amount of the reversal; and(B) the date the recredit was reversed.
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(1) No later than 10 business days after the business day on which an indemnifying bank receives a claim under subsection (a) from a claimant bank with respect to a substitute check, the indemnifying bank shall—(A) provide, to the claimant bank, the original check (with respect to such substitute check) or a copy of the original check (including an image or a substitute check) that—(i) accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated); or(ii) is otherwise sufficient to determine the bank’s claim is not valid; and(B) recredit the claimant bank for the amount of the claim up to the amount of the substitute check, plus interest if applicable; or(C) provide information to the claimant bank as to why the indemnifying bank is not obligated to comply with subparagraph (A) or (B).
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(2) an evaluation of the benefits accruing to consumers and financial institutions from reduced transportation costs, longer hours for accepting deposits for credit within 1 business day, the impact of fraud losses, and an estimate of consumers’ share of the total benefits derived from this chapter; and
Citations to §5002(6)
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(1) In the Expedited Funds Availability Act [12 U.S.C. 4001 et seq.], enacted on August 10, 1987, the Congress directed the Board of Governors of the Federal Reserve System to consider establishing regulations requiring Federal reserve banks and depository institutions to provide for check truncation, in order to improve the check processing system.
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(3) Check truncation is no less desirable in 2003 for both financial service customers and the financial services industry, to reduce costs, improve efficiency in check collections, and expedite funds availability for customers than it was over 15 years ago when Congress first directed the Board to consider establishing such a process.
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(1) To facilitate check truncation by authorizing substitute checks.
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(b) A substitute check shall be the legal equivalent of the original check for all purposes, including any provision of any Federal or State law, and for all persons if the substitute check—
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(c) A bank shall ensure that the substitute check for which the bank is the reconverting bank bears all endorsements applied by parties that previously handled the check (whether in electronic form or in the form of the original paper check or a substitute check) for forward collection or return.
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(e) A substitute check that is the legal equivalent of the original check under subsection (b) shall be subject to any provision, including any provision relating to the protection of customers, of part 229 of title 12 of the Code of Federal Regulations, the Uniform Commercial Code, and any other applicable Federal or State law as if such substitute check were the original check, to the extent such provision of law is not inconsistent with this chapter.
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A bank that transfers, presents, or returns a substitute check and receives consideration for the check warrants, as a matter of law, to the transferee, any subsequent collecting or returning bank, the depositary bank, the drawee, the drawer, the payee, the depositor, and any endorser (regardless of whether the warrantee receives the substitute check or another paper or electronic form of the substitute check or original check) that—
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(2) no depositary bank, drawee, drawer, or endorser will receive presentment or return of the substitute check, the original check, or a copy or other paper or electronic version of the substitute check or original check such that the bank, drawee, drawer, or endorser will be asked to make a payment based on a check that the bank, drawee, drawer, or endorser has already paid.
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(a) A reconverting bank and each bank that subsequently transfers, presents, or returns a substitute check in any electronic or paper form, and receives consideration for such transfer, presentment, or return shall indemnify the transferee, any subsequent collecting or returning bank, the depositary bank, the drawee, the drawer, the payee, the depositor, and any endorser, up to the amount described in subsections (b) and (c), as applicable, to the extent of any loss incurred by any recipient of a substitute check if that loss occurred due to the receipt of a substitute check instead of the original check.
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(1) If the indemnifying bank produces the original check or a copy of the original check (including an image or a substitute check) that accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated) or is otherwise sufficient to determine whether or not a claim is valid, the indemnifying bank shall—(A) be liable under this section only for losses covered by the indemnity that are incurred up to the time that the original check or copy is provided to the indemnified party; and(B) have a right to the return of any funds it has paid under the indemnity in excess of those losses.
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(A) be liable under this section only for losses covered by the indemnity that are incurred up to the time that the original check or copy is provided to the indemnified party; and
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(2) The production of the original check, a substitute check, or a copy under paragraph (1) by an indemnifying bank shall not absolve the bank from any liability on a warranty established under this chapter or any other provision of law.
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(3) Each indemnified party shall have a duty to comply with all reasonable requests for assistance from an indemnifying bank in connection with any claim the indemnifying bank brings against a warrantor or other party related to a check that forms the basis for the indemnification.
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(D) the production of the original check or a better copy of the original check is necessary to determine the validity of any claim described in subparagraph (B).
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(ii) the warranty claim with respect to such check;
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(I) the original check; or
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(II) a copy of the original check (including an image or a substitute check) that accurately represents all of the information on the front and back of the original check, as of the time at which the original check was truncated; and
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(i) on 6 or more business days during the 6-month period ending on the date on which the consumer submits the claim, the balance in the consumer account was negative or would have become negative if checks or other charges to the account had been paid; or
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(ii) on 2 or more business days during such 6-month period, the balance in the consumer account was negative or would have become negative in the amount of $5,000 or more if checks or other charges to the account had been paid.
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(A) the original check or a copy of the original check (including an image or a substitute check) that—(i) accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated); or(ii) is otherwise sufficient to determine whether or not the consumer’s claim is valid; and
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(C) production of the original check, another substitute check, or a better copy of the original check is necessary to determine the validity of the charge to the customer account or any warranty claim connected with such substitute check.
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(C) the reason why production of the original check, another substitute check, or a better copy of the original check is necessary to determine the validity of the charge to the consumer account or the warranty claim; and
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(A) mistaken for the legal equivalent of the check under section 5003(b) of this title; or
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(B) sent or handled by any bank, including the indemnifying bank, as a forward collection or returned check.
