[Congressional Record (Bound Edition), Volume 149 (2003), Part 17]
[House]
[Pages 23855-23862]
[From the U.S. Government Publishing Office, www.gpo.gov]




CONFERENCE REPORT ON H.R. 1474, CHECK CLEARING FOR THE 21ST CENTURY ACT

  Mr. OXLEY submitted the following conference report and statement on 
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:

                  Conference Report (H. Rept. 108-291)

       The committee of conference on the disagreeing votes of the 
     two Houses on the amendment of the Senate to the bill (H.R. 
     1474), to facilitate check truncation by authorizing 
     substitute checks, to foster innovation in the check 
     collection system without mandating receipt of checks in 
     electronic form, and to improve the overall efficiency of the 
     Nation's payments system, and for other purposes, having met, 
     after full and free conference, have agreed to recommend and 
     do recommend to their respective Houses as follows:
       That the House recede from its disagreement to the 
     amendment of the Senate and agree to the same with an 
     amendment as follows:
       In lieu, of the matter proposed to be inserted by the 
     Senate amendment, insert the following:

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Check 
     Clearing for the 21st Century Act'' or the ``Check 21 Act''.
         (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings; purposes.
Sec. 3. Definitions.
Sec. 4. General provisions governing substitute checks.
Sec. 5. Substitute check warranties.
Sec. 6. Indemnity.
Sec. 7. Expedited recredit for consumers.
Sec. 8. Expedited recredit procedures for banks.
Sec. 9. Delays in an emergency.
Sec. 10. Measure of damages.
Sec. 11. Statute of limitations and notice of claim.
Sec. 12. Consumer awareness.
Sec. 13. Effect on other law.
Sec. 14. Variation by agreement.
Sec. 15. Regulations.
Sec. 16. Study and report on funds availability.
Sec. 17. Statistical reporting of costs and revenues for transporting 
              checks between Federal Reserve banks.
Sec. 18. Evaluation and report by the Comptroller General.
Sec. 19. Depositary services efficiency and cost reduction.
Sec. 20. Effective date.

     SEC. 2. FINDINGS; PURPOSES.

       (a) Findings.--The Congress finds as follows:
       (1) In the Expedited Funds Availability Act, enacted on 
     August 10, 1987, the Congress directed the Board of Governors 
     of the Federal Reserve System to consider establishing 
     regulations requiring Federal reserve banks and depository 
     institutions to provide for check truncation, in order to 
     improve the check processing system.
       (2) In that same Act, the Congress--
       (A) provided the Board of Governors of the Federal Reserve 
     System with full authority to regulate all aspects of the 
     payment system, including the receipt, payment, collection, 
     and clearing of checks, and related functions of the payment 
     system pertaining to checks; and
       (B) directed that the exercise of such authority by the 
     Board superseded any State law, including the Uniform 
     Commercial Code, as in effect in any State.
       (3) Check truncation is no less desirable in 2003 for both 
     financial service customers and the financial services 
     industry, to reduce costs, improve efficiency in check 
     collections, and expedite funds availability for customers 
     than it was over 15 years ago when Congress first directed 
     the Board to consider establishing such a process.
       (b) Purposes.--The purposes of this Act are as follows:
       (1) To facilitate check truncation by authorizing 
     substitute checks.
       (2) To foster innovation in the check collection system 
     without mandating receipt of checks in electronic form.
       (3) To improve the overall efficiency of the Nation's 
     payments system.

     SEC. 3. DEFINITIONS.

