[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5414 Introduced in House (IH)]
107th CONGRESS
2d Session
H. R. 5414
To facilitate check truncation by authorizing substitute checks, to
foster innovation in the check collection system without mandating
receipt of checks in electronic form, and to improve the overall
efficiency of the Nation's payments system, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
September 19, 2002
Mr. Ferguson (for himself and Mr. Ford) introduced the following bill;
which was referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To facilitate check truncation by authorizing substitute checks, to
foster innovation in the check collection system without mandating
receipt of checks in electronic form, and to improve the overall
efficiency of the Nation's payments system, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; FINDINGS; PURPOSES.
(a) Short Title.--This Act may be cited as the ``Check Clearing for
the 21st Century Act''.
(b) Findings.--The Congress finds as follows:
(1) In the Expedited Funds Availability Act, 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.
(2) In that same Act, the Congress--
(A) provided the Board of Governors of the Federal
Reserve System with full authority to regulate all
aspects of the payment system, including the receipt,
payment, collection, and clearing of checks, and
related functions of the payment system pertaining to
checks, and
(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the Board superseded any State law, including the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.
(3) Check truncation is no less desirable today 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.
(c) Purposes.--The purposes of this Act are as follows:
(1) To facilitate check truncation by authorizing
substitute checks.
(2) To foster innovation in the check collection system
without mandating receipt of checks in electronic form.
(3) To improve the overall efficiency of the Nation's
payments system.
SEC. 2. DEFINITIONS.
For purposes of this Act, the following definitions shall apply:
(1) Account.--The term ``account'' means a deposit account
at a bank.
(2) Bank.--The term ``bank''--
(A) means any person located in a State engaged in
the business of banking, including any depository
institution (as defined in section 19(b)(1)(A) of the
Federal Reserve Act); and
(B) includes--
(i) any Federal reserve bank;
(ii) any Federal home loan bank; and
(iii) to the extent it acts as a payor--
(I) the Treasury of the United
States;
(II) the United States Postal
Service;
(III) a State government; and
(IV) a unit of general local
government.
(3) Banking day.--The term ``banking day'' means that part
of any business day during which an office of a bank is open to
the public for carrying on substantially all of the banking
business of the bank.
(4) Banking terms.--
(A) Collecting bank.--The term ``collecting bank''
means any bank handling a check for collection except
the paying bank.
(B) Depositary bank.--
(i) In general.--The term ``depositary
bank'' means the first bank to which a check is
transferred even though it is also the paying
bank or the payee.
(ii) Treated as depositary bank in case of
check deposit.--A bank shall be treated as the
depository bank, for purposes of this Act, if a
check is transferred for deposit in a customer
account at such bank, even though the check is
physically received and indorsed first by
another bank.
(C) Paying bank.--The term ``paying bank'' means--
(i) the bank by which a check is payable,
unless the check is payable at another bank and
is sent to the other bank for payment or
collection;
(ii) the bank at which a check is payable
and to which it is sent for payment or
collection;
(iii) the Federal reserve bank or Federal
home loan bank by which a check is payable;
(iv) the bank through which a check is
payable and to which it is sent for payment or
collection, if the check is not payable by a
bank;
(v) the State or unit of general local
government on which a check is drawn and to
which it is sent for payment or collection;
(vi) the bank through which a check is
payable and to which the check is sent for
payment or collection, regardless of whether
the check is payable by another bank; and
(vii) the bank whose routing number appears
on a check in fractional form or in the MICR
line and to which the check is sent for payment
or collection.
(D) Returning bank.--
(i) In general.--The term ``returning
bank'' means a bank (other than the paying or
depositary bank) handling a returned check or
notice in lieu of return.
(ii) Treatment as collecting bank.--No
provision of this Act shall be construed as
affecting the treatment of a returning bank as
a collecting bank for purposes of section 4-
202(b) of the Uniform Commercial Code.
(5) Board.--The term ``Board'' means the Board of Governors
of the Federal Reserve System.
