29–006

108TH CONGRESS REPORT " HOUSE OF REPRESENTATIVES ! 1st Session 108–291

CHECK CLEARING FOR THE 21ST CENTURY ACT 

OCTOBER 1, 2003.—Ordered to be printed 

Mr. OXLEY, from the committee of conference, 

submitted the following 

CONFERENCE REPORT 

[To accompany H.R. 1474] 

The committee of conference on the disagreeing votes of the 

two Houses on the amendment of the Senate to the bill (H.R. 

1474), 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, having met, after full and free conference, have agreed 

to recommend and do recommend to their respective Houses as follows: 

That the House recede from its disagreement to the amendment of the Senate and agree to the same with an amendment as 

follows: 

In lieu of the matter proposed to be inserted by the Senate 

amendment, insert the following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

(a) SHORT TITLE.—This Act may be cited as the ‘‘Check Clearing for the 21st Century Act’’ or the ‘‘Check 21 Act’’. 

(b) TABLE OF CONTENTS.—The table of contents of this Act is 

as follows:

Sec. 1. Short title; table of contents. 

Sec. 2. Findings; purposes. 

Sec. 3. Definitions. 

Sec. 4. General provisions governing substitute checks. 

Sec. 5. Substitute check warranties. 

Sec. 6. Indemnity. 

Sec. 7. Expedited recredit for consumers. 

Sec. 8. Expedited recredit procedures for banks. 

Sec. 9. Delays in an emergency. 

Sec. 10. Measure of damages. 

Sec. 11. Statute of limitations and notice of claim. 

Sec. 12. Consumer awareness. 

Sec. 13. Effect on other law. 

2

Sec. 14. Variation by agreement. 

Sec. 15. Regulations. 

Sec. 16. Study and report on funds availability. 

Sec. 17. Statistical reporting of costs and revenues for transporting checks between 

Federal Reserve banks. 

Sec. 18. Evaluation and report by the Comptroller General. 

Sec. 19. Depositary services efficiency and cost reduction. 

Sec. 20. Effective date.

SEC. 2. FINDINGS; PURPOSES. 

(a) 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 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. 

(b) 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. 3. 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’’ means any person that is located in a State and engaged in the business of banking and 

includes—

(A) any depository institution (as defined in section 

19(b)(1)(A) of the Federal Reserve Act); 

(B) any Federal reserve bank; 

(C) any Federal home loan bank; or 

(D) 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; or 

(iv) a unit of general local government (as defined 

in section 602(24) of the Expedited Funds Availability 

Act). 

3

(3) BANKING TERMS.— (A) COLLECTING BANK.—The term ‘‘collecting bank’’ 

means any bank handling a check for collection except the 

paying bank. 

(B) DEPOSITARY BANK.—The term ‘‘depositary bank’’ 

means—

(i) the first bank to which a check is transferred, 

even if such bank is also the paying bank or the payee; 

or 

(ii) a bank to which a check is transferred for deposit in an account at such bank, even if 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 or through another bank and 

is sent to the other bank for payment or collection; or 

(ii) the bank at or through which a check is payable 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. 

(4) BOARD.—The term ‘‘Board’’ means the Board of Governors of the Federal Reserve System. 

(5) BUSINESS DAY.—The term ‘‘business day’’ has the same 

meaning as in section 602(3) of the Expedited Funds Availability Act. 

(6) 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 a travelers check; and 

(B) does not include a noncash item or an item payable 

in a medium other than United States dollars. 

(7) 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; or 

(B) with respect to a check handled for return, deposits 

the check into, or cashes the check against, a consumer account. 

(8) CONSUMER ACCOUNT.—The term ‘‘consumer account’’ 

has the same meaning as in section 602(10) of the Expedited 

Funds Availability Act. 

(9) CUSTOMER.—The term ‘‘customer’’ means a person having an account with a bank. 

(10) 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. 

4

(11) INDEMNIFYING BANK.—The term ‘‘indemnifying bank’’ 

means a bank that is providing an indemnity under section 6 

with respect to a substitute check. 

(12) 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, that are printed near 

the bottom of a check in magnetic ink in accordance with generally applicable industry standards. 

(13) NONCASH ITEM.—The term ‘‘noncash item’’ has the 

same meaning as in section 602(14) of the Expedited Funds 

Availability Act. 

(14) PERSON.—The term ‘‘person’’ means a natural person, 

corporation, unincorporated company, partnership, government 

unit or instrumentality, trust, or any other entity or organization. 

