[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1474 Introduced in House (IH)]
108th CONGRESS
1st Session
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.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 27, 2003
Ms. Hart (for herself, Mr. Ford, Mr. Ferguson, Mr. Oxley, Mr. Bachus,
Mr. Crowley, Mr. Jones of North Carolina, Mr. Royce, Mrs. Kelly, Mr.
Toomey, Mr. Gillmor, Mr. Hinojosa, Mr. Lucas of Kentucky, Mr. Ross,
Mrs. McCarthy of New York, Mr. McIntyre, Ms. Norton, and Mr. Boswell)
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the Board superseded any State law, including the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'' 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) Banking terms.--
(A) Claimant bank.--The term ``claimant bank''
means a bank that submits a claim for recredit under
section 7 to an indemnifying bank.
(B) Collecting bank.--The term ``collecting bank''
means any bank handling a check for collection except
the paying bank.
(C) 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.
(D) 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.
(E) 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.
(11) Indemnifying bank.--The term ``indemnifying bank''
means a bank that is providing an indemnity under section 5
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 and all other 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.
(17) State.--The term ``State'' has the same meaning as in
section 3(a)(3) 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. 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, so long as a bank has made the warranties in section 4
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 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. 4. 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 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 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. 5. 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 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 4.
(2) Amount in absence of breach of warranty.--In the
absence of a breach of a warranty provided under section 4, 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.--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, Substitute Check, or
Sufficient Copy.--
(1) In general.--If the indemnifying bank produces the
original check, a substitute check, or a copy of the original
check that is 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 the original check, the substitute check, or a
sufficient copy is provided to the indemnified party;
and
(B) have a right to the return of any funds the
bank 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
sufficient 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
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.--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) 30-day period.--Any claim under paragraph (1) with
respect to a consumer account may be submitted by a consumer
before the end of the 30-day period beginning on the later of--
(A) the date on which the consumer 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 consumer.
(3) Extension under extenuating circumstances.--If the
consumer's ability to submit the claim within the 30-day period
under paragraph (2) is delayed due to extenuating
circumstances, including extended travel or the illness of the
consumer, the 30-day period shall be extended for a total not
to exceed 30 additional days.
(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.
(2) Claim in writing.--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.
(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 provided to the consumer the
original check, a substitute check, or a copy of the
original check and demonstrates that the substitute
check was properly charged to the consumer's 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
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--
(A) the original check, the substitute check, or a
copy of the original check that is sufficient to
determine that the substitute check was properly
charged to the consumer's account; and
(B) an explanation of the basis for the
determination by the bank that the substitute check was
properly charged, including 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 5 or 9.
(h) 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 that the claimant
bank has indemnified) has received a claim for
expedited recredit from a consumer under section 6 with
respect to such 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 6 with respect to such substitute check; and
(C) production of the original check, another
substitute check, or a better copy of the original
check is necessary to determine the validity of the
charge to the customer account or any warranty claim
connected with such substitute check.
(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 6, 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 3(b); or
(B) sent or handled by any bank, including the
indemnifying bank, as a forward collection or returned
check.
(3) Claim in writing.--An indemnifying bank may, in the
bank's discretion, require the claimant bank to submit in
writing the information required by paragraph (1), including a
copy of the written claim, if any, that the consumer submitted
in accordance with section 6(b).
(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--
(A) provide the original check (with respect to
such substitute check), another substitute check, or a
copy of the original check that is sufficient to
determine that the bank's claim is not valid 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 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 5 or 9 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 consumer account under section 6(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 5(d).--If the indemnifying bank provides the claimant bank with
the original check, another substitute check, or a sufficient copy of
the original check under subsection (c)(1)(A), 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. 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 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. 9. 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 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
(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 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.
SEC. 10. 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 Consumer.--A timely claim by a consumer
under section 6 for expedited recredit constitutes timely notice of a
claim by the consumer for purposes of subsection (b).
SEC. 11. CONSUMER AWARENESS.
(a) In General.--Each bank shall provide, in accordance with
subsection (b), a brief notice about substitute checks that describes--
(1) the process of check substitution and how the process
may be different than the check clearing process with which the
consumer may be familiar; and
(2) a description of the consumer recredit rights
established under section 6 when a consumer believes in good
faith that a substitute check was not properly charged to the
consumer's account.
(b) Distribution.--
(1) Existing customers.--With respect to consumers that are
customers of a bank on the effective date of this Act, 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, 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.
(c) Model Language.--
(1) In general.--No later than 1 year after the date of
enactment of this Act, the Board shall publish model forms and
clauses that a depository institution may use to describe each
of the elements required by subsection (a).
(2) Safe harbor.--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. 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. 12. 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. 13. 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.--Except as provided in
subsection (a), no provision of this Act may be varied by agreement of
any person or persons.
SEC. 14. REGULATIONS.
The Board may, by regulation, clarify or otherwise implement the
provisions of this Act or may modify the requirements imposed by this
Act with respect to substitute checks to further the purposes of this
Act, including reducing risk, accommodating technological or other
developments, and alleviating undue compliance burdens.
SEC. 15. EFFECTIVE DATE.
This Act shall take effect at the end of the 18-month period
beginning on the date of the enactment of this Act, except as otherwise
specifically provided in this Act.
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