        For purposes of this Act, the following definitions shall 
     apply:
       (1) Account.--The term ``account'' means a deposit account 
     at a bank.
       (2) Bank.--The term ``bank'' means any person that is 
     located in a State and engaged in the business of banking and 
     includes--
       (A) any depository institution (as defined in section 
     19(b)(1)(A) of the Federal Reserve Act);
       (B) any Federal reserve bank;
       (C) any Federal home loan bank; or
       (D) to the extent it acts as a pay or--
       (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) Collecting bank.--The term ``collecting bank'' means 
     any bank handling a check for collection except the paying 
     bank.
       (B) Depositary bank.--The term ``depositary bank'' means--
       (i) the first bank to which a check is transferred, even if 
     such bank is also the paying bank or the payee; or
       (ii) a bank to which a check is transferred for deposit in 
     an account at such bank, even if the check is physically 
     received and indorsed first by another bank.
       (C) Paying bank.--The term ``paying bank'' means--
       (i) the bank by which a check is payable, unless the check 
     is payable at or through another bank and is sent to the 
     other bank for payment or collection; or
       (ii) the bank at or through which a check is payable and to 
     which the check is sent for payment or collection.
       (D) Returning bank.--
       (i) In general.--The term ``returning bank'' means a bank 
     (other than the paying or depositary bank) handling a 
     returned check or notice in lieu of return.
       (ii) Treatment as collecting bank.--No provision of this 
     Act shall be construed as affecting the treatment of a 
     returning bank as a collecting bank for purposes of section 
     4-202(b) of the Uniform Commercial Code.
       (4) Board.--The term ``Board'' means the Board of Governors 
     of the Federal Reserve System.
       (5) Business day.--The term ``business day'' has the same 
     meaning as in section 602(3) of the Expedited Funds 
     Availability Act.
       (6) Check.--The term ``check''--
       (A) means a draft, payable on demand and drawn on or 
     payable through or at an office of a bank, whether or not 
     negotiable, that is handled for forward collection or return, 
     including a substitute check and a travelers check; and
       (B) does not include a noncash item or an item payable in a 
     medium other than United States dollars.
       (7) Consumer.--The term ``consumer'' means an individual 
     who--
       (A) with respect to a check handled for forward collection, 
     draws the check on a consumer account; or
       (B) with respect to a check handled for return, deposits 
     the check into, or cashes the check against, a consumer 
     account.
       (8) Consumer account.--The term ``consumer account'' has 
     the same meaning as in section 602(10) of the Expedited Funds 
     Availability Act.

[[Page 23856]]

       (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 terms ``MICR line'' and ``magnetic ink 
     character recognition line'' mean the numbers, which may 
     include the bank routing number, account number, check 
     number, check amount, and other information, that are printed 
     near the bottom of a check in magnetic ink in accordance with 
     generally applicable industry standards.
       (13) Noncash item.--The term ``noncash item'' has the same 
     meaning as in section 602(14) of the Expedited Funds 
     Availability Act.
       (14) Person.--The term ``person'' means a natural person, 
     corporation, unincorporated company, partnership, government 
     unit or instrumentality, trust, or any other entity or 
     organization.
       (15) Reconverting bank.--The term ``reconverting bank'' 
     means--
       (A) the bank that creates a substitute check; or
       (B) if a substitute check is created by a person other than 
     a bank, the first bank that transfers or presents such 
     substitute check.
       (16) Substitute check.--The term ``substitute check'' means 
     a paper reproduction of the original check that--
       (A) contains an image of the front and back of the original 
     check;
       (B) bears a MICR line containing all the information 
     appearing on the MICR line of the original check, except as 
     provided under generally applicable industry standards for 
     substitute checks to facilitate the processing of substitute 
     checks;
       (C) conforms, in paper stock, dimension, and otherwise, 
     with generally applicable industry standards for substitute 
     checks; and
       (D) is suitable for automated processing in the same manner 
     as the original check.
       (17) State.--The term ``State'' has the same meaning as in 
     section 3(a) of the Federal Deposit Insurance Act.
       (18) Truncate.--The term ``truncate'' means to remove an 
     original paper check from the check collection or return 
     process and send to a recipient, in lieu of such original 
     paper check, a substitute check or, by agreement, information 
     relating to the original check (including data taken from the 
     MICR line of the original check or an electronic image of the 
     original check), whether with or without subsequent delivery 
     of the original paper check.
       (19) Uniform commercial code.--The term ``Uniform 
     Commercial Code'' means the Uniform Commercial Code in effect 
     in a State.
       (20) Other terms.--Unless the context requires otherwise, 
     the terms not defined in this section shall have the same 
     meanings as in the Uniform Commercial Code.

     SEC. 4. GENERAL PROVISIONS GOVERNING SUBSTITUTE CHECKS.