(15) RECONVERTING BANK.—The term ‘‘reconverting bank’’ 

means—

(A) the bank that creates a substitute check; or 

(B) if a substitute check is created by a person other 

than a bank, the first bank that transfers or presents such 

substitute check. 

(16) 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 a MICR line containing all the information 

appearing on the MICR line of the original check, except as 

provided under generally applicable industry standards for 

substitute checks to facilitate the processing of 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. 

(17) STATE.—The term ‘‘State’’ has the same meaning as in 

section 3(a) of the Federal Deposit Insurance Act. 

(18) 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. 

(19) UNIFORM COMMERCIAL CODE.—The term ‘‘Uniform 

Commercial Code’’ means the Uniform Commercial Code in effect in a State. 

(20) 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. 4. 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 agreeVerDate jul 14 2003 06:41 Oct 02, 2003 Jkt 029006 PO 00000 Frm 00004 Fmt 6659 Sfmt 6603 E:\HR\OC\HR291.XXX HR291
5

ment with the recipient, so long as a bank has made the warranties 

in section 5 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 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.

(d) IDENTIFICATION OF RECONVERTING BANK.—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. 

(e) APPLICABLE LAW.—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 Act. 

SEC. 5. SUBSTITUTE CHECK WARRANTIES. 

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—

(1) the substitute check meets all the requirements for legal 

equivalence under section 4(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 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. 

SEC. 6. INDEMNITY. 

(a) INDEMNITY.—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 

6

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 provided under section 5. 

(2) AMOUNT IN ABSENCE OF BREACH OF WARRANTY.—In the 

absence of a breach of a warranty provided under section 5, the 

amount of the indemnity under subsection (a) 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.— (1) IN GENERAL.—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. 

(2) RULE OF CONSTRUCTION.—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. 

(d) EFFECT OF PRODUCING ORIGINAL CHECK OR COPY.— (1) IN GENERAL.—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. 

(2) COORDINATION OF INDEMNITY WITH IMPLIED WARRANTY.—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 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 asVerDate jul 14 2003 06:41 Oct 02, 2003 Jkt 029006 PO 00000 Frm 00006 Fmt 6659 Sfmt 6603 E:\HR\OC\HR291.XXX HR291
7

sistance 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. 7. EXPEDITED RECREDIT FOR CONSUMERS. 

(a) RECREDIT CLAIMS.— (1) IN GENERAL.—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—

(i) the check was not properly charged to the consumer’s account; or 

(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). 

(2) 40-DAY PERIOD.—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. 

(3) EXTENSION UNDER EXTENUATING CIRCUMSTANCES.—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. 

(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 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. 

8

(2) CLAIM IN WRITING.— (A) IN GENERAL.—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. 

(B) MEANS OF SUBMISSION.—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. 

(c) RECREDIT TO CONSUMER.— (1) CONDITIONS FOR RECREDIT.—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. 

(2) TIMING OF RECREDIT.— (A) IN GENERAL.—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. 

(B) RECREDIT PENDING INVESTIGATION.—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. 

(d) AVAILABILITY OF RECREDIT.—

(1) NEXT BUSINESS DAY AVAILABILITY.—Except as provided 

in paragraph (2), a bank that provides a recredit to a consumer 

9

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). 

(2) SAFEGUARD EXCEPTIONS.—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) NEW ACCOUNTS.—The claim is made during the 30-

day period beginning on the business day the consumer 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 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. 

(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 consumer 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) OVERDRAFT FEES.—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. 

(e) REVERSAL OF RECREDIT.—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).

(f) NOTICE TO CONSUMER.— (1) NOTICE IF CONSUMER CLAIM NOT VALID.—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—

10

(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. 

(2) NOTICE OF RECREDIT.—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. 

(3) NOTICE OF REVERSAL OF RECREDIT.—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. 

(4) MODE OF DELIVERY.—A notice described in this subsection shall be delivered by United States mail or by any other 

means through which the consumer has agreed to receive account information. 

(g) OTHER CLAIMS NOT AFFECTED.—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 6 or 10. 

(h) CLARIFICATION CONCERNING CONSUMER POSSESSION.—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. 

(i) SCOPE OF APPLICATION.—This section shall only apply to 

customers who are consumers. 

SEC. 8. 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 that the claimant 

bank has indemnified) has received a claim for expedited 

recredit from a consumer under section 7 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 7 

with respect to such substitute check; and 

11

(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. 

(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. 

(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 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 7, 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. 

(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 4(b); or 

(B) sent or handled by any bank, including the indemnifying bank, as a forward collection or returned check. 