(6) Business day.--The term ``business day'' has the same
meaning as in section 602(3) of the Expedited Funds
Availability Act.
(7) Check.--The term ``check''--
(A) means a draft, payable on demand and drawn on
or payable through or at an office of a bank, whether
or not negotiable, that is handled for forward
collection or return, including a substitute check; and
(B) does not include a noncash item or an item
payable in a medium other than United States dollars.
(8) Consumer.--The term ``consumer'' means an individual
who--
(A) with respect to a check handled for forward
collection, draws the check on a consumer account; and
(B) with respect to a check handled for return,
deposits the check into, or cashes the check against, a
consumer account.
(9) Consumer account.--The term ``consumer account'' has
the same meaning as in section 602(10) of the Expedited Funds
Availability Act.
(10) Customer.--
(11) Forward collection.--The term ``forward collection''
means the transfer by a bank of a check to a collecting bank
for settlement or the paying bank for payment.
(12) Indemnifying bank.--The term ``indemnifying bank''
means a bank that is providing an indemnity under section 5
with respect to a substitute check.
(13) MICR line.--The terms ``MICR line'' and ``magnetic ink
character recognition line'' mean the numbers, which may
include the bank routing number, account number, check number,
check amount, and other information printed near the bottom of
a check in magnetic ink in accordance with generally applicable
industry standards.
(14) Noncash item.--The term ``noncash item'' has the same
meaning as in section 602(14) of the Expedited Funds
Availability Act.
(15) Person.--The term ``person'' includes a government
unit or instrumentality.
(16) Reconverting bank.--
(A) In general.--The term ``reconverting bank''
means the bank that creates a substitute check.
(B) If substitute check is not created by a bank.--
If a substitute check is created by a person other than
a bank, the term ``reconverting bank'' means the first
bank that transfers or presents such substitute check.
(17) Substitute check.--The term ``substitute check'' means
a paper reproduction of the original check that--
(A) contains an image of the front and back of the
original check;
(B) bears an MICR line containing all information
required under generally applicable industry standards
for substitute checks;
(C) conforms, in paper stock, dimension, and
otherwise, with generally applicable industry standards
for substitute checks; and
(D) is suitable for automated processing in the
same manner as the original check.
(18) State.--The term ``State'' has the same meaning as in
section 3(a)(3) of the Federal Deposit Insurance Act.
(19) Truncate.--The term ``truncate'' means to remove an
original paper check from the check collection or return
process and send to a recipient, in lieu of such original paper
check, a substitute check or, by agreement, information
relating to the original check (including data taken from the
MICR line of the original check or an electronic image of the
original check), whether with or without subsequent delivery of
the original paper check.
(20) Uniform commercial code.--The term ``Uniform
Commercial Code'' means the Uniform Commercial Code in effect
in a State.
(21) Unit of general local government.--The term ``unit of
general local government'' has the same meaning as in section
602(24) of the Expedited Funds Availability Act.
(22) Other terms.--Unless the context requires otherwise,
the terms not defined in this section shall have the same
meanings as in the Uniform Commercial Code.
SEC. 3. GENERAL PROVISIONS GOVERNING SUBSTITUTE CHECKS.
(a) No Agreement Required.--A person may deposit, present, or send
for collection or return a substitute check without an agreement with
the recipient, to the extent the bank is treated as having made the
warranties in section 4 as a matter of law with respect to such
substitute check.
(b) Legal Equivalence.--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--
(1) accurately represents all of the information on the
front and back of the original check as of the time the
original check was truncated; and
(2) bears the legend: ``This is a legal copy of your check.
You can use it the same way you would use the original
check.''.
(c) Endorsements.--A reconverting bank shall ensure that the
substitute check that is created by the 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.
(d) Identification of Reconverting Bank.--A reconverting bank shall
identify itself as a reconverting bank on any substitute check such
bank creates so as to preserve any previous reconverting bank
identifications in conformance with generally applicable industry
standards.
