[Congressional Record Volume 149, Number 96 (Thursday, June 26, 2003)]
[Senate]
[Pages S8811-S8815]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




        IMPROVING THE EFFICIENCY OF THE NATION'S PAYMENTS SYSTEM

  Mr. FRIST. Mr. President, I ask unanimous consent that the Senate 
proceed to the immediate consideration of Calendar No. 168, S. 1334.
  The PRESIDING OFFICER. The clerk will state the bill by title.
  The legislative clerk read as follows:

       A bill (S. 1334) 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.

  There being no objection, the Senate proceeded to consider the bill.
  Mr. FRIST. Mr. President, I ask unanimous consent that the bill be 
read the third time, the Banking Committee be discharged from further 
consideration of H.R. 1474, and the Senate proceed to its immediate 
consideration; that all after the enacting clause be stricken and the 
text of S. 1334 be inserted in lieu thereof; that the bill, as amended, 
be read the third time and passed; that the motion to reconsider be 
laid upon the table, and that any statements regarding the measure be 
printed in the Record. I further ask unanimous consent that S. 1334 be 
returned to the calendar.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The bill (H.R. 1474), as amended, was passed, as follows:

       Resolved, That the bill from the House of Representatives 
     (H.R. 1474) entitled ``An Act 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.'', do 
     pass with the following amendment:
       Strike out all after the enacting clause and insert:

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Check 
     Truncation Act of 2003''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings and 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.
Sec. 14. Regulations.
Sec. 15. Study and report on funds availability.
Sec. 16. Evaluation and report by the Comptroller General.
Sec. 17. Variation by agreement.
Sec. 18. Effective date.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--Congress finds that--
       (1) the Expedited Funds Availability Act (12 U.S.C. 4001 et 
     seq.)--
       (A) directs the Board to consider establishing regulations 
     requiring Federal reserve banks and

[[Page S8812]]

     depository institutions to provide for check truncation, in 
     order to improve the check processing system;
       (B) authorizes the Board 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
       (C) directs that the exercise of such authority by the 
     Board shall supersede any State law, including the Uniform 
     Commercial Code, as in effect in any State; and
       (2) 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 account 
     holders than it was in 1987, when Congress first directed the 
     Board to consider establishing such a process.
       (b) Purposes.--The purposes of this Act are--
       (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; and
       (3) to improve the overall efficiency of the Nation's 
     payments system.

     SEC. 3. DEFINITIONS.

       In this Act, the following definitions shall apply:
       (1) Account.--The term ``account'' means a deposit account 
     at a bank.
       (2) Bank.--The term ``bank''--
       (A) means any person located in a State engaged in the 
     business of banking, including any depository institution; 
     and
       (B) includes--
       (i) any Federal reserve bank;
       (ii) any Federal home loan bank; and
       (iii) to the extent that it acts as a payor--

       (I) the Treasury of the United States;
       (II) the United States Postal Service;
       (III) a State government; and
       (IV) a unit of general local government.

       (3) Banking 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 endorsed first by another bank.
       (C) Depository institution.--The term ``depository 
     institution'' has the same meaning as in section 19(b)(1)(A) 
     of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A)).
       (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 (12 U.S.C. 4001(3)).
       (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 (12 U.S.C. 4001(10)).
       (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 6 
     with respect to a substitute check.
       (12) MICR line.--The term ``MICR line'' or ``magnetic ink 
     character recognition line'' means 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 (12 U.S.C. 4001(14)).
       (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 (12 U.S.C. 
     1813(a)).
       (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) Unit of general local government.--The term ``unit of 
     general local government'' has the same meaning as in section 
     602(24) of the Expedited Funds Availability Act (12 U.S.C. 
     4001(24)).
       (21) Other terms.--Unless the context requires otherwise, 
     terms used in this Act that are 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 agreement with the recipient, to the extent that the bank 
     has made the warranties described in section 5 with respect 
     to the substitute check.
       (b) Legal Equivalence.--A substitute check shall be 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--
       (1) 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
       (2) bears the legend: ``This is a legal copy of your check. 
     You can use it the same way you would use the original 
     check.''.
       (c) Endorsements.--A reconverting bank shall ensure that 
     the substitute check 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 reconverting 
     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 consumers, of part 229 of title 12, Code 
     of Federal Regulations (or any successor thereto), the 
     Uniform Commercial Code, and any other applicable Federal or 
     State law that would apply if the substitute check were the 
     original check, to the extent that 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 to 
     the transferee, any subsequent collecting or returning bank, 
     the depositary bank, the drawee, the drawer, the payee, the 
     depositor, and any endorser (regardless of whether the 
     warrantee receives the substitute check or another paper or 
     electronic form of the substitute or original check) that--
       (1) the substitute check meets all the requirements for 
     legal equivalence under section 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 
     it will be asked to make a payment based on a check it 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 amounts 
     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.

[[Page S8813]]

       (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 fees and other 
     expenses of representation) proximately caused by a breach of 
     a warranty established under section 5.
       (2) Amount in absence of breach of warranty.--In the 
     absence of a breach of a warranty established 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 fees and other expenses of representation).
       (c) Comparative Negligence.--
       (1) In general.--If a loss under 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 the 
     indemnification of that party 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 Substitute 
     Check.--
       (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 at which 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, substitute check, or 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 that 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 account for a substitute 
     check that was provided to the consumer;
       (B) either--
       (i) the check was not properly charged to the consumer 
     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 subject consumer 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 subject consumer account or 
     the warranty claim; and
       (D) sufficient information to identify the substitute check 
     and to investigate the claim.
       (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 subject 
     consumer account for the amount described in paragraph (1) 
     not later than the end of the business day following the 
     business day on which the bank determines the claim of the 
     consumer is valid.
       (B) Recredit pending investigation.--If the bank has not 
     determined that the claim of the consumer 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 
     subject consumer 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, 
     not 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 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 claim of the consumer 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 on which 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 on which 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 claim of a 
     consumer under this section was in fact properly charged to 
     the consumer account, the bank shall send to the consumer, 
     not later than the business day following the business day on 
     which the bank makes the determination--

[[Page S8814]]

       (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 at which 
     the original check was truncated); or
       (ii) is otherwise sufficient to determine whether or not 
     the claim of the consumer 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, not 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 on which 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, not 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 on which 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 provision of 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) 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 
     subject consumer account been charged;
       (B) the claimant bank has suffered a resulting loss or is 
     obligated to recredit the consumer account under section 7 
     with respect to such substitute 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 consumer 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 period 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 subject consumer 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 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.--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 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 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 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) of this section, 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 subsection (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 
     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
       (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 (1), if any, shall be reduced 
     by the amount that the claimant receives and retains as a 
     recredit under section 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 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 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 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) 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 constitutes 
     timely notice of a claim by the consumer for purposes 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 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

[[Page S8815]]

     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 subsection (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 effective 
     date of this Act;
       (B) at the time at which a customer relationship is 
     initiated, if such relationship is initiated on or after the 
     effective date of this Act and such customer will receive 
     original checks or substitute checks along with periodic 
     account statements; and
       (C) to each customer of the bank that requests 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 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 
     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 format of 
     such form.
       (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;
       (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 conducted 
     under this section, together with any recommendations 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 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.--Not later than 5 years after the 
     date of enactment of this Act, the Comptroller General shall 
     submit a report to Congress concerning 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.

     SEC. 17. 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. 18. EFFECTIVE DATE.

       Except as otherwise specifically provided in this Act, this 
     Act shall become effective 12 months after the date of 
     enactment of this Act.

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