[Congressional Record Volume 149, Number 144 (Wednesday, October 15, 2003)]
[Senate]
[Pages S12632-S12633]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       CHECK CLEARING FOR THE 21ST CENTURY ACT-CONFERENCE REPORT

  Mr. BURNS. Mr. President, I submit a report of the committee of 
conference on the bill (H.R. 1474), and ask for its immediate 
consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Committee of Conference on the disagreeing votes of the 
     two Houses on the amendment of the Senate to the bill (H.R. 
     1474), to facilitate check truncation by authorizing 
     substitute checks, to foster innovation in the check 
     collection system without mandating receipt of checks in 
     electronic form, and to improve the overall efficiency of the 
     Nation's payments system, and for other purposes, having met, 
     have agreed that the House recede from its disagreement to 
     the amendment of the Senate, and agree to the same with an 
     amendment, signed by a majority of the conferees on the part 
     of both Houses.

  The PRESIDING OFFICER. The Senate will proceed to the consideration 
of the conference report.
  (The conference report is printed in the proceedings of the House in 
the Record of October 1, 2003.)
  Mr. SARBANES. Mr. President, I support the conference report to the 
Check Clearing for the 21st Century Act or Check 21 Act. This is an 
important piece of legislation and a high priority for the Federal 
Reserve Board. I commend Chairman Shelby for his leadership on this 
issue. Senators Johnson, Carper, Miller and Bennett also played 
important roles in developing this legislation. The Check 21 Act enjoys 
broad bipartisan support. the conference report passed the House of 
Representatives unanimously on October 9th. Earlier this year both 
Houses of Congress passed similar bills by unanimous vote.
  This legislation is designed to allow banks to use electronic images 
of checks to expedite check collection and processing. Current law 
requires a bank that receives a deposited check to physically return 
the check to the

[[Page S12633]]

issuing bank unless there is an agreement to provide for alternative 
presentment. It is important to note that there is no current legal 
requirement that an issuing bank return the original check to its 
customer.
  The terrorist attacks of September 11, 2001 and the subsequent 
closure of air traffic by the Federal Aviation Administration exposed a 
serious weakness in our financial system. The inability of banks to 
send physical checks for presentment and payment for several days 
prevented the clearing of close to $50 billion in transactions. This 
crisis required the Federal Reserve to use extraordinary efforts to 
prevent a serious disruption in our financial markets.
  Under the Check 21 Act, banks will no longer be required to 
physically transport checks across the nation. Instead, they will be 
allowed to electronically scan the front and back of each check, create 
an encrypted, electronic image of each check, and then transmit the 
images rapidly from one area of the country to another. Consumers who 
wish to receive copies of their checks for record keeping purposes or 
who are investigating bank errors or possible fraud may receive printed 
copies of these electronic images. According to the Federal bank 
regulatory agencies, they have received few, if any, complaints from 
bank consumers who currently do not have their original checks returned 
with their monthly statements and use imaged copies of checks to 
dispute payments. Moreover, the Check 21 Act will not alter present law 
requiring banks to maintain copies of checks for seven years.
  The widespread adoption of check truncation and electronic imaging 
will reduce the dependence of the check processing system on 
transportation and will increase the resiliency of the financial system 
to terrorist attacks or other unforeseen events. In addition, the 
banking industry has indicated that the legislation has the potential 
to make deposited funds available to the consumer more quickly. With 
increased efficiency through electronic check transmission, banks have 
also indicated that they will be able to reduce processing time and may 
be able to more quickly identify check fraud and bank errors. Moreover, 
in certain cases where a consumer's account is improperly charged, the 
legislation provides for expedited recrediting of the account.
  Important consumer protections were maintained during the development 
of this check truncation legislation in the Senate. I appreciate 
Chairman Shelby's responsiveness to many of my concerns regarding 
consumer protections and ensuring that consumers enjoy some of the 
benefits of the legislation. I am also pleased that the House Conferees 
agreed to incorporate the Senate's consumer protection provisions in 
the Conference Report.
  First, the conference report contains statutory language clarifying 
that the comparative negligence language in the bill is not intended to 
reduce the rights of consumers under the Uniform Commercial Code or 
other applicable state or federal law. The report language in the 
Senate bill further clarifies that in the absence of fraud or bad 
faith, the comparative negligence provisions would generally not be 
applicable to consumer check users.
  Second, the Check 21 Act establishes, for the first time, the right 
of expedited recredit for improper check charges to a consumer's bank 
account. Pursuant to Section 7 of the legislation, certain consumers 
are given a right to expedited recredit within 10 days for the amount 
of a substitute check--under $2,500--that is improperly charged to the 
consumer's account. Current check law does not mandate a time frame for 
resolving consumer complaints. A consumer will have 40 days to make a 
claim after the financial institution mails the periodic statement or 
makes the substitute check available. Under extenuating circumstances, 
the financial institution must extend the period for filing a claim by 
a reasonable amount of time.
  Section 7 states that the time for action begins when the financial 
institutions mails or delivers, by any means agreed to by the consumer, 
the periodic statement, or the date on which the substitute check is 
made available to the consumer and Section 12 permits notices to be 
sent to a consumer by any means agreed to by the consumer. However, 
this Act does not address how the agreement referred to in sections 7 
or 12 may occur. That topic is covered by the Electronic Signatures in 
Global and National Commerce Act.
  Third, the conference report contains a Federal Reserve study on the 
appropriateness of the time frame and monetary threshold for expedited 
funds availability. This provision requires the Fed to re-evaluate 
current practices and may lead to the reduction in the amount of time a 
bank may hold a deposited check before making the funds available to 
the consumer.
  Lastly, the conference report contains a General Accounting Office 
study to evaluate an assessment of consumer acceptance of the check 
truncation process, including whether consumers who were receiving 
returned checks prior to the enactment of this legislation incurred any 
new costs; and estimate of the gains in efficiencies made possible by 
this Act; and a determination of consumers' share of total benefits 
derived from this Act.
  I also want to take a moment to recognize those members of the 
Banking Committee staff who devoted so many hours to crafting this 
important and comprehensive legislation. On my staff: Patience 
Singleton and Aaron Klein and on the staff of Chairman Shelby: Peggy 
Kuhn and Doug Nappi.
  I look forward to monitoring the implementation of the Check 21 act 
by the Federal Reserve and the banking industry to ensure that 
consumers benefit from this legislation.
  Mr. BURNS. I ask unanimous consent that the conference report be 
adopted and the statements relating to the conference report be printed 
in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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