(3) CLAIM IN WRITING.— (A) IN GENERAL.—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 7(b). 

(B) MEANS OF SUBMISSION.—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. 

(c) RECREDIT BY INDEMNIFYING BANK.—

(1) PROMPT ACTION REQUIRED.—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—

12

(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). 

(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 liability for claims brought under any other 

law or from additional damages under section 6 or 10 with respect to such check. 

(3) REFUND TO INDEMNIFYING BANK.—If a claimant bank 

reverses, in accordance with section 7(e), a recredit previously 

made to a consumer account under section 7(c), 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 A SUFFICIENT COPY

GOVERNED BY SECTION 6(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 6(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. 9. DELAYS IN AN EMERGENCY. 

A delay by a bank beyond the time limits prescribed or permitted by this Act 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. 

SEC. 10. MEASURE OF DAMAGES. 

(a) LIABILITY.—

(1) IN GENERAL.—Except as provided in section 6, any person who, in connection with a substitute check, breaches any 

warranty under this Act or fails to comply with any requirement imposed by, or 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; and 

13

(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 7 or 8. 

(b) COMPARATIVE NEGLIGENCE.—

(1) IN GENERAL.—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. 

(2) RULE OF CONSTRUCTION.—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. 

SEC. 11. 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 

from liability in an action to enforce a claim under this Act to the 

extent of any loss caused by the delay in giving notice of the claim. 

(c) NOTICE OF CLAIM BY CONSUMER.—A timely claim by a consumer under section 7 for expedited recredit constitutes timely notice 

of a claim by the consumer for purposes of subsection (b). 

SEC. 12. CONSUMER AWARENESS. 

(a) IN GENERAL.—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 7 

when a consumer believes in good faith that a substitute check 

was not properly charged to the account of the consumer.

14

(b) DISTRIBUTION.—

(1) EXISTING CUSTOMERS.—With respect to consumers who 

are customers of a bank on the effective date of this Act 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 Act. 

(2) NEW ACCOUNT HOLDERS.—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. 

(3) MODE OF DELIVERY.—A bank may send the notices required by this subsection by United States mail or by any other 

means through which the consumer has agreed to receive account information. 

(4) CONSUMERS WHO REQUEST COPIES OF CHECKS.—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. 

(c) MODEL LANGUAGE.—

(1) IN GENERAL.—Before the end of the 9-month period beginning on the date of the enactment of this Act, the Board 

shall publish model forms and clauses that a bank may use to 

describe each of the elements required by subsection (a). 

(2) SAFE HARBOR.—

(A) IN GENERAL.—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. 

(B) DELETION OR REARRANGEMENT.—A bank may delete any information in the model form or clause that is not 

required by this Act or rearrange the format. 

(3) USE OF MODEL LANGUAGE NOT REQUIRED.—This section 

shall not be construed as requiring any bank to use a model 

form or clause that the Board prepares under this subsection. 

SEC. 13. 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. 14. VARIATION BY AGREEMENT. 

(a) SECTION 8.—Any provision of section 8 may be varied by 

agreement of the banks involved. 

(b) NO OTHER PROVISIONS MAY BE VARIED.—Except as provided in subsection (a), no provision of this Act may be varied by 

agreement of any person or persons. 

SEC. 15. REGULATIONS. 

The Board may prescribe such regulations as the Board determines to be necessary to implement, prevent circumvention or evasion of, or facilitate compliance with the provisions of this Act. 

15

SEC. 16. STUDY AND REPORT ON FUNDS AVAILABILITY. 

(a) STUDY.—In order to evaluate the implementation and the 

impact of this Act, 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 

(5) the appropriateness of the time periods and amount limits applicable under sections 603 and 604 of the Expedited 

Funds Availability Act, as in effect on the date of enactment of 

this Act. 

(b) REPORT TO CONGRESS.—Before the end of the 30-month period beginning on the effective date of this Act, 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. 

SEC. 17. STATISTICAL REPORTING OF COSTS AND REVENUES FOR 

TRANSPORTING CHECKS BETWEEN RESERVE BANKS. 

In the annual report prepared by the Board for the first full calendar year after the date of enactment of this Act 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.

SEC. 18. EVALUATION AND REPORT BY THE COMPTROLLER GENERAL. 

(a) STUDY.—During the 5-year period beginning on the date of 

the enactment of this Act, the Comptroller General of the United 

States shall evaluate the implementation and administration of this 

Act, including—

(1) an estimate of the gains in economic efficiency made 

possible from check truncation; 

(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 Act; and 

(3) an assessment of consumer acceptance of the check truncation process resulting from this Act, as well as any new costs 

incurred by consumers who had their original checks returned 

with their regular monthly statements prior to the date of enactment of this Act. 