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(A) provide, to the claimant bank, the original check (with respect to such substitute check) or a copy of the original check (including an image or a substitute check) that—(i) accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated); or(ii) is otherwise sufficient to determine the bank’s claim is not valid; and
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(2) Providing a recredit under this subsection to a claimant bank with respect to a substitute check shall not absolve the indemnifying bank from liability for claims brought under any other law or from additional damages under section 5005 or 5009 of this title with respect to such check.
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(d) If the indemnifying bank provides the claimant bank with the original check or a copy of the original check (including an image or a substitute check) under subsection (c)(1)(A), section 5005(d) of this title shall govern any right of the indemnifying bank to any repayment of any funds the indemnifying bank has recredited to the claimant bank pursuant to subsection (c).
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(1) how a substitute check is the legal equivalent of an original check for all purposes, including any provision of any Federal or State law, and for all persons, if the substitute check—
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(1) With respect to consumers who are customers of a bank on the effective date of this chapter and who receive original checks or substitute checks, a bank shall provide the notice described in subsection (a) to each such consumer no later than the first regularly scheduled communication with the consumer after the effective date of this chapter.
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(2) A bank shall provide the notice described in subsection (a) to each consumer who will receive original checks or substitute checks, other than existing customers referred to in paragraph (1), at the time at which the customer relationship is initiated.
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(4) Notice shall be provided to each consumer of the bank that requests a copy of a check and receives a substitute check, at the time of the request.
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(1) the percentage of total checks cleared in which the paper check is not returned to the paying bank;
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(3) the length of time within which depositary banks learn of the nonpayment of local and nonlocal checks;
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(4) the increase or decrease in check-related losses over the study period; and
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In the annual report prepared by the Board for the first full calendar year after October 28, 2003, and in each of the 9 subsequent annual reports by the Board, the Board shall include the amount of operating costs attributable to, and an estimate of the Federal Reserve banks’ imputed revenues derived from, the transportation of commercial checks between Federal Reserve bank check processing centers.
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(1) an estimate of the gains in economic efficiency made possible from check truncation;
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(2) The term “check” has the same meaning as in section 5002(6) of title 12.
Citations to §5002(7)
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(2) Nothing in this subsection reduces the rights of a consumer or any other person under the Uniform Commercial Code or other applicable provision of Federal or State law.
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(1) A consumer may make a claim for expedited recredit from the bank that holds the account of the consumer with respect to a substitute check, if the consumer asserts in good faith that—(A) the bank charged the consumer’s account for a substitute check that was provided to the consumer;(B) either—(ii) the consumer has a warranty claim with respect to such substitute check;(C) the consumer suffered a resulting loss; and(D) the production of the original check or a better copy of the original check is necessary to determine the validity of any claim described in subparagraph (B).
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(A) the bank charged the consumer’s account for a substitute check that was provided to the consumer;
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(ii) the consumer has a warranty claim with respect to such substitute check;
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(C) the consumer suffered a resulting loss; and
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(2) Any claim under paragraph (1) with respect to a consumer account may be submitted by a consumer before the end of the 40-day period beginning on the later of—(A) the date on which the financial institution mails or delivers, by a means agreed to by the consumer, the periodic statement of account for such account which contains information concerning the transaction giving rise to the claim; or(B) the date on which the substitute check is made available to the consumer.
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(B) the date on which the substitute check is made available to the consumer.
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(3) If the ability of the consumer to submit the claim within the 40-day period under paragraph (2) is delayed due to extenuating circumstances, including extended travel or the illness of the consumer, the 40-day period shall be extended by a reasonable amount of time.
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(1) To make a claim for an expedited recredit under subsection (a) with respect to a substitute check, the consumer shall provide to the bank that holds the account of such consumer—(A) a description of the claim, including an explanation of—(i) why the substitute check was not properly charged to the consumer’s account; or(ii) the warranty claim with respect to such check;(B) a statement that the consumer suffered a loss and an estimate of the amount of the loss;(C) the reason why production of the original check or a better copy of the original check is necessary to determine the validity of the charge to the consumer’s account or the warranty claim; and(D) sufficient information to identify the substitute check and to investigate the claim.
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(i) why the substitute check was not properly charged to the consumer’s account; or
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(B) a statement that the consumer suffered a loss and an estimate of the amount of the loss;
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(A) The bank holding the consumer account that is the subject of a claim by the consumer under subsection (a) may, in the discretion of the bank, require the consumer to submit the information required under paragraph (1) in writing.
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(B) A bank that requires a submission of information under subparagraph (A) may permit the consumer to make the submission electronically, if the consumer has agreed to communicate with the bank in that manner.
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(A) a consumer submits a claim to the bank with respect to that substitute check that meets the requirement of subsection (b); and
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(ii) demonstrated to the consumer that the substitute check was properly charged to the consumer account.
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(A) The bank shall recredit the consumer’s account for the amount described in paragraph (1) no later than the end of the business day following the business day on which the bank determines the consumer’s claim is valid.
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(B) If the bank has not yet determined that the consumer’s claim is valid before the end of the 10th business day after the business day on which the consumer submitted the claim, the bank shall recredit the consumer’s account for—(i) the lesser of the amount of the substitute check that was charged against the consumer account, or $2,500, together with interest if the account is an interest-bearing account, no later than the end of such 10th business day; and(ii) the remaining amount of the substitute check that was charged against the consumer account, if any, together with interest if the account is an interest-bearing account, not later than the 45th calendar day following the business day on which the consumer submits the claim.