       (a) No Agreement Required.--A person may deposit, present, 
     or send for collection or return a substitute check without 
     an agreement with the recipient, so long as a bank has made 
     the warranties in section 5 with respect to such substitute 
     check.
       (b) Legal Equivalence.--A substitute check shall be the 
     legal equivalent of the original check for all purposes, 
     including any provision of any Federal or State law, and for 
     all persons if the substitute check--
       (1) accurately represents all of the information on the 
     front and back of the original check as of the time the 
     original check was truncated; and
       (2) bears the legend: ``This is a legal copy of your check. 
     You can use it the same way you would use the original 
     check.''.
       (c) Endorsements.--A bank shall ensure that the substitute 
     check for which the bank is the reconverting bank bears all 
     endorsements applied by parties that previously handled the 
     check (whether in electronic form or in the form of the 
     original paper check or a substitute check) for forward 
     collection or return.
       (d) Identification of Reconverting Bank.--A bank shall 
     identify itself as a reconverting bank on any substitute 
     check for which the bank is a reconverting bank so as to 
     preserve any previous reconverting bank identifications in 
     conformance with generally applicable industry standards.
       (e) Applicable Law.--A substitute check that is the legal 
     equivalent of the original check under subsection (b) shall 
     be subject to any provision, including any provision relating 
     to the protection of customers, of part 229 of title 12 of 
     the Code of Federal Regulations, the Uniform Commercial Code, 
     and any other applicable Federal or State law as if such 
     substitute check were the original check, to the extent such 
     provision of law is not inconsistent with this Act.

     SEC. 5. SUBSTITUTE CHECK WARRANTIES.

       A bank that transfers, presents, or returns a substitute 
     check and receives consideration for the check warrants, as a 
     matter of law, to the transferee, any subsequent collecting 
     or returning bank, the depositary bank, the drawee, the 
     drawer, the payee, the depositor, and any endorser 
     (regardless of whether the warrantee receives the substitute 
     check or another paper or electronic form of the substitute 
     check or original check) that--
       (1) the substitute check meets all the requirements for 
     legal equivalence under section 4(b); and
       (2) no depositary bank, drawee, drawer, or endorser will 
     receive presentment or return of the substitute check, the 
     original check, or a copy or other paper or electronic 
     version of the substitute check or original check such that 
     the bank, drawee, drawer, or endorser will be asked to make a 
     payment based on a check that the bank, drawee, drawer, or 
     endorser has already paid.

     SEC. 6. INDEMNITY.

       (a) Indemnity.--A reconverting bank and each bank that 
     subsequently transfers, presents, or returns a substitute 
     check in any electronic or paper form, and receives 
     consideration for such transfer, presentment, or return shall 
     indemnify the transferee, any subsequent collecting or 
     returning bank, the depositary bank, the drawee, the drawer, 
     the payee, the depositor, and any endorser, up to the amount 
     described in subsections (b) and (c), as applicable, to the 
     extent of any loss incurred by any recipient of a substitute 
     check if that loss occurred due to the receipt of a 
     substitute check instead of the original check.
       (b) Indemnity Amount.--
       (1) Amount in event of breach of warranty.--The amount of 
     the indemnity under subsection (a) shall be the amount of any 
     loss (including costs and reasonable attorney's fees and 
     other expenses of representation) proximately caused by a 
     breach of a warranty provided under section 5.
       (2) Amount in absence of breach of warranty.--In the 
     absence of a breach of a warranty provided under section 5, 
     the amount of the indemnity under subsection (a) shall be the 
     sum of--
       (A) the amount of any loss, up to the amount of the 
     substitute check; and
       (B) interest and expenses (including costs and reasonable 
     attorney's fees and other expenses of representation).
       (c) Comparative Negligence.--
       (1) In general.--If a loss described in subsection (a) 
     results in whole or in part from the negligence or failure to 
     act in good faith on the part of an indemnified party, then 
     that party's indemnification under this section shall be 
     reduced in proportion to the amount of negligence or bad 
     faith attributable to that party.
       (2) Rule of construction.--Nothing in this subsection 
     reduces the rights of a consumer or any other person under 
     the Uniform Commercial Code or other applicable provision of 
     Federal or State law.
       (d) Effect of Producing Original Check or Copy.--
       (1) In general.--If the indemnifying bank produces the 
     original check or a copy of the original check (including an 
     image or a substitute check) that accurately represents all 
     of the information on the front and back of the original 
     check (as of the time the original check was truncated) or is 
     otherwise sufficient to determine whether or not a claim is 
     valid, the indemnifying bank shall--
       (A) be liable under this section only for losses covered by 
     the indemnity that are incurred up to the time that the 
     original check or copy is provided to the indemnified party; 
     and
       (B) have a right to the return of any funds it has paid 
     under the indemnity in excess of those losses.
       (2) Coordination of indemnity with implied warranty.--The 
     production of the original check, a substitute check, or a 
     copy under paragraph (1) by an indemnifying bank shall not 
     absolve the bank from any liability on a warranty established 
     under this Act or any other provision of law.
       (e) Subrogation of Rights.--
       (1) In general.--Each indemnifying bank shall be subrogated 
     to the rights of any indemnified party to the extent of the 
     indemnity.
       (2) Recovery under warranty.--A bank that indemnifies a 
     party under this section may attempt to recover from another 
     party based on a warranty or other claim.
       (3) Duty of indemnified party.--Each indemnified party 
     shall have a duty to comply with all reasonable requests for 
     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. 7. EXPEDITED RECREDIT FOR CONSUMERS.