(b) REPORT TO CONGRESS.—Before the end of the 5-year period 

referred to in subsection (a), the Comptroller General shall submit 

a report to the Congress containing the findings and conclusions of 

the Comptroller General in connection with the evaluation conducted pursuant to subsection (a), together with such recommendations for legislative and administrative action as the Comptroller 

General may determine to be appropriate. 

16

SEC. 19. DEPOSITARY SERVICES EFFICIENCY AND COST REDUCTION. 

(a) FINDINGS.—The Congress finds as follows: 

(1) The Secretary of the Treasury has long compensated financial institutions for various critical depositary and financial 

agency services provided for or on behalf of the United States 

by—

(A) placing large balances, commonly referred to as 

‘‘compensating balances’’, on deposit at such institutions; 

and 

(B) using imputed interest on such funds to offset 

charges for the various depositary and financial agency 

services provided to or on behalf of the Government. 

(2) As a result of sharp declines in interest rates over the 

last few years to record low levels, or the public debt outstanding reaching the statutory debt limit, the Department of 

the Treasury often has had to dramatically increase or decrease 

the size of the compensating balances on deposit at these financial institutions. 

(3) The fluctuation of the compensating balances, and the 

necessary pledging of collateral by financial institutions to secure the value of compensating balances placed with those institutions, have created unintended financial uncertainty for the 

Secretary of the Treasury and for the management by financial 

institutions of their cash and securities. 

(4) It is imperative that the process for providing financial 

services to the Government be transparent, and provide the information necessary for the Congress to effectively exercise its 

appropriation and oversight responsibilities. 

(5) The use of direct payment for services rendered would 

strengthen cash and debt management responsibilities of the 

Secretary of the Treasury because the Secretary would no longer 

need to dramatically increase or decrease the level of such balances when interest rates fluctuate sharply or when the public 

debt outstanding reaches the statutory debt limit. 

(6) An alternative to the use of compensating balances, such 

as direct payments to financial institutions, would ensure that 

payments to financial institutions for the services they provide 

would be made in a more predictable manner and could result 

in cost savings. 

(7) Limiting the use of compensating balances could result 

in a more direct and cost-efficient method of obtaining those 

services currently provided under compensating balance arrangements. 

(8) A transition from the use of compensating balances to 

another compensation method must be carefully managed to 

prevent higher-than-necessary transitional costs and enable 

participating financial institutions to modify their planned investment of cash and securities. 

(b) AUTHORIZATION OF APPROPRIATIONS FOR SERVICES RENDERED BY DEPOSITARIES AND FINANCIAL AGENCIES OF THE UNITED

STATES.—There are authorized to be appropriated for fiscal years 

beginning after fiscal year 2003 to the Secretary of the Treasury 

such sums as may be necessary for reimbursing financial institutions in their capacity as depositaries and financial agents of the 

United States for all services required or directed by the Secretary 

17

of the Treasury, or a designee of the Secretary, to be performed by 

such financial institutions on behalf of the Secretary of the Treasury 

or another Federal agency, including services rendered before fiscal 

year 2004. 

(c) ORDERLY TRANSITION.—

(1) IN GENERAL.—As appropriations authorized in subsection (b) become available, the Secretary of the Treasury shall 

promptly begin the process of phasing in the use of the appropriations to pay financial institutions serving as depositaries 

and financial agents of the United States, and transitioning 

from the use of compensating balances to fund these services. 

(2) POST-TRANSITION USE LIMITED TO EXTRAORDINARY CIRCUMSTANCES.—

(A) IN GENERAL.—Following the transition to the use of 

the appropriations authorized in subsection (b), the Secretary of the Treasury may use the compensating balances 

to pay financial institutions serving as depositaries and financial agents of the United States only in extraordinary 

situations where the Secretary determines that they are 

needed to ensure the fiscal operations of the Government 

continue to function in an efficient and effective manner. 

(B) REPORT.—Any use of compensating balances pursuant to subparagraph (A) shall promptly be reported by the 

Secretary of the Treasury to the Committee on Financial 

Services of the House of Representatives and the Committee 

on Banking, Housing, and Urban Affairs of the Senate. 

