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(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 subject consumer account been charged;
(B) the claimant bank has suffered a result-
ing loss or is obligated to recredit the consumer
account under section 7 with respect to such sub-
stitute check; and
(C) production of the original check or a
better copy of the original check is necessary to
determine the validity of the charge to the con-
sumer account or any warranty claim connected
with such substitute check.
(2) 120-DAY PERIOD.—Any claim under para-
graph (1) may be submitted by the claimant bank to
an indemnifying bank before the end of the 120-day
period beginning on the date of the transaction that
gave rise to the claim.
(b) PROCEDURES FOR CLAIMS.—
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(1) IN GENERAL.—To make a claim under sub-
section (a) for an expedited recredit relating to a sub-
stitute check, the claimant bank shall send to the in-
demnifying bank—
(A) a description of—
(i) the claim, including an explanation
of why the substitute check cannot be prop-
erly 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 sub-
ject consumer account under section 7, together
with an estimate of the amount of the loss or re-
credit;
(C) the reason why production of the origi-
nal 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 indem-
nifying 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
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connection with a claim for an expedited recredit in-
cludes a copy of any substitute check for which any
such claim is made, the claimant bank shall take rea-
sonable 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 re-
quired by paragraph (1) in writing, including a
copy of the written or electronically submitted
claim, if any, that the consumer provided in ac-
cordance with section 7(b).
(B) MEANS
OF
SUBMISSION.—An indem-
nifying bank that requires a submission of infor-
mation under subparagraph (A) may permit the
claimant bank to make the submission electroni-
cally, if the claimant bank has agreed to commu-
nicate with the indemnifying bank in that man-
ner.
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(c) RECREDIT BY INDEMNIFYING BANK.—
(1) PROMPT ACTION REQUIRED.—Not later than
10 business days after the business day on which an
indemnifying bank receives a claim under subsection
(a) from a claimant bank with respect to a substitute
check, the indemnifying bank shall—
(A) provide, to the claimant bank, the origi-
nal 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 in-
formation on the front and back of the
original check (as of the time at which the
original check was truncated); or
(ii) is otherwise sufficient to determine
that the claim of the bank is not valid;
(B) recredit the claimant bank for the
amount of the claim up to the amount of the sub-
stitute check, plus interest if applicable; or
(C) provide information to the claimant
bank as to why the indemnifying bank is not ob-
ligated to comply with subparagraph (A) or (B).
(2) RECREDIT DOES NOT ABROGATE OTHER LI-
ABILITIES.—Providing a recredit under this sub-
section to a claimant bank with respect to a substitute
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check shall not absolve the indemnifying bank from li-
ability 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 ac-
count 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 indem-
nifying bank any amount previously advanced by the
indemnifying bank in connection with such substitute
check.
(d) PRODUCTION OF ORIGINAL CHECK OR A SUFFI-
CIENT COPY GOVERNED BY SECTION 6(d).—If the indem-
nifying 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) of this sec-
tion, section 6(d) shall govern any right of the indemnifying
bank to any repayment of any funds that the indemnifying
bank has recredited to the claimant bank pursuant to sub-
section (c).
SEC. 9. DELAYS IN AN EMERGENCY.
Delay by a bank beyond the time limits prescribed or
permitted by this Act is excused if the delay is caused by
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interruption of communication or computer facilities, sus-
pension of payments by another bank, war, emergency con-
ditions, 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 regu-
lation 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
(B) interest and expenses (including costs
and reasonable attorney fees and other expenses
of representation) related to the substitute check.
(2) OFFSET
OF
RECREDITS.—The amount of
damages that any person receives under paragraph
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(1), if any, shall be reduced by the amount that the
claimant receives and retains as a recredit under sec-
tion 7 or 8, if any.
(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 sub-
section (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 ju-
risdiction, before the end of the 1-year period begin-
ning on the date on which the cause of action accrues.
(2) ACCRUAL.—For purposes of paragraph (1), a
cause of action accrues as of the date on which the in-
jured party first learns, or by which such person rea-
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sonably should have learned, of the facts and cir-
cumstances giving rise to the cause of action.
(b) NOTICE OF CLAIMS REQUIRED.—Unless a person
gives notice of a claim to the indemnifying or warranting
bank, not later than 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 con-
stitutes timely notice of a claim by the consumer for pur-
poses of subsection (b).
SEC. 12. CONSUMER AWARENESS.
(a) IN GENERAL.—During the 3-year period beginning
on the effective date of this Act, each bank shall provide
to each consumer that is a customer of the bank, in accord-
ance 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—
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(A) accurately represents all of the informa-
tion 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.
(b) DISTRIBUTION.—
(1) IN GENERAL.—The notice required by sub-
section (a) shall be provided—
(A) to each consumer that is a customer of
the bank as of the effective date of this Act, and
that receives original checks or substitute checks
along with periodic account statements, not later
than together with the first regularly scheduled
communication with the customer after the effec-
tive date of this Act;
(B) at the time at which a customer rela-
tionship is initiated, if such relationship is initi-
ated on or after the effective date of this Act and
such customer will receive original checks or sub-
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stitute checks along with periodic account state-
ments; and
(C) to each customer of the bank that re-
quests a copy of a check and receives a substitute
check, at the time of the request.
(2) MODE OF DELIVERY.—A bank may provide
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.
(c) MODEL LANGUAGE.—
(1) IN GENERAL.—Not later than 9 months after
the date of enactment of this Act, the Board shall pub-
lish model forms and clauses that a depository insti-
tution may use to describe each of the elements re-
quired by subsection (a).
(2) SAFE HARBOR.—A bank shall be treated as
being in compliance with the requirements of sub-
section (a) if the substitute check notice of the bank
uses a model form or clause published by the Board,
and such model form or clause accurately describes
the policies and practices of the bank. A bank may
delete any information in the model form or clause
that is not required by this Act, or rearrange the for-
mat of such form.
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(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. REGULATIONS.
The Board may prescribe such regulations as it deems
necessary to implement, prevent circumvention or evasion
of, or facilitate compliance with the provisions of this Act.
SEC. 15. 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 financial institutions
make funds available to consumers for local and
nonlocal checks prior to the expiration of maximum
hold periods;
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(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.—Not later than 30 months
after the effective date of this Act, the Board shall submit
a report to Congress concerning the results of the study con-
ducted under this section, together with any recommenda-
tions for legislative action.
SEC. 16. EVALUATION AND REPORT BY THE COMPTROLLER
GENERAL.
(a) STUDY.—Not later than 5 years after the date of
enactment of this Act, the Comptroller General of the United
States shall evaluate the implementation and administra-
tion of this Act, including—
(1) an estimate of the gains in economic effi-
ciency made possible from check truncation;
(2) an evaluation of the benefits accruing to con-
sumers and financial institutions from reduced trans-
portation costs, longer hours for accepting deposits for