       (a) Recredit Claims.--
       (1) In general.--A consumer may make a claim for expedited 
     recredit from the bank that holds the account of the consumer 
     with respect to a substitute check, if the consumer asserts 
     in good faith that--
       (A) the bank charged the consumer's account for a 
     substitute check that was provided to the consumer;
       (B) either--
       (i) the check was not properly charged to the consumer's 
     account; or
       (ii) the consumer has a warranty claim with respect to such 
     substitute check;
       (C) the consumer suffered a resulting loss; and
       (D) the production of the original check or a better copy 
     of the original check is necessary to determine the validity 
     of any claim described in subparagraph (B).
       (2) 40-day period.--Any claim under paragraph (1) with 
     respect to a consumer account may be submitted by a consumer 
     before the end of the 40-day period beginning on the later 
     of--
       (A) the date on which the financial institution mails or 
     delivers, by a means agreed to by the consumer, the periodic 
     statement of account for such account which contains 
     information concerning the transaction giving rise to the 
     claim; or
       (B) the date on which the substitute check is made 
     available to the consumer.

[[Page 23857]]

       (3) Extension under extenuating circumstances.--If the 
     ability of the consumer to submit the claim within the 40-day 
     period under paragraph (2) is delayed due to extenuating 
     circumstances, including extended travel or the illness of 
     the consumer, the 40-day period shall be extended by a 
     reasonable amount of time.
       (b) Procedures for Claims.--
       (1) In general.--To make a claim for an expedited recredit 
     under subsection (a) with respect to a substitute check, the 
     consumer shall provide to the bank that holds the account of 
     such consumer--
       (A) a description of the claim, including an explanation 
     of--
       (i) why the substitute check was not properly charged to 
     the consumer's account; or
       (ii) the warranty claim with respect to such check;
       (B) a statement that the consumer suffered a loss and an 
     estimate of the amount of the loss;
       (C) the reason why production of the original check or a 
     better copy of the original check is necessary to determine 
     the validity of the charge to the consumer's account or the 
     warranty claim; and
       (D) sufficient information to identify the substitute check 
     and to investigate the claim.
       (2) Claim in writing.--
       (A) In general.--The bank holding the consumer account that 
     is the subject of a claim by the consumer under subsection 
     (a) may, in the discretion of the bank, require the consumer 
     to submit the information required under paragraph (1) in 
     writing.
       (B) Means of submission.--A bank that requires a submission 
     of information under subparagraph (A) may permit the consumer 
     to make the submission electronically, if the consumer has 
     agreed to communicate with the bank in that manner.
       (c) Recredit to Consumer.--
       (1) Conditions for recredit.--The bank shall recredit a 
     consumer account in accordance with paragraph (2) for the 
     amount of a substitute check that was charged against the 
     consumer account if--
       (A) a consumer submits a claim to the bank with respect to 
     that substitute check that meets the requirement of 
     subsection (b); and
       (B) the bank has not--
       (i) provided to the consumer--

       (I) the original check; or
       (II) a copy of the original check (including an image or a 
     substitute check) that accurately represents all of the 
     information on the front and back of the original check, as 
     of the time at which the original check was truncated; and