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(ii) the remaining amount of the substitute check that was charged against the consumer account, if any, together with interest if the account is an interest-bearing account, not later than the 45th calendar day following the business day on which the consumer submits the claim.
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(1) Except as provided in paragraph (2), a bank that provides a recredit to a consumer account under subsection (c) shall make the recredited funds available for withdrawal by the consumer by the start of the next business day after the business day on which the bank recredits the consumer’s account under subsection (c).
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(2) A bank may delay availability to a consumer of a recredit provided under subsection (c)(2)(B)(i) until the start of either the business day following the business day on which the bank determines that the consumer’s claim is valid or the 45th calendar day following the business day on which the consumer submits a claim for such recredit in accordance with subsection (b), whichever is earlier, in any of the following circumstances:(A) The claim is made during the 30-day period beginning on the business day the consumer account was established.(B) Without regard to the charge that is the subject of the claim for which the recredit was made—(i) on 6 or more business days during the 6-month period ending on the date on which the consumer submits the claim, the balance in the consumer account was negative or would have become negative if checks or other charges to the account had been paid; or(ii) on 2 or more business days during such 6-month period, the balance in the consumer account was negative or would have become negative in the amount of $5,000 or more if checks or other charges to the account had been paid.
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(i) on 6 or more business days during the 6-month period ending on the date on which the consumer submits the claim, the balance in the consumer account was negative or would have become negative if checks or other charges to the account had been paid; or
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(3) No bank that, in accordance with paragraph (2), delays the availability of a recredit under subsection (c) to any consumer account may impose any overdraft fees with respect to drafts drawn by the consumer on such recredited amount before the end of the 5-day period beginning on the date notice of the delay in the availability of such amount is sent by the bank to the consumer.
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(2) notifies the consumer in accordance with subsection (f)(3).
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(1) If a bank determines that a substitute check subject to the consumer’s claim was in fact properly charged to the consumer’s account, the bank shall send to the consumer, no later than the business day following the business day on which the bank makes a determination—(A) the original check or a copy of the original check (including an image or a substitute check) that—(i) accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated); or(ii) is otherwise sufficient to determine whether or not the consumer’s claim is valid; and(B) an explanation of the basis for the determination by the bank that the substitute check was properly charged, including a statement that the consumer may request copies of any information or documents on which the bank relied in making the determination.
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(ii) is otherwise sufficient to determine whether or not the consumer’s claim is valid; and
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(B) an explanation of the basis for the determination by the bank that the substitute check was properly charged, including a statement that the consumer may request copies of any information or documents on which the bank relied in making the determination.
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(2) If a bank recredits a consumer account under subsection (c), the bank shall send to the consumer, no later than the business day following the business day on which the bank makes the recredit, a notice of—(A) the amount of the recredit; and(B) the date the recredited funds will be available for withdrawal.
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(3) In addition to the notice required under paragraph (1), if a bank reverses a recredited amount under subsection (e), the bank shall send to the consumer, no later than the business day following the business day on which the bank reverses the recredit, a notice of—(A) the amount of the reversal; and(B) the date the recredit was reversed.
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(h) A consumer who was provided a substitute check may make a claim for an expedited recredit under this section with regard to a transaction involving the substitute check whether or not the consumer is in possession of the substitute check.
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(A) the claimant bank (or a bank that the claimant bank has indemnified) has received a claim for expedited recredit from a consumer under section 5006 of this title with respect to a substitute check or would have been subject to such a claim had the consumer’s account been charged;
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(B) a statement that the claimant bank has suffered a loss or is obligated to recredit the consumer’s account under section 5006 of this title, together with an estimate of the amount of the loss or recredit;
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(A) An indemnifying bank may, in the discretion of the bank, require the claimant bank to submit the information required by paragraph (1) in writing, including a copy of the written or electronically submitted claim, if any, that the consumer provided in accordance with section 5006(b) of this title.
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(2) Nothing in this subsection reduces the rights of a consumer or any other person under the Uniform Commercial Code or other applicable provision of Federal or State law.
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(c) A timely claim by a consumer under section 5006 of this title for expedited recredit constitutes timely notice of a claim by the consumer for purposes of subsection (b).
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(2) the consumer recredit rights established under section 5006 of this title when a consumer believes in good faith that a substitute check was not properly charged to the account of the consumer.
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(1) With respect to consumers who are customers of a bank on the effective date of this chapter and who receive original checks or substitute checks, a bank shall provide the notice described in subsection (a) to each such consumer no later than the first regularly scheduled communication with the consumer after the effective date of this chapter.
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(2) A bank shall provide the notice described in subsection (a) to each consumer who will receive original checks or substitute checks, other than existing customers referred to in paragraph (1), at the time at which the customer relationship is initiated.
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(4) Notice shall be provided to each consumer of the bank that requests a copy of a check and receives a substitute check, at the time of the request.
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(2) an evaluation of the benefits accruing to consumers and financial institutions from reduced transportation costs, longer hours for accepting deposits for credit within 1 business day, the impact of fraud losses, and an estimate of consumers’ share of the total benefits derived from this chapter; and
Citations to §5002(8)
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(2) Any claim under paragraph (1) with respect to a consumer account may be submitted by a consumer before the end of the 40-day period beginning on the later of—(A) the date on which the financial institution mails or delivers, by a means agreed to by the consumer, the periodic statement of account for such account which contains information concerning the transaction giving rise to the claim; or(B) the date on which the substitute check is made available to the consumer.