(e) Applicable Law.--A substitute check that is the legal
equivalent of the original check under subsection (b) shall be subject
to any provision of part 229 of title 12 of the Code of Federal
Regulations (as in effect on the date of the enactment of this Act),
the Uniform Commercial Code, and any other applicable Federal or State
law that would apply if such substitute check were the original check,
to the extent such provision of law is not inconsistent with this Act.
SEC. 4. SUBSTITUTE CHECK WARRANTIES.
A bank that transfers, presents, or returns a substitute check and
receives consideration for the check shall be deemed to have warranted
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
or original check) that--
(1) the substitute check meets all the requirements for
legal equivalence under section 3(b); and
(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 it will be
asked to make a payment based on a check it has already paid.
SEC. 5. INDEMNITY.
(a) Indemnity.--A reconverting bank that creates a substitute
check, and each bank that subsequently transfers, presents, or returns
that substitute check in any electronic or paper form, and receives
consideration for such transfer, presentment, or return shall be deemed
to have indemnified 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), 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.
(b) Indemnity Amount.--
(1) Amount in event of breach of warranty.--The amount of
the indemnity under subsection (a) shall be the amount of any
loss (including costs and reasonable attorney's fees and other
expenses of representation) proximately caused by a breach of a
warranty established by operation of section 4.
(2) Amount in absence of breach of warranty.--In the
absence of a breach of a warranty established by operation of
section 4, the amount of the indemnity shall be the sum of--
(A) the amount of any loss, up to the amount of the
substitute check; and
(B) interest and expenses (including costs and
reasonable attorney's fees and other expenses of
representation).
(c) Comparative Negligence.--If a loss described in subsection (a)
results in whole or in part from the negligence or failure to act in
good faith on the part of an indemnified party, then that party's
indemnification under this section shall be reduced in proportion to
the amount of negligence or bad faith attributable to that party.
(d) Effect of Producing Original Check or Substitute Check.--
(1) In general.--If the indemnifying bank produces the
original check or substitute check, the indemnifying bank
shall--
(A) be liable only for losses covered by the
indemnity that are incurred up to the time the original
check or substitute check 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.
(2) Coordination of indemnity with implied warranty.--The
production of the original check or substitute check in
accordance with paragraph (1) by an indemnifying bank shall not
absolve the bank from any liability on a warranty established
under this Act or any other provision of law.
(e) Subrogation of Rights.--
(1) In general.--Each indemnifying bank shall be subrogated
to the rights of any indemnified party to the extent of the
indemnity.
(2) Recovery under warranty.--A bank that indemnifies a
party under this section may attempt to recover from another
party based on a warranty or other claim.
(3) Duty of indemnified party.--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.
SEC. 6. EXPEDITED RECREDIT FOR CONSUMERS.
(a) Recredit Claims.--
(1) In general.--Subject to subsection (f), a customer who
is a consumer may make a claim for expedited recredit from the
bank that holds the customer's account with respect to a
substitute check if the customer asserts in good faith that--
(A) the bank charged the customer's account for a
substitute check that was provided to the customer;
(B) either--
(i) the check was not properly charged to,
or chargeable against, such account; or
(ii) the customer has a warranty claim with
respect to such substitute check;
(C) the customer suffered a resulting loss; and
(D) the production of the original check or
substitute check is necessary to determine the validity
of any claim described in subparagraph (B).
(2) 30-day period.--Any claim under paragraph (1) with
respect to a customer account may be submitted by a customer
before the end of the 30-day period beginning on the later of--
(A) the date on which the customer receives the
periodic statement of account for such account which
contains information concerning the transaction giving
rise to the claim; or
(B) the date the substitute check is made available
to the customer.
(3) Extension under extenuating circumstances.--If the
customer's ability to submit the claim within the 30-day period
referred to in paragraph (2) is delayed due to extenuating
circumstances, including extended travel or the illness of the
customer, the 30-day period may be extended for a total of not
to exceed 30 additional days, in accordance with regulations
prescribed by the Board.