       (ii) demonstrated to the consumer that the substitute check 
     was properly charged to the consumer account.
       (2) Timing of recredit.--
       (A) In general.--The bank shall recredit the consumer's 
     account for the amount described in paragraph (1) no later 
     than the end of the business day following the business day 
     on which the bank determines the consumer's claim is valid.
       (B) Recredit pending investigation.--If the bank has not 
     yet determined that the consumer's claim is valid before the 
     end of the 10th business day after the business day on which 
     the consumer submitted the claim, the bank shall recredit the 
     consumer's account for--
       (i) the lesser of the amount of the substitute check that 
     was charged against the consumer account, or $2,500, together 
     with interest if the account is an interest-bearing account, 
     no later than the end of such 10th business day; and
       (ii) the remaining amount of the substitute check that was 
     charged against the consumer account, if any, together with 
     interest if the account is an interest-bearing account, not 
     later than the 45th calendar day following the business day 
     on which the consumer submits the claim.
       (d) Availability of Recredit.--
       (1) Next business day availability.--Except as provided in 
     paragraph (2), a bank that provides a recredit to a consumer 
     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 or a copy of the original check 
     (including an image or a substitute check) that--
       (i) accurately represents all of the information on the 
     front and back of the original check (as of the time the 
     original check was truncated); or
       (ii) is otherwise sufficient to determine whether or not 
     the consumer's claim is valid; and
       (B) an explanation of the basis for the determination by 
     the bank that the substitute check was properly charged, 
     including a statement that the consumer may request copies of 
     any information or documents on which the bank relied in 
     making the determination.
       (2) Notice of recredit.--If a bank recredits a consumer 
     account under subsection (c), the bank shall send to the 
     consumer, no later than the business day following the 
     business day on which the bank makes the recredit, a notice 
     of--
       (A) the amount of the recredit; and
       (B) the date the recredited funds will be available for 
     withdrawal.
       (3) Notice of reversal of recredit.--In addition to the 
     notice required under paragraph (1), if a bank reverses a 
     recredited amount under subsection (e), the bank shall send 
     to the consumer, no later than the business day following the 
     business day on which the bank reverses the recredit, a 
     notice of--
       (A) the amount of the reversal; and
       (B) the date the recredit was reversed.
       (4) Mode of delivery.--A notice described in this 
     subsection shall be delivered by United States mail or by any 
     other means through which the consumer has agreed to receive 
     account information.
       (g) Other Claims Not Affected.--Providing a recredit in 
     accordance with this section shall not absolve the bank from 
     liability for a claim made under any other law, such as a 
     claim for wrongful dishonor under the Uniform Commercial 
     Code, or from liability for additional damages under section 
     6 or 10.
       (h) Clarification Concerning Consumer Possession.--A 
     consumer who was provided a substitute check may make a claim 
     for an expedited recredit under this section with regard to a 
     transaction involving the substitute check whether or not the 
     consumer is in possession of the substitute check.
       (i) Scope of Application.--This section shall only apply to 
     customers who are consumers.

     SEC. 8. EXPEDITED RECREDIT PROCEDURES FOR BANKS.

       (a) Recredit Claims.--
       (1) In general.--A bank may make a claim against an 
     indemnifying bank for expedited recredit for which that bank 
     is indemnified if--
       (A) the claimant bank (or a bank that the claimant bank has 
     indemnified) has received a claim for expedited recredit from 
     a consumer under section 7 with respect to a substitute check 
     or would have been subject to such a claim had the consumer's 
     account been charged;
       (B) the claimant bank has suffered a resulting loss or is 
     obligated to recredit a consumer account under section 7 with 
     respect to such substitute check; and
       (C) production of the original check, another substitute 
     check, or a better copy of the original check is necessary to 
     determine the validity of the charge to the customer account 
     or any warranty claim connected with such substitute check.
       (2) 120-day period.--Any claim under paragraph (1) may be 
     submitted by the claimant bank to an indemnifying bank before 
     the end of the 120-day beginning on the date of the 
     transaction that gave rise to the claim.
       (b) Procedures for Claims.--
       (1) In general.--To make a claim under subsection (a) for 
     an expedited recredit relating to a substitute check, the 
     claimant bank shall send to the indemnifying bank--
       (A) a description of--
       (i) the claim, including an explanation of why the 
     substitute check cannot be properly charged to the consumer 
     account; or
       (ii) the warranty claim;
       (B) a statement that the claimant bank has suffered a loss 
     or is obligated to recredit the consumer's account under 
     section 7, together with an estimate of the amount of the 
     loss or recredit;
       (C) the reason why production of the original check, 
     another substitute check, or a better copy of the original 
     check is necessary to determine the validity of the charge to 
     the consumer account or the warranty claim; and