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(A) The bank holding the consumer account that is the subject of a claim by the consumer under subsection (a) may, in the discretion of the bank, require the consumer to submit the information required under paragraph (1) in writing.
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(1) The bank shall recredit a consumer account in accordance with paragraph (2) for the amount of a substitute check that was charged against the consumer account if—(A) a consumer submits a claim to the bank with respect to that substitute check that meets the requirement of subsection (b); and(B) the bank has not—(i) provided to the consumer—(I) the original check; or(II) a copy of the original check (including an image or a substitute check) that accurately represents all of the information on the front and back of the original check, as of the time at which the original check was truncated; and(ii) demonstrated to the consumer that the substitute check was properly charged to the consumer account.
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(ii) demonstrated to the consumer that the substitute check was properly charged to the consumer account.
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(i) the lesser of the amount of the substitute check that was charged against the consumer account, or $2,500, together with interest if the account is an interest-bearing account, no later than the end of such 10th business day; and
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(ii) the remaining amount of the substitute check that was charged against the consumer account, if any, together with interest if the account is an interest-bearing account, not later than the 45th calendar day following the business day on which the consumer submits the claim.
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(1) Except as provided in paragraph (2), a bank that provides a recredit to a consumer account under subsection (c) shall make the recredited funds available for withdrawal by the consumer by the start of the next business day after the business day on which the bank recredits the consumer’s account under subsection (c).
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(A) The claim is made during the 30-day period beginning on the business day the consumer account was established.
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(i) on 6 or more business days during the 6-month period ending on the date on which the consumer submits the claim, the balance in the consumer account was negative or would have become negative if checks or other charges to the account had been paid; or
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(ii) on 2 or more business days during such 6-month period, the balance in the consumer account was negative or would have become negative in the amount of $5,000 or more if checks or other charges to the account had been paid.
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(3) No bank that, in accordance with paragraph (2), delays the availability of a recredit under subsection (c) to any consumer account may impose any overdraft fees with respect to drafts drawn by the consumer on such recredited amount before the end of the 5-day period beginning on the date notice of the delay in the availability of such amount is sent by the bank to the consumer.
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(e) A bank may reverse a recredit to a consumer account if the bank—(1) determines that a substitute check for which the bank recredited a consumer account under subsection (c) was in fact properly charged to the consumer account; and(2) notifies the consumer in accordance with subsection (f)(3).
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(1) determines that a substitute check for which the bank recredited a consumer account under subsection (c) was in fact properly charged to the consumer account; and
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(2) If a bank recredits a consumer account under subsection (c), the bank shall send to the consumer, no later than the business day following the business day on which the bank makes the recredit, a notice of—(A) the amount of the recredit; and(B) the date the recredited funds will be available for withdrawal.
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(B) the claimant bank has suffered a resulting loss or is obligated to recredit a consumer account under section 5006 of this title with respect to such substitute check; and
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(i) the claim, including an explanation of why the substitute check cannot be properly charged to the consumer account; or
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(C) the reason why production of the original check, another substitute check, or a better copy of the original check is necessary to determine the validity of the charge to the consumer account or the warranty claim; and
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(3) If a claimant bank reverses, in accordance with section 5006(e) of this title, a recredit previously made to a consumer account under section 5006(c) of this title, or otherwise receives a credit or recredit with regard to such substitute check, the claimant bank shall promptly refund to any indemnifying bank any amount previously advanced by the indemnifying bank in connection with such substitute check.
Citations to §5002(9)
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(3) Check truncation is no less desirable in 2003 for both financial service customers and the financial services industry, to reduce costs, improve efficiency in check collections, and expedite funds availability for customers than it was over 15 years ago when Congress first directed the Board to consider establishing such a process.
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(e) A substitute check that is the legal equivalent of the original check under subsection (b) shall be subject to any provision, including any provision relating to the protection of customers, of part 229 of title 12 of the Code of Federal Regulations, the Uniform Commercial Code, and any other applicable Federal or State law as if such substitute check were the original check, to the extent such provision of law is not inconsistent with this chapter.
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(C) production of the original check, another substitute check, or a better copy of the original check is necessary to determine the validity of the charge to the customer account or any warranty claim connected with such substitute check.
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(1) With respect to consumers who are customers of a bank on the effective date of this chapter and who receive original checks or substitute checks, a bank shall provide the notice described in subsection (a) to each such consumer no later than the first regularly scheduled communication with the consumer after the effective date of this chapter.
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(2) A bank shall provide the notice described in subsection (a) to each consumer who will receive original checks or substitute checks, other than existing customers referred to in paragraph (1), at the time at which the customer relationship is initiated.
Citations to §5002(10)
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(c) A bank shall ensure that the substitute check for which the bank is the reconverting bank bears all endorsements applied by parties that previously handled the check (whether in electronic form or in the form of the original paper check or a substitute check) for forward collection or return.
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(B) sent or handled by any bank, including the indemnifying bank, as a forward collection or returned check.
Citations to §5002(11)
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(1) If the indemnifying bank produces the original check or a copy of the original check (including an image or a substitute check) that accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated) or is otherwise sufficient to determine whether or not a claim is valid, the indemnifying bank shall—(A) be liable under this section only for losses covered by the indemnity that are incurred up to the time that the original check or copy is provided to the indemnified party; and(B) have a right to the return of any funds it has paid under the indemnity in excess of those losses.
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(2) The production of the original check, a substitute check, or a copy under paragraph (1) by an indemnifying bank shall not absolve the bank from any liability on a warranty established under this chapter or any other provision of law.