(3) REQUIREMENTS FOR ORDERLY TRANSITION.—In 

transitioning to the use of the appropriations authorized in subsection (b), the Secretary of the Treasury shall take such steps 

as may be appropriate to—

(A) prevent abrupt financial disruption to the functions 

of the Department of the Treasury or to the participating financial institutions; and 

(B) maintain adequate accounting and management 

controls to ensure that payments to financial institutions 

for their banking services provided to the Government as 

depositaries and financial agents are accurate and that the 

arrangements last no longer than is necessary. 

(4) REPORTS REQUIRED.—

(A) ANNUAL REPORT.—

(i) IN GENERAL.—For each fiscal year, the Secretary of the Treasury shall submit a report to the Congress on the use of compensating balances and on the 

use of appropriations authorized in subsection (b) during that fiscal year. 

(ii) INCLUSION IN BUDGET.—The report required 

under clause (i) may be submitted as part of the budget 

submitted by the President under section 1105 of the 

title 31, United States Code, for the following fiscal 

year and if so, the report shall be submitted concurrently to the Committee on Financial Services of the 

House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate. 

(B) FINAL REPORT FOLLOWING TRANSITION.—

18

(i) IN GENERAL.—Following completion of the transition from the use of compensating balances to the use 

of the appropriations authorized in subsection (b) to 

pay financial institutions for their services as depositaries and financial agents of the United States, the 

Secretary of the Treasury shall submit a report on the 

transition to the Committee on Financial Services of 

the House of Representatives and the Committee on 

Banking, Housing, and Urban Affairs of the Senate. 

(ii) CONTENTS OF REPORT.—The report submitted 

under clause (i) shall include a detailed analysis of—

(I) the cost of transition; 

(II) the direct costs of the services being paid 

from the appropriations authorized in subsection 

(b); and 

(III) the benefits realized from the use of direct 

payment for such services, rather than the use of 

compensating balance arrangements. 

(d) TECHNICAL AMENDMENT.—The 2d undesignated paragraph 

of section 16 of the Federal Reserve Act (12 U.S.C. 412) is amended—

(1) in the 3d sentence, by inserting ‘‘or any other asset of 

a Federal reserve bank’’ before the period at the end; and 

(2) in the last sentence, by inserting ‘‘, or are otherwise held 

by or on behalf of,’’ after ‘‘in the vaults of’’. 

(e) EFFECTIVE DATE.—Notwithstanding section 20, this section 

shall take effect on the date of the enactment of this Act. 

SEC. 20. EFFECTIVE DATE. 

This Act shall take effect at the end of the 12-month period beginning on the date of the enactment of this Act, except as otherwise 

specifically provided in this Act.

And the Senate agree to the same.

For consideration of the House bill and the Senate amendment, and modifications committed to conference: 

MICHAEL G. OXLEY, 

SPENCER BACHUS, 

STEVEN C. LATOURETTE, 

MELISSA A. HART, 

PATRICK J. TIBERI, 

BARNEY FRANK, 

HAROLD E. FORD, Jr., 

Managers on the Part of the House.

RICHARD C. SHELBY, 

ROBERT F. BENNETT, 

WAYNE ALLARD, 

PAUL S. SARBANES, 

TIM JOHNSON, 

Managers on the Part of the Senate.

(19)

JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF 

CONFERENCE 

The managers on the part of the House and the Senate at the 

conference on the disagreeing votes of the two Houses on the 

amendment of the Senate to the bill (H.R. 1474), 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, submit the following 

joint statement to the House and the Senate in explanation of the 

effect of the action agreed upon by the managers and recommended 

in the accompanying conference report: 

The Senate amendment struck all of the House bill after the 

enacting clause and inserted a substitute text. 

The House recedes from its disagreement to the amendment of 

the Senate with an amendment that is a substitute for the House 

bill and the Senate amendment. 

The Managers on the part of the House and the Senate met 

on October 1, 2003 (the House chairing), and reconciled the differences between the House bill and the Senate amendment. 

The differences between the House bill, the Senate amendment, and the substitute agreed to in conference are noted below, 

except for clerical corrections, conforming changes made necessary 

by agreements reached by the conferees, and minor drafting and 

clarifying changes. 

SHORT TITLE; TABLE OF CONTENTS; FINDINGS AND PURPOSES

House Bill 

Section 1 of the House bill establishes the short title of the bill, 

the ‘‘Check Clearing for the 21st Century Act,’’ or the ‘‘Check 21 

Act’’, and provides the findings and purposes of the legislation. 

Senate Amendment 

Section 1 of the Senate amendment provides the short title of 

the bill, the ‘‘Check Truncation Act of 2003’’, and a table of contents. Section 2 of the Senate amendment also provides the findings and purposes of the legislation. 

Conference Agreement 

The Senate recedes to the House. 