(b) Procedures for Claims.--
(1) In general.--To make a claim for an expedited recredit
under subsection (a) with respect to a substitute check, the
customer shall provide to the bank that holds the customer
account of such customer the following:
(A) A description of the claim, including an
explanation of--
(i) why the substitute check was not
properly charged to, or chargeable against, the
customer's account; or
(ii) the warranty claim with respect to
such check.
(B) A statement that the customer suffered a loss
and an estimate of the amount of the loss.
(C) The reason why production of the original check
or substitute check is necessary to determine the
validity of the charge to the customer's account or the
warranty claim.
(D) Sufficient information to identify the
substitute check and to investigate the claim.
(2) Claim in writing.--The bank holding the customer
account that is the subject of a claim by the customer under
subsection (a) may, in the discretion of the bank, require the
customer to submit the information required under paragraph (1)
in writing.
(c) Recredit to Customer.--
(1) Prompt action required.--If a customer submits a claim
to a bank under subsection (a) (with respect to a substitute
check) that meets the requirements of subsection (b), the bank
shall, by the end of the 10th business day following the
banking day on which the customer submits such claim to the
bank--
(A) produce the original or substitute check and
demonstrate to the customer that the substitute check
was properly charged to the customer account of the
customer; or
(B) recredit the customer account of the customer
in an amount equal to the sum of--
(i) an amount not to exceed the lesser of--
(I) the amount of the substitute
check that was improperly charged
against the customer account; or
(II) $2,500; and
(ii) interest on the amount recredited
under clause (i).
(2) Recredit of amounts in excess of $2,500.--If, in
connection with a claim by a customer under subsection (a) with
respect to a substitute check, the bank determines that an
amount in excess of any amount recredited to the customer
account of the customer under paragraph (1) was improperly
charged against the customer account in connection with such
check, the bank shall credit the customer account for such
excess amount, plus interest, before the end of the business
day following the banking day on which the bank makes such
determination.
(3) Period for determination.--A bank shall make a
determination with respect to the validity of a claim by a
customer under subsection (a) for purposes of paragraph (2) no
later than 45 calendar days after the banking day on which the
customer submits the claim in accordance with subsection (b).
(d) Availability of Recredit.--
(1) Next business day availability.--Except as provided in
paragraphs (2) and (3), a bank that provides a recredit to a
customer account under subsection (c) shall make the recredited
funds available for withdrawal by the customer by the start of
the next business day after the business day by which the bank
is required to recredit the customer under subsection (c).
(2) Safeguard exceptions.--Subject to paragraph (4), a bank
may delay availability to a customer of a recredit provided to
a customer account under subsection (c) until the start of the
45th business day following the banking day on which the
customer submits a claim for such recredit in accordance with
subsection (b) in any of the following cases:
(A) New accounts.--The claim is made during the 30-
day period beginning on the banking day the customer
account was established.
(B) Repeated overdrafts.--Without regard to the
charge that is the subject of the claim for which the
recredit was made--
(i) on 6 or more banking days during the 6-
month period ending on the date the customer
submits the claim, the balance in the customer 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 banking days during such
6-month period, the balance in the customer
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.
(C) Prevention of fraud losses.--The bank has
reasonable cause to believe that the claim is
fraudulent, based on facts (other than the fact that
the check in question or the customer is of a
particular class) that would cause a well-grounded
belief in the mind of a reasonable person that the
claim is fraudulent.
(3) Emergency conditions.--If there has been an
interruption of communications, computer, or equipment
facilities, or other emergency condition beyond the control of
the bank, the bank may delay availability of a recredit
provided to a customer account under subsection (c) until a
reasonable period after the emergency has ceased, to the extent
the bank exercises such diligence as the circumstances require
and complies with paragraph (4).
(4) Notice to customer.--
(A) Prompt notice of delay in availability.--A bank
that, in accordance with paragraph (2) or (3), delays
the availability of a recredit under subsection (c) to
any customer account shall notify the customer of such
delay--
(i) at the time of the recredit; or
(ii) if the determination is made after the
recredit, in as expeditious a manner as
possible after the delay is put into effect.