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(1) Each indemnifying bank shall be subrogated to the rights of any indemnified party to the extent of the indemnity.
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(3) Each indemnified party shall have a duty to comply with all reasonable requests for assistance from an indemnifying bank in connection with any claim the indemnifying bank brings against a warrantor or other party related to a check that forms the basis for the indemnification.
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(1) A bank may make a claim against an indemnifying bank for expedited recredit for which that bank is indemnified if—(A) the claimant bank (or a bank that the claimant bank has indemnified) has received a claim for expedited recredit from a consumer under section 5006 of this title with respect to a substitute check or would have been subject to such a claim had the consumer’s account been charged;(B) the claimant bank has suffered a resulting loss or is obligated to recredit a consumer account under section 5006 of this title with respect to such substitute check; and(C) production of the original check, another substitute check, or a better copy of the original check is necessary to determine the validity of the charge to the customer account or any warranty claim connected with such substitute check.
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(2) Any claim under paragraph (1) may be submitted by the claimant bank to an indemnifying bank before the end of the 120-day period beginning on the date of the transaction that gave rise to the claim.
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(1) To make a claim under subsection (a) for an expedited recredit relating to a substitute check, the claimant bank shall send to the indemnifying bank—(A) a description of—(i) the claim, including an explanation of why the substitute check cannot be properly charged to the consumer account; or(ii) the warranty claim;(B) a statement that the claimant bank has suffered a loss or is obligated to recredit the consumer’s account under section 5006 of this title, together with an estimate of the amount of the loss or recredit;(C) the reason why production of the original check, another substitute check, or a better copy of the original check is necessary to determine the validity of the charge to the consumer account or the warranty claim; and(D) information sufficient for the indemnifying bank to identify the substitute check and to investigate the claim.
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(D) information sufficient for the indemnifying bank to identify the substitute check and to investigate the claim.
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(B) sent or handled by any bank, including the indemnifying bank, as a forward collection or returned check.
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(A) An indemnifying bank may, in the discretion of the bank, require the claimant bank to submit the information required by paragraph (1) in writing, including a copy of the written or electronically submitted claim, if any, that the consumer provided in accordance with section 5006(b) of this title.
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(B) An indemnifying bank that requires a submission of information under subparagraph (A) may permit the claimant bank to make the submission electronically, if the claimant bank has agreed to communicate with the indemnifying bank in that manner.
-
(1) No later than 10 business days after the business day on which an indemnifying bank receives a claim under subsection (a) from a claimant bank with respect to a substitute check, the indemnifying bank shall—(A) provide, to the claimant bank, the original check (with respect to such substitute check) or a copy of the original check (including an image or a substitute check) that—(i) accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated); or(ii) is otherwise sufficient to determine the bank’s claim is not valid; and(B) recredit the claimant bank for the amount of the claim up to the amount of the substitute check, plus interest if applicable; or(C) provide information to the claimant bank as to why the indemnifying bank is not obligated to comply with subparagraph (A) or (B).
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(C) provide information to the claimant bank as to why the indemnifying bank is not obligated to comply with subparagraph (A) or (B).
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(2) Providing a recredit under this subsection to a claimant bank with respect to a substitute check shall not absolve the indemnifying bank from liability for claims brought under any other law or from additional damages under section 5005 or 5009 of this title with respect to such check.
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(3) If a claimant bank reverses, in accordance with section 5006(e) of this title, a recredit previously made to a consumer account under section 5006(c) of this title, or otherwise receives a credit or recredit with regard to such substitute check, the claimant bank shall promptly refund to any indemnifying bank any amount previously advanced by the indemnifying bank in connection with such substitute check.
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(d) If the indemnifying bank provides the claimant bank with the original check or a copy of the original check (including an image or a substitute check) under subsection (c)(1)(A), section 5005(d) of this title shall govern any right of the indemnifying bank to any repayment of any funds the indemnifying bank has recredited to the claimant bank pursuant to subsection (c).
Citations to §5002(14)
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(a) A person may deposit, present, or send for collection or return a substitute check without an agreement with the recipient, so long as a bank has made the warranties in section 5004 of this title with respect to such substitute check.
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(b) A substitute check shall be the legal equivalent of the original check for all purposes, including any provision of any Federal or State law, and for all persons if the substitute check—
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(2) Nothing in this subsection reduces the rights of a consumer or any other person under the Uniform Commercial Code or other applicable provision of Federal or State law.
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(1) Except as provided in section 5005 of this title, any person who, in connection with a substitute check, breaches any warranty under this chapter or fails to comply with any requirement imposed by, or regulation prescribed pursuant to, this chapter with respect to any other person shall be liable to such person in an amount equal to the sum of—(A) the lesser of—(i) the amount of the loss suffered by the other person as a result of the breach or failure; or(ii) the amount of the substitute check; and(B) interest and expenses (including costs and reasonable attorney’s fees and other expenses of representation) related to the substitute check.
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(i) the amount of the loss suffered by the other person as a result of the breach or failure; or
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(2) The amount of damages any person receives under paragraph (1), if any, shall be reduced by the amount, if any, that the claimant receives and retains as a recredit under section 5006 or 5007 of this title.
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(1) If a person incurs damages that resulted in whole or in part from the negligence or failure of that person to act in good faith, then the amount of any liability due to that person under subsection (a) shall be reduced in proportion to the amount of negligence or bad faith attributable to that person.
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(2) Nothing in this subsection reduces the rights of a consumer or any other person under the Uniform Commercial Code or other applicable provision of Federal or State law.