20

DEFINITIONS

House Bill 

Section 2 of the House bill defines certain terms, including 

‘‘substitute check,’’ ‘‘reconverting bank,’’ ‘‘collecting bank,’’ ‘‘depositary bank,’’ ‘‘claimant bank,’’ and ‘‘truncate.’’

Senate Amendment 

Section 3 of the Senate amendment defines certain terms, including ‘‘indemnifying bank’’, ‘‘MICR line’’, ‘‘reconverting bank’’, 

‘‘truncate’’ and ‘‘substitute check’’. 

Conference Agreement 

The House recedes to the Senate with an amendment removing 

the definition of ‘‘claimant bank’’. 

GENERAL PROVISIONS GOVERNING SUBSTITUTE CHECKS

House Bill 

Section 3 of the House bill allows a person to deposit, present, 

or send for collection or return a substitute check without an agreement with the recipient. This section mandates that a substitute 

check have the legal equivalence of an original check if the substitute check: (i) accurately represents all of the information on the 

front and back of the original check at the time the original check 

was truncated; and (ii) contains the legend ‘‘this is a copy of your 

check. You can use it the same way you would use the original 

check.’’

The reconverting bank must ensure that the substitute check 

bears all the endorsements applied by all of the parties that previously handled the check and must identify itself as the reconverting bank. 

Senate Amendment 

Section 4 of the Senate amendment allows a person to deposit, 

present or send for collection or return a substitute check without 

an agreement with the recipient. This section mandates that a substitute check have the legal equivalence of an original check if the 

substitute check: (i) accurately represents all of the information on 

the front and back of the original check at the time the original 

check was truncated; and (ii) contains the legend ‘‘this is a copy of 

your check. You can use it the same way you would use the original check.’’

The reconverting bank must ensure that the substitute check 

bears all the endorsements applied by all of the parties that previously handled the check and shall identify itself as the reconverting bank. 

Conference Agreement 

This provision is not in disagreement.

21

SUBSTITUTE CHECK WARRANTIES

House Bill 

Section 4 of the House bill provides that a bank that transfers, 

presents or returns a substitute check and receives consideration 

for the check is deemed to have warranted that the substitute 

check meets all requirements for legal equivalence and that no entity will be asked to make a payment on a check already paid. 

Senate Amendment 

Section 5 of the Senate amendment states that a bank that 

transfers, presents or returns a substitute check and receives consideration for the check is deemed to have warranted that the substitute check meets all requirements for legal equivalence and that 

no entity will be asked to make a payment on a check already paid. 

Conference Agreement 

This provision is not in disagreement. 

INDEMNITY

House Bill 

Section 5 of the House bill grants an indemnity to the transferee by a reconverting bank and each bank that subsequently 

transfers, presents or returns a substitute check and receives consideration for the transfer, presentment, or return up to either the 

amount of the loss proximately caused by the breach of the warranty provided in section 4 or, in the absence of such a breach, the 

amount of any loss up to the amount of the substitute check plus 

any interest or expenses. 

This section also allows for comparative negligence if a loss results in whole or in part from the negligence or failure to act in 

good faith on the part of the indemnified party, reducing that party’s indemnification by the amount of negligence or bad faith. 

Senate Amendment 

Section 6 of the Senate amendment bill grants an indemnity 

to the transferee by a reconverting bank and each bank that subsequently transfers, presents or returns a substitute check and receives consideration for such transfer, presentment or return up to 

either the amount of the loss proximately caused by the breach of 

the warranty provided in section 4 or, in the absence of such a 

breach, the amount of any loss up to the amount of the substitute 

check plus any interest or expenses. 

This section also allows for comparative negligence if a loss results in whole or in part from the negligence or failure to act in 

good faith on the part of the indemnified party, reducing that party’s indemnification by the amount of negligence or bad faith. Section 6(c)(2) of this section states that nothing in the comparative 

negligence provisions of section 6(c)(1) reduces consumer’s rights 

under other laws. 

Conference Agreement 

The House recedes to the Senate. 

22

EXPEDITED RECREDIT FOR CONSUMERS

House Bill 

Section 6 of the House bill provides an expedited recredit to a 

consumer if the consumer asserts that the bank charged the customer’s account improperly or the customer has a warranty claim 

with respect to the substitute check. The customer must show that 

they suffered a loss and that the production of the original or a better copy of the original is necessary to determine the validity of any 

claim. This claim must be made within 30 days after receiving 

their periodic statement and may have an additional 30 days to file 

a claim under extenuating circumstances. According to this section, 

if the bank has not determined if the claim is valid within 10 business days, the bank must recredit the lesser of the amount 

charged, or $2,500 with interest and any remaining amount must 

be recredited within 45 calendar days. Additionally, a consumer 

does not have to be in possession of the substitute check in order 

to make a claim. 