(B) Overdraft fees.--No bank that, in accordance
with paragraph (2) or (3), delays the availability of a
recredit under subsection (c) to any customer account
may impose any overdraft fees with respect to drafts
drawn by the customer on such recredited amount before
the end of the 5-day period beginning on the date the
notice under subparagraph (A) with respect to the
availability of such amount was sent by the bank to the
customer.
(e) Reversal of Recredit.--If a bank determines that a substitute
check for which the bank recredited a customer account under subsection
(c) was in fact properly charged to the customer account, the bank may
reverse the recredit to the customer account if, upon reversing the
recredited amount, the bank--
(1) notifies the customer of the date and the amount of the
reversal;
(2) provides the original check or the substitute check to
the customer; and
(3) provides the customer with an explanation of the basis
for the determination by the bank that the substitute check had
been properly charged, including copies of any information or
documents on which the bank relied in making such
determination.
(f) Preservation of Rights.--In any case described in subparagraph
(A) and (B) of subsection (a)(1) involving a substitute check, the
customer shall have the rights and protections provided under part 229
of title 12 of the Code of Federal Regulations, as in effect on the
date of the enactment of this Act, the Uniform Commercial Code, and any
other applicable Federal or State law that would apply in such case had
the customer been provided the original check.
(g) Scope of Application.--This section shall only apply to
customers who are consumers.
SEC. 7. EXPEDITED RECREDIT PROCEDURES FOR BANKS.
(a) Recredit Claims.--
(1) In general.--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 it has
indemnified) has received a claim for expedited
recredit from a customer under section 6 with respect
to such substitute check or would have been subject to
such a claim had the customer's account been charged;
(B) the claimant bank has suffered a resulting loss
or is obligated to recredit a customer account under
section 6 with respect to such check; and
(C) production of the original check or substitute
check is necessary to determine the validity of the
charge to the customer account or any warranty claim
connected with such substitute check.
(2) 120-day period.--Any claim under paragraph (1) may be
submitted by the claimant bank to an indemnifying bank before
the end of the 120-day beginning on the date of the transaction
that gave rise to the claim.
(3) Claimant bank defined.--For purposes of this section,
the term ``claimant bank'' means a bank which submits a claim
under this subsection to an indemnifying bank.
(b) Procedures for Claims.--
(1) In general.--To make a claim under subsection (a) for
an expedited recredit relating to a substitute check, the
claimant bank shall provide to the indemnifying bank the
following:
(A) A description--
(i) of the claim, including an explanation
of why the substitute check cannot be properly
charged to the customer account; or
(ii) a description of the warranty claim.
(B) A statement that the claimant bank has suffered
a loss or is obligated to recredit a customer's account
under section 6, together with an estimate of the
amount of the loss or recredit.
(C) The reason why production of the original check
or substitute check is necessary to determine the
validity of the charge to the customer account or the
warranty claim.
(D) Information sufficient for the indemnifying
bank to identify the substitute check and to
investigate the claim.
(2) Requirements relating to copies of substitute checks.--
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 3(b); or
(B) sent or handled by any bank, including the
indemnifying bank, as forward collection or returned
checks.
(3) Claim in writing.--At the request of the indemnifying
bank, the claimant bank shall provide a copy of any written
claim submitted by a customer in accordance with section 6(b),
if the claimant bank has obtained such customer's claim in
writing.
(c) Recredit by Indemnifying Bank.--
(1) Prompt action required.--No later than 10 business days
after the business day 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 the original check (with respect to
such substitute check) or another substitute check to
the claimant bank;
(B) recredit the claimant bank for the amount of
the claim up to the amount of the substitute check,
plus interest; or
(C) provide information to the claimant bank as to
why the indemnifying bank is not obligated to perform
the service described in subparagraph (A) or (B).