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(2) A cause of action accrues as of the date the injured party first learns, or by which such person reasonably should have learned, of the facts and circumstances giving rise to the cause of action.
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(b) Except as provided in subsection (c), unless a person gives notice of a claim to the indemnifying or warranting bank within 30 days after the person has reason to know of the claim and the identity of the indemnifying or warranting bank, the indemnifying or warranting bank is discharged from liability in an action to enforce a claim under this chapter to the extent of any loss caused by the delay in giving notice of the claim.
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(1) how a substitute check is the legal equivalent of an original check for all purposes, including any provision of any Federal or State law, and for all persons, if the substitute check—
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(b) Except as provided in subsection (a), no provision of this chapter may be varied by agreement of any person or persons.
Citations to §5002(15)
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(c) A bank shall ensure that the substitute check for which the bank is the reconverting bank bears all endorsements applied by parties that previously handled the check (whether in electronic form or in the form of the original paper check or a substitute check) for forward collection or return.
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(d) A bank shall identify itself as a reconverting bank on any substitute check for which the bank is a reconverting bank so as to preserve any previous reconverting bank identifications in conformance with generally applicable industry standards.
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(a) A reconverting bank and each bank that subsequently transfers, presents, or returns a substitute check in any electronic or paper form, and receives consideration for such transfer, presentment, or return shall indemnify the transferee, any subsequent collecting or returning bank, the depositary bank, the drawee, the drawer, the payee, the depositor, and any endorser, up to the amount described in subsections (b) and (c), as applicable, to the extent of any loss incurred by any recipient of a substitute check if that loss occurred due to the receipt of a substitute check instead of the original check.
Citations to §5002(16)
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(1) To facilitate check truncation by authorizing substitute checks.
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(a) A person may deposit, present, or send for collection or return a substitute check without an agreement with the recipient, so long as a bank has made the warranties in section 5004 of this title with respect to such substitute check.
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(b) A substitute check shall be the legal equivalent of the original check for all purposes, including any provision of any Federal or State law, and for all persons if the substitute check—
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(c) A bank shall ensure that the substitute check for which the bank is the reconverting bank bears all endorsements applied by parties that previously handled the check (whether in electronic form or in the form of the original paper check or a substitute check) for forward collection or return.
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(d) A bank shall identify itself as a reconverting bank on any substitute check for which the bank is a reconverting bank so as to preserve any previous reconverting bank identifications in conformance with generally applicable industry standards.
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(e) A substitute check that is the legal equivalent of the original check under subsection (b) shall be subject to any provision, including any provision relating to the protection of customers, of part 229 of title 12 of the Code of Federal Regulations, the Uniform Commercial Code, and any other applicable Federal or State law as if such substitute check were the original check, to the extent such provision of law is not inconsistent with this chapter.
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A bank that transfers, presents, or returns a substitute check and receives consideration for the check warrants, as a matter of law, to the transferee, any subsequent collecting or returning bank, the depositary bank, the drawee, the drawer, the payee, the depositor, and any endorser (regardless of whether the warrantee receives the substitute check or another paper or electronic form of the substitute check or original check) that—
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(1) the substitute check meets all the requirements for legal equivalence under section 5003(b) of this title; and
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(2) no depositary bank, drawee, drawer, or endorser will receive presentment or return of the substitute check, the original check, or a copy or other paper or electronic version of the substitute check or original check such that the bank, drawee, drawer, or endorser will be asked to make a payment based on a check that the bank, drawee, drawer, or endorser has already paid.
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(a) A reconverting bank and each bank that subsequently transfers, presents, or returns a substitute check in any electronic or paper form, and receives consideration for such transfer, presentment, or return shall indemnify the transferee, any subsequent collecting or returning bank, the depositary bank, the drawee, the drawer, the payee, the depositor, and any endorser, up to the amount described in subsections (b) and (c), as applicable, to the extent of any loss incurred by any recipient of a substitute check if that loss occurred due to the receipt of a substitute check instead of the original check.
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(A) the amount of any loss, up to the amount of the substitute check; and
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(1) If the indemnifying bank produces the original check or a copy of the original check (including an image or a substitute check) that accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated) or is otherwise sufficient to determine whether or not a claim is valid, the indemnifying bank shall—(A) be liable under this section only for losses covered by the indemnity that are incurred up to the time that the original check or copy is provided to the indemnified party; and(B) have a right to the return of any funds it has paid under the indemnity in excess of those losses.
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(2) The production of the original check, a substitute check, or a copy under paragraph (1) by an indemnifying bank shall not absolve the bank from any liability on a warranty established under this chapter or any other provision of law.
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(1) A consumer may make a claim for expedited recredit from the bank that holds the account of the consumer with respect to a substitute check, if the consumer asserts in good faith that—(A) the bank charged the consumer’s account for a substitute check that was provided to the consumer;(B) either—(ii) the consumer has a warranty claim with respect to such substitute check;(C) the consumer suffered a resulting loss; and(D) the production of the original check or a better copy of the original check is necessary to determine the validity of any claim described in subparagraph (B).
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(A) the bank charged the consumer’s account for a substitute check that was provided to the consumer;
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(ii) the consumer has a warranty claim with respect to such substitute check;
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(B) the date on which the substitute check is made available to the consumer.
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(1) To make a claim for an expedited recredit under subsection (a) with respect to a substitute check, the consumer shall provide to the bank that holds the account of such consumer—(A) a description of the claim, including an explanation of—(i) why the substitute check was not properly charged to the consumer’s account; or(ii) the warranty claim with respect to such check;(B) a statement that the consumer suffered a loss and an estimate of the amount of the loss;(C) the reason why production of the original check or a better copy of the original check is necessary to determine the validity of the charge to the consumer’s account or the warranty claim; and(D) sufficient information to identify the substitute check and to investigate the claim.