[[Page 23858]]

       (D) information sufficient for the indemnifying bank to 
     identify the substitute check and to investigate the claim.
       (2) Requirements relating to copies of substitute checks.--
     If the information submitted by a claimant bank pursuant to 
     paragraph (1) in connection with a claim for an expedited 
     recredit includes a copy of any substitute check for which 
     any such claim is made, the claimant bank shall take 
     reasonable steps to ensure that any such copy cannot be--
       (A) mistaken for the legal equivalent of the check under 
     section 4(b); or
       (B) sent or handled by any bank, including the indemnifying 
     bank, as a forward collection or returned check.
       (3) Claim in writing.--
       (A) In general.--An indemnifying bank may, in the 
     discretion of the bank, require the claimant bank to submit 
     the information required by paragraph (1) in writing, 
     including a copy of the written or electronically submitted 
     claim, if any, that the consumer provided in accordance with 
     section 7(b).
       (B) Means of submission.--An indemnifying bank that 
     requires a submission of information under subparagraph (A) 
     may permit the claimant bank to make the submission 
     electronically, if the claimant bank has agreed to 
     communicate with the indemnifying bank in that manner.
       (c) Recredit by Indemnifying Bank.--
       (1) Prompt action required.--No later than 10 business days 
     after the business day on which an indemnifying bank receives 
     a claim under subsection (a) from a claimant bank with 
     respect to a substitute check, the indemnifying bank shall--
       (A) provide, to the claimant bank, the original check (with 
     respect to such substitute check) or a copy of the original 
     check (including an image or a substitute check) that--
       (i) accurately represents all of the information on the 
     front and back of the original check (as of the time the 
     original check was truncated); or
       (ii) is otherwise sufficient to determine the bank's claim 
     is not valid; and
       (B) recredit the claimant bank for the amount of the claim 
     up to the amount of the substitute check, plus interest if 
     applicable; or
       (C) provide information to the claimant bank as to why the 
     indemnifying bank is not obligated to comply with 
     subparagraph (A) or (B).
       (2) Recredit does not abrogate other liabilities.--
     Providing a recredit under this subsection to a claimant bank 
     with respect to a substitute check shall not absolve the 
     indemnifying bank from liability for claims brought under any 
     other law or from additional damages under section 6 or 10 
     with respect to such check.
       (3) Refund to indemnifying bank.--If a claimant bank 
     reverses, in accordance with section 7(e), a recredit 
     previously made to a consumer account under section 7(c), or 
     otherwise receives a credit or recredit with regard to such 
     substitute check, the claimant bank shall promptly refund to 
     any indemnifying bank any amount previously advanced by the 
     indemnifying bank in connection with such substitute check.
       (d) Production of Original Check or a Sufficient Copy 
     Governed by Section 6(d).--If the indemnifying bank provides 
     the claimant bank with the original check or a copy of the 
     original check (including an image or a substitute check) 
     under subsection (c)(1)(A), section 6(d) shall govern any 
     right of the indemnifying bank to any repayment of any funds 
     the indemnifying bank has recredited to the claimant bank 
     pursuant to subsection (c).

     SEC. 9. DELAYS IN AN EMERGENCY.

       A delay by a bank beyond the time limits prescribed or 
     permitted by this Act shall be excused if the delay is caused 
     by interruption of communication or computer facilities, 
     suspension of payments by another bank, war, emergency 
     conditions, failure of equipment, or other circumstances 
     beyond the control of a bank and if the bank uses such 
     diligence as the circumstances require.

     SEC. 10. MEASURE OF DAMAGES.