(2) Recredit does not abrogate other liabilities.--
Providing a recredit under this subsection to a claimant bank
with respect to a substitute check shall not absolve the
indemnifying bank from any liability for additional damages
under section 5 or 8 with respect to such check.
(3) Refund to indemnifying bank.--If a claimant bank
reverses, in accordance with section 6(e), a recredit
previously made to a customer account under section 6(c) in
connection with a substitute check 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.
(d) Production of Original Check or Substitute Check Governed by
Section 5(d).--If the indemnifying bank provides the claimant bank with
the original check or substitute check, section 5(d) 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).
SEC. 8. MEASURE OF DAMAGES.
(a) Liability.--
(1) In general.--Except as provided in section 5, any
person who, in connection with a substitute check, breaches any
warranty under this Act or fails to comply with any requirement
imposed under this Act, or any regulation prescribed pursuant
to this Act, 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;
(B) interest and expenses (including costs and
reasonable attorney's fees and other expenses of
representation) related to the substitute check.
(2) Offset of recredits.--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 6 or 7.
(b) Comparative Negligence.--If a party incurs damages that
resulted in whole or in part from that party's negligence or failure to
act in good faith, then the amount of any liability due to that party
under subsection (a) shall be reduced in proportion to the amount of
negligence or bad faith attributable to that party.
SEC. 9. STATUTE OF LIMITATIONS AND NOTICE OF CLAIM.
(a) Actions Under This Act.--
(1) In general.--An action to enforce a claim under this
Act may be brought in any United States district court, or in
any other court of competent jurisdiction, before the end of
the 1-year period beginning on the date the cause of action
accrues.
(2) Accrual.--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.
(b) Discharge of Claims.--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 to the extent of any loss
caused by the delay in giving notice of the claim.
(c) Notice of Claim by Customer.--A timely claim by a customer
under section 6 for expedited recredit also constitutes timely notice
of a claim by the customer for purposes of subsection (b).
SEC. 10. CONSUMER AWARENESS.
(a) In General.--The Board shall develop and prepare a brief
document on substitute checks for distribution by banks to customers
which contains--
(1) a description of the process of check substitution and
how the process may be different than the check clearing
process the customer is familiar with;
(2) a description of the benefits of check substitution,
including expedited funds availability for the customer, and a
notice that shorter check processing times, through check
substitution, will reduce the float a consumer may currently be
taking advantage of, however ill-advised such a practice may
be; and
(3) a description of the claim for recredit process
established under section 6 when the customer believes in good
faith that a substitute check was not properly charged to, or
chargeable against, the customer's account.
(b) Distribution.--
(1) In general.--Each bank shall distribute to each
existing and potential customer of the bank, after the
effective date of this Act, the document prepared by the Board
pursuant to subsection (a).
(2) 1st mailing.--With respect to existing customers of the
bank as of the effective date of this Act, the bank shall meet
the requirements of paragraph (1) by including the document
prepared by the Board in the first regularly scheduled mailing
to such customers after such effective date.
SEC. 11. EFFECT ON OTHER LAW.
This Act shall supersede any provision of Federal or State law,
including the Uniform Commercial Code, that is inconsistent with this
Act, but only to the extent of the inconsistency.
SEC. 12. VARIATION BY AGREEMENT.
(a) Section 7.--Any provision of section 7 may be varied by
agreement of the banks involved.
(b) No Other Provisions May Be Varied.--No provision of this Act
other than a provision of section 7 may be varied by agreement of any
person.
SEC. 13. REGULATIONS.
The Board may, by regulation clarify or otherwise implement the
provisions of this Act and may modify the requirements imposed by this
Act with respect to substitute checks generally to further the purposes
of this Act, including reducing risk, accommodating technological or
other developments, and alleviating undue compliance burdens.
SEC. 14. EFFECTIVE DATE.
This Act shall take effect on January 1, 2006.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Referred to the Subcommittee on Financial Institutions and Consumer Credit.
Subcommittee Hearings Held.
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