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(i) why the substitute check was not properly charged to the consumer’s account; or
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(D) sufficient information to identify the substitute check and to investigate the claim.
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(1) The bank shall recredit a consumer account in accordance with paragraph (2) for the amount of a substitute check that was charged against the consumer account if—(A) a consumer submits a claim to the bank with respect to that substitute check that meets the requirement of subsection (b); and(B) the bank has not—(i) provided to the consumer—(I) the original check; or(II) a copy of the original check (including an image or a substitute check) that accurately represents all of the information on the front and back of the original check, as of the time at which the original check was truncated; and(ii) demonstrated to the consumer that the substitute check was properly charged to the consumer account.
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(A) a consumer submits a claim to the bank with respect to that substitute check that meets the requirement of subsection (b); and
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(II) a copy of the original check (including an image or a substitute check) that accurately represents all of the information on the front and back of the original check, as of the time at which the original check was truncated; and
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(ii) demonstrated to the consumer that the substitute check was properly charged to the consumer account.
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(i) the lesser of the amount of the substitute check that was charged against the consumer account, or $2,500, together with interest if the account is an interest-bearing account, no later than the end of such 10th business day; and
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(ii) the remaining amount of the substitute check that was charged against the consumer account, if any, together with interest if the account is an interest-bearing account, not later than the 45th calendar day following the business day on which the consumer submits the claim.
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(1) determines that a substitute check for which the bank recredited a consumer account under subsection (c) was in fact properly charged to the consumer account; and
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(1) If a bank determines that a substitute check subject to the consumer’s claim was in fact properly charged to the consumer’s account, the bank shall send to the consumer, no later than the business day following the business day on which the bank makes a determination—(A) the original check or a copy of the original check (including an image or a substitute check) that—(i) accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated); or(ii) is otherwise sufficient to determine whether or not the consumer’s claim is valid; and(B) an explanation of the basis for the determination by the bank that the substitute check was properly charged, including a statement that the consumer may request copies of any information or documents on which the bank relied in making the determination.
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(A) the original check or a copy of the original check (including an image or a substitute check) that—(i) accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated); or(ii) is otherwise sufficient to determine whether or not the consumer’s claim is valid; and
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(B) an explanation of the basis for the determination by the bank that the substitute check was properly charged, including a statement that the consumer may request copies of any information or documents on which the bank relied in making the determination.
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(h) A consumer who was provided a substitute check may make a claim for an expedited recredit under this section with regard to a transaction involving the substitute check whether or not the consumer is in possession of the substitute check.
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(A) the claimant bank (or a bank that the claimant bank has indemnified) has received a claim for expedited recredit from a consumer under section 5006 of this title with respect to a substitute check or would have been subject to such a claim had the consumer’s account been charged;
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(B) the claimant bank has suffered a resulting loss or is obligated to recredit a consumer account under section 5006 of this title with respect to such substitute check; and
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(C) production of the original check, another substitute check, or a better copy of the original check is necessary to determine the validity of the charge to the customer account or any warranty claim connected with such substitute check.
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(1) To make a claim under subsection (a) for an expedited recredit relating to a substitute check, the claimant bank shall send to the indemnifying bank—(A) a description of—(i) the claim, including an explanation of why the substitute check cannot be properly charged to the consumer account; or(ii) the warranty claim;(B) a statement that the claimant bank has suffered a loss or is obligated to recredit the consumer’s account under section 5006 of this title, together with an estimate of the amount of the loss or recredit;(C) the reason why production of the original check, another substitute check, or a better copy of the original check is necessary to determine the validity of the charge to the consumer account or the warranty claim; and(D) information sufficient for the indemnifying bank to identify the substitute check and to investigate the claim.
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(i) the claim, including an explanation of why the substitute check cannot be properly charged to the consumer account; or
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(C) the reason why production of the original check, another substitute check, or a better copy of the original check is necessary to determine the validity of the charge to the consumer account or the warranty claim; and
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(D) information sufficient for the indemnifying bank to identify the substitute check and to investigate the claim.
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(2) If the information submitted by a claimant bank pursuant to paragraph (1) in connection with a claim for an expedited recredit includes a copy of any substitute check for which any such claim is made, the claimant bank shall take reasonable steps to ensure that any such copy cannot be—(A) mistaken for the legal equivalent of the check under section 5003(b) of this title; or(B) sent or handled by any bank, including the indemnifying bank, as a forward collection or returned check.
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(1) No later than 10 business days after the business day on which an indemnifying bank receives a claim under subsection (a) from a claimant bank with respect to a substitute check, the indemnifying bank shall—(A) provide, to the claimant bank, the original check (with respect to such substitute check) or a copy of the original check (including an image or a substitute check) that—(i) accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated); or(ii) is otherwise sufficient to determine the bank’s claim is not valid; and(B) recredit the claimant bank for the amount of the claim up to the amount of the substitute check, plus interest if applicable; or(C) provide information to the claimant bank as to why the indemnifying bank is not obligated to comply with subparagraph (A) or (B).