       (a) Liability.--
       (1) In general.--Except as provided in section 6, any 
     person who, in connection with a substitute check, breaches 
     any warranty under this Act or fails to comply with any 
     requirement imposed by, or regulation prescribed pursuant to, 
     this Act with respect to any other person shall be liable to 
     such person in an amount equal to the sum of--
       (A) the lesser of--
       (i) the amount of the loss suffered by the other person as 
     a result of the breach or failure; or
       (ii) the amount of the substitute check; and
       (B) interest and expenses (including costs and reasonable 
     attorney's fees and other expenses of representation) related 
     to the substitute check.
       (2) Offset of recredits.--The amount of damages any person 
     receives under paragraph (1), if any, shall be reduced by the 
     amount, if any, that the claimant receives and retains as a 
     recredit under section 7 or 8.
       (b) Comparative Negligence.--
       (1) In general.--If a person incurs damages that resulted 
     in whole or in part from the negligence or failure of that 
     person to act in good faith, then the amount of any liability 
     due to that person under subsection (a) shall be reduced in 
     proportion to the amount of negligence or bad faith 
     attributable to that person.
       (2) Rule of construction.--Nothing in this subsection 
     reduces the rights of a consumer or any other person under 
     the Uniform Commercial Code or other applicable provision of 
     Federal or State law.

     SEC. 11. STATUTE OF LIMITATIONS AND NOTICE OF CLAIM.

       (a) Actions Under This Act.--
       (1) In general.--An action to enforce a claim under this 
     Act may be brought in any United States district court, or in 
     any other court of competent jurisdiction, before the end of 
     the 1-year period beginning on the date the cause of action 
     accrues.
       (2) Accrual.--A cause of action accrues as of the date the 
     injured party first learns, or by which such person 
     reasonably should have learned, of the facts and 
     circumstances giving rise to the cause of action.
       (b) Discharge of Claims.--Except as provided in subsection 
     (c), unless a person gives notice of a claim to the 
     indemnifying or warranting bank within 30 days after the 
     person has reason to know of the claim and the identity of 
     the indemnifying or warranting bank, the indemnifying or 
     warranting bank is discharged from liability in an action to 
     enforce a claim under this Act to the extent of any loss 
     caused by the delay in giving notice of the claim.
       (c) Notice of Claim by Consumer.--A timely claim by a 
     consumer under section 7 for expedited recredit constitutes 
     timely notice of a claim by the consumer for purposes of 
     subsection (b).

     SEC. 12. CONSUMER AWARENESS.

       (a) In General.--Each bank shall provide, in accordance 
     with subsection (b), a brief notice about substitute checks 
     that describes--
       (1) how a substitute check is the legal equivalent of an 
     original check for all purposes, including any provision of 
     any Federal or State law, and for all persons, if the 
     substitute check--
       (A) accurately represents all of the information on the 
     front and back of the original check as of the time at which 
     the original check was truncated; and
       (B) bears the legend: `This is a legal copy of your check. 
     You can use it in the same way you would use the original 
     check.'; and
       (2) the consumer recredit rights established under section 
     7 when a consumer believes in good faith that a substitute 
     check was not properly charged to the account of the 
     consumer.
       (b) Distribution.--
       (1) Existing customers.--With respect to consumers who are 
     customers of a bank on the effective date of this Act and who 
     receive original checks or substitute checks, a bank shall 
     provide the notice described in subsection (a) to each such 
     consumer no later than the first regularly scheduled 
     communication with the consumer after the effective date of 
     this Act.
       (2) New account holders.--A bank shall provide the notice 
     described in subsection (a) to each consumer who will receive 
     original checks or substitute checks, other than existing 
     customers referred to in paragraph (1), at the time at which 
     the customer relationship is initiated.
       (3) Mode of delivery.--A bank may send the notices required 
     by this subsection by United States mail or by any other 
     means through which the consumer has agreed to receive 
     account information.
       (4) Consumers who request copies of checks.--Notice shall 
     be provided to each consumer of the bank that requests a copy 
     of a check and receives a substitute check, at the time of 
     the request.
       (c) Model Language.--
       (1) In general.--Before the end of the 9-month period 
     beginning on the date of the enactment of this Act, the Board 
     shall publish model forms and clauses that a bank may use to 
     describe each of the elements required by subsection (a).
       (2) Safe harbor.--
       (A) In general.--A bank shall be treated as being in 
     compliance with the requirements of subsection (a) if the 
     bank's substitute check notice uses a model form or clause 
     published by the Board and such model form or clause 
     accurately describes the bank's policies and practices.
       (B) Deletion or rearrangement.--A bank may delete any 
     information in the model form or clause that is not required 
     by this Act or rearrange the format.
       (3) Use of model language not required.--This section shall 
     not be construed as requiring any bank to use a model form or 
     clause that the Board prepares under this subsection.