Senate Amendment 

Section 7 of the Senate amendment requires the consumer to 

make a claim for expedited recredit within 40 days after the bank 

transmits the periodic statement or receipt of the substitute check, 

whichever is later. Under extenuating circumstances, including extended travel or illness of the consumer, the bank shall extend the 

period for a reasonable amount of time. 

Section 7(c)(1)(B) requires that banks do not have to provide 

copies of documentation relied upon in denying an expedited recredit claim. Instead, a bank must provide a statement of right of 

the consumer to request such documentation. 

Conference Agreement 

The Conference Agreement consists of the Senate provisions 

relating to (1) the time period for expedited recredit; (2) the extension of the time period for expedited recredit; and (3) allowing electronic submission of expedited recredit claims. Further, the Conference Agreement provides that, when resolving customer claims, 

the delivered copy of the original check must read that the check 

‘‘accurately represents all the information’’ on the original check 

standard and that the bank does not have to provide copies of documentation relied upon in denying expedited recredit claim. Instead, 

a bank must provide a statement of the right of the consumer to 

request such documentation. 

The Conference Agreement also adopts the House provision 

providing that a consumer who receives a substitute check does not 

need to currently have the substitute check to make a claim for expedited recredit. 

EXPEDITED RECREDIT PROCEDURES FOR BANKS

House Bill 

Section 7 of the House bill permits a bank to make a claim 

against an indemnifying bank for an expedited recredit if the 

claimant’s customer has made a claim for recredit, the claimant

23

bank has suffered a loss, and production of the original check, a 

substitute check or a better copy of the check is necessary to determine the validity of the charge. This claim must be made within 

120 days of the transaction. This claim must be in writing and 

must describe the claim and demonstrate a loss. 

Senate Amendment 

Section 8 of the Senate amendment permits a bank to make a 

claim against an indemnifying bank for an expedited recredit if the 

claimant’s customer has made a claim for recredit, the claimant 

bank has suffered a loss, and production of the original check, a 

substitute check or a better copy of the check is necessary to determine the validity of the charge. This claim must be made within 

120 days of the transaction. This claim must be in writing and 

must describe the claim and demonstrate a loss. 

Conference Agreement 

This provision is not in disagreement. 

DELAYS IN AN EMERGENCY

House Bill 

Section 8 of the House bill permits delays in compliance with 

the provisions of this legislation if they are caused by circumstances beyond the control of a bank, and if the bank used such 

diligence as the circumstances require. 

Senate Amendment 

Section 9 of the Senate amendment permits delays in compliance with the provisions of this legislation if they are caused by circumstances beyond the control of a bank, and if the bank used such 

diligence as the circumstances require. 

Conference Agreement 

This provision is not in disagreement. 

MEASURE OF DAMAGES

House Bill 

Section 9 of the House bill makes persons who breach a warranty or fail to comply with the bill, or regulations under the bill, 

liable for the lesser of the amount of the loss or the amount of the 

substitute check plus interest and expenses. This section applies a 

comparative negligence standard for the determination of damages. 

Senate Amendment 

Section 10 of the Senate amendment makes persons who 

breach a warranty or fail to comply with the bill, or regulations 

under the bill, liable for the lesser of the amount of the loss or the 

amount of the substitute check plus interest and expenses. This 

section applies a comparative negligence standard for the determination of damages. 

24

The amendment also provides that nothing in the comparative 

negligence provision of section 10(b)(1) reduces consumer’s rights 

under other laws. 

Conference Agreement 

The House recedes to the Senate. 

STATUTE OF LIMITATIONS AND NOTICE OF CLAIM

House Bill 

Section 10 of the House bill provides for a 1 year statute of 

limitations from the time that the customer learns of the claim. 

Senate Amendment 

Section 11 of the Senate amendment provides for a 1 year statute of limitations from the time that the customer learns of the 

claim. 

Conference Agreement 

This provision is not in disagreement. 

CONSUMER AWARENESS

House Bill 

Section 11 of the House bill requires that each bank provide 

notice to its customers describing the process of check substitution 

and a description of the consumer recredit provision. This section 

applies to both new and existing customers. 

Senate Amendment 

Section 12 of the Senate amendment states that notice to consumers only has to be sent if consumers get their original checks 

or substitute checks back in their periodic statements. 