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(A) provide, to the claimant bank, the original check (with respect to such substitute check) or a copy of the original check (including an image or a substitute check) that—(i) accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated); or(ii) is otherwise sufficient to determine the bank’s claim is not valid; and
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(B) recredit the claimant bank for the amount of the claim up to the amount of the substitute check, plus interest if applicable; or
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(2) Providing a recredit under this subsection to a claimant bank with respect to a substitute check shall not absolve the indemnifying bank from liability for claims brought under any other law or from additional damages under section 5005 or 5009 of this title with respect to such check.
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(3) If a claimant bank reverses, in accordance with section 5006(e) of this title, a recredit previously made to a consumer account under section 5006(c) of this title, or otherwise receives a credit or recredit with regard to such substitute check, the claimant bank shall promptly refund to any indemnifying bank any amount previously advanced by the indemnifying bank in connection with such substitute check.
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(d) If the indemnifying bank provides the claimant bank with the original check or a copy of the original check (including an image or a substitute check) under subsection (c)(1)(A), section 5005(d) of this title shall govern any right of the indemnifying bank to any repayment of any funds the indemnifying bank has recredited to the claimant bank pursuant to subsection (c).
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(1) Except as provided in section 5005 of this title, any person who, in connection with a substitute check, breaches any warranty under this chapter or fails to comply with any requirement imposed by, or regulation prescribed pursuant to, this chapter with respect to any other person shall be liable to such person in an amount equal to the sum of—(A) the lesser of—(i) the amount of the loss suffered by the other person as a result of the breach or failure; or(ii) the amount of the substitute check; and(B) interest and expenses (including costs and reasonable attorney’s fees and other expenses of representation) related to the substitute check.
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(ii) the amount of the substitute check; and
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(B) interest and expenses (including costs and reasonable attorney’s fees and other expenses of representation) related to the substitute check.
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(a) Each bank shall provide, in accordance with subsection (b), a brief notice about substitute checks that describes—(1) how a substitute check is the legal equivalent of an original check for all purposes, including any provision of any Federal or State law, and for all persons, if the substitute check—(A) accurately represents all of the information on the front and back of the original check as of the time at which the original check was truncated; and(B) bears the legend: “This is a legal copy of your check. You can use it in the same way you would use the original check.”; and(2) the consumer recredit rights established under section 5006 of this title when a consumer believes in good faith that a substitute check was not properly charged to the account of the consumer.
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(1) how a substitute check is the legal equivalent of an original check for all purposes, including any provision of any Federal or State law, and for all persons, if the substitute check—
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(2) the consumer recredit rights established under section 5006 of this title when a consumer believes in good faith that a substitute check was not properly charged to the account of the consumer.
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(1) With respect to consumers who are customers of a bank on the effective date of this chapter and who receive original checks or substitute checks, a bank shall provide the notice described in subsection (a) to each such consumer no later than the first regularly scheduled communication with the consumer after the effective date of this chapter.
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(2) A bank shall provide the notice described in subsection (a) to each consumer who will receive original checks or substitute checks, other than existing customers referred to in paragraph (1), at the time at which the customer relationship is initiated.
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(4) Notice shall be provided to each consumer of the bank that requests a copy of a check and receives a substitute check, at the time of the request.
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(A) A bank shall be treated as being in compliance with the requirements of subsection (a) if the bank’s substitute check notice uses a model form or clause published by the Board and such model form or clause accurately describes the bank’s policies and practices.
Citations to §5002(17)
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(B) directed that the exercise of such authority by the Board superseded any State law, including the Uniform Commercial Code, as in effect in any State.
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(b) A substitute check shall be the legal equivalent of the original check for all purposes, including any provision of any Federal or State law, and for all persons if the substitute check—
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(e) A substitute check that is the legal equivalent of the original check under subsection (b) shall be subject to any provision, including any provision relating to the protection of customers, of part 229 of title 12 of the Code of Federal Regulations, the Uniform Commercial Code, and any other applicable Federal or State law as if such substitute check were the original check, to the extent such provision of law is not inconsistent with this chapter.
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(2) Nothing in this subsection reduces the rights of a consumer or any other person under the Uniform Commercial Code or other applicable provision of Federal or State law.
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(2) Nothing in this subsection reduces the rights of a consumer or any other person under the Uniform Commercial Code or other applicable provision of Federal or State law.
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(1) how a substitute check is the legal equivalent of an original check for all purposes, including any provision of any Federal or State law, and for all persons, if the substitute check—
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This chapter shall supersede any provision of Federal or State law, including the Uniform Commercial Code, that is inconsistent with this chapter, but only to the extent of the inconsistency.
Citations to §5002(19)
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(B) directed that the exercise of such authority by the Board superseded any State law, including the Uniform Commercial Code, as in effect in any State.
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(e) A substitute check that is the legal equivalent of the original check under subsection (b) shall be subject to any provision, including any provision relating to the protection of customers, of part 229 of title 12 of the Code of Federal Regulations, the Uniform Commercial Code, and any other applicable Federal or State law as if such substitute check were the original check, to the extent such provision of law is not inconsistent with this chapter.
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(2) Nothing in this subsection reduces the rights of a consumer or any other person under the Uniform Commercial Code or other applicable provision of Federal or State law.
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(g) Providing a recredit in accordance with this section shall not absolve the bank from liability for a claim made under any other law, such as a claim for wrongful dishonor under the Uniform Commercial Code, or from liability for additional damages under section 5005 or 5009 of this title.
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(2) Nothing in this subsection reduces the rights of a consumer or any other person under the Uniform Commercial Code or other applicable provision of Federal or State law.
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This chapter shall supersede any provision of Federal or State law, including the Uniform Commercial Code, that is inconsistent with this chapter, but only to the extent of the inconsistency.