Banks also must provide notice to customers that request a 

copy of a check and receive a substitute check from the bank. 

Banks must provide customers that receive original checks or 

substitute checks with a brief informative notice for the first three 

years that the Act is in effect. 

Conference Agreement 

The Conference Agreement adopts the House position regarding the permanence of the consumer notice provisions. 

The Conference Agreement also merges language from Senate 

section 12(b)(1)(C) and House section 11(b). The Conference Agreement adopts the Senate provision regarding the 9 month time 

frame within which the FRB must publish model language and requiring notice to include (i) description of substitute check process; 

and (ii) description of consumer recredit rights. 

EFFECT ON OTHER LAW

House Bill 

Section 12 of the House bill supersedes any inconsistent Federal or State laws to the extent of the inconsistency.

25

Senate Amendment 

Section 13 of the Senate amendment supersedes any inconsistent Federal or State laws to the extent of the inconsistency. 

Conference Agreement 

This provision is not in disagreement. 

VARIATION BY AGREEMENT

House Bill 

Section 13 of the House bill permits provisions of section 7 to 

be varied by the banks involved. 

Senate Amendment 

Section 17 of the Senate amendment permits provisions of section 8 to be varied by the banks involved. 

Conference Agreement 

The Conference Agreement makes only technical changes related to cross-references and maintains the substance of both provisions. 

REGULATIONS

House Bill 

Section 14 of the House bill allows the Federal Reserve to 

write regulations related to the operation of this legislation. Additionally, the Federal Reserve is required to report on the increased 

speed of check processing and the prices it charges for transportation services. 

Senate Amendment 

Sections 14 and 15 of the Senate amendment allows the Federal Reserve to regulate the operation of this legislation. However, 

it differs in the study and monitoring of funds available. The Senate amendment mandates a study of implementation of the Act, including impact on funds availability. 

Conference Agreement 

The Conference Agreement adopts the Senate provisions regarding the authority of the Federal Reserve to issue regulations 

as it deems necessary to implement, prevent, circumvent or evasion 

of, or facilitate compliance with the legislation and the reporting 

requirements. 

The Conferees also agree to a provision which requires the 

Federal Reserve Board to publish statistical data on costs and revenue related to transporting commercial checks (exclusive of the 

checks the reserve banks handle as fiscal agents) between Federal 

Reserve Bank offices by air or ground couriers. In the past, such 

statistics have been of interest to certain organizations. This provision does not mandate specific methodologies for imputing or estimating revenues. Further, this section does not change the Monetary Control Act’s requirement that the Federal Reserve Banks, 

over the long run, recover the costs of their priced services or affect 

26

the Federal Reserve Board’s ability under its pricing principles to 

determine what constitutes a major service category. 

The House recedes to the Senate on a funds availability study. 

EVALUATION AND REPORT BY THE COMPTROLLER GENERAL

House Bill 

The House bill contains no similar provision. 

Senate Amendment 

Section 16 of the Senate amendment provides for the Comptroller General of the United States to evaluate the implementation 

and administration of this bill within 5 years. 

Conference Agreement 

The House recedes to the Senate. 

DEPOSITARY SERVICES EFFICIENCY AND COST REDUCTION

House Bill 

The House bill contains no similar provision. 

Senate Amendment 

The Senate amendment contains no similar provision. 

Conference Agreement 

The Conference Agreement includes language requested by the 

Department of Treasury which authorizes the Treasury Department to directly compensate financial institutions that provide depositary services to the Federal Government. 

Additionally, the Conference Agreement includes language requested by the Federal Reserve Board to effect technical changes 

to the Federal Reserve Act in the way currency is collateralized 

which will allow for greater liquidity in case of a national emergency. 

EFFECTIVE DATE

House Bill 

Section 15 establishes the effective date as 18 months after the 

date of enactment. 

Senate Amendment 

Section 18 establishes the effective date as 12 months after the 

date of enactment. 

Conference Agreement 

The House recedes to the Senate.

27

For consideration of the House bill and the Senate amendment, and modifications committed to conference: 

MICHAEL G. OXLEY, SPENCER BACHUS, STEVEN C. LATOURETTE, MELISSA A. HART, PATRICK J. TIBERI, BARNEY FRANK, HAROLD E. FORD, Jr., 

Managers on the Part of the House.

RICHARD C. SHELBY, 

ROBERT F. BENNETT, 

WAYNE ALLARD, 

PAUL S. SARBANES, 

TIM JOHNSON, 

Managers on the Part of the Senate.

Æ