     SEC. 13. EFFECT ON OTHER LAW.

        This Act shall supersede any provision of Federal or State 
     law, including the Uniform Commercial Code, that is 
     inconsistent with this Act, but only to the extent of the 
     inconsistency.

     SEC. 14. VARIATION BY AGREEMENT.

       (a) Section 8.--Any provision of section 8 may be varied by 
     agreement of the banks involved.
       (b) No Other Provisions May Be Varied.--Except as provided 
     in subsection (a), no provision of this Act may be varied by 
     agreement of any person or persons.

     SEC. 15. REGULATIONS.

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

     SEC. 16. STUDY AND REPORT ON FUNDS AVAILABILITY.

       (a) Study.--In order to evaluate the implementation and the 
     impact of this Act, the Board shall conduct a study of--
       (1) the percentage of total checks cleared in which the 
     paper check is not returned to the paying bank;
       (2) the extent to which banks make funds available to 
     consumers for local and nonlocal checks prior to the 
     expiration of maximum hold periods;
       (3) the length of time within which depositary banks learn 
     of the nonpayment of local and nonlocal checks;

[[Page 23859]]

       (4) the increase or decrease in check-related losses over 
     the study period; and
       (5) the appropriateness of the time periods and amount 
     limits applicable under sections 603 and 604 of the Expedited 
     Funds Availability Act, as in effect on the date of enactment 
     of this Act.
       (b) Report to Congress.--Before the end of the 30-month 
     period beginning on the effective date of this Act, the Board 
     shall submit a report to the Congress containing the results 
     of the study conducted under this section, together with 
     recommendations for legislative action.

     SEC. 17. STATISTICAL REPORTING OF COSTS AND REVENUES FOR 
                   TRANSPORTING CHECKS BETWEEN RESERVE BANKS.

       In the annual report prepared by the Board for the first 
     full calendar year after the date of enactment of this Act 
     and in each of the 9 subsequent annual reports by the Board, 
     the Board shall include the amount of operating costs 
     attributable to, and an estimate of the Federal Reserve 
     banks' imputed revenues derived from, the transportation of 
     commercial checks between Federal Reserve bank check 
     processing centers.

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

       (a) Study.--During the 5-year period beginning on the date 
     of the enactment of this Act, the Comptroller General of the 
     United States shall evaluate the implementation and 
     administration of this Act, including--
       (1) an estimate of the gains in economic efficiency made 
     possible from check truncation;
       (2) an evaluation of the benefits accruing to consumers and 
     financial institutions from reduced transportation costs, 
     longer hours for accepting deposits for credit within 1 
     business day, the impact of fraud losses, and an estimate of 
     consumers' share of the total benefits derived from this Act; 
     and
       (3) an assessment of consumer acceptance of the check 
     truncation process resulting from this Act, as well as any 
     new costs incurred by consumers who had their original checks 
     returned with their regular monthly statements prior to the 
     date of enactment of this Act.
       (b) Report to Congress.--Before the end of the 5-year 
     period referred to in subsection (a), the Comptroller General 
     shall submit a report to the Congress containing the findings 
     and conclusions of the Comptroller General in connection with 
     the evaluation conducted pursuant to subsection (a), together 
     with such recommendations for legislative and administrative 
     action as the Comptroller General may determine to be 
     appropriate.

     SEC. 19. DEPOSITARY SERVICES EFFICIENCY AND COST REDUCTION.

       (a) Findings.--The Congress finds as follows:
       (1) The Secretary of the Treasury has long compensated 
     financial institutions for various critical depositary and 
     financial agency services provided for or on behalf of the 
     United States by--
       (A) placing large balances, commonly referred to as 
     ``compensating balances'', on deposit at such institutions; 
     and
       (B) using imputed interest on such funds to offset charges 
     for the various depositary and financial agency services 
     provided to or on behalf of the Government.
       (2) As a result of sharp declines in interest rates over 
     the last few years to record low levels, or the public debt 
     outstanding reaching the statutory debt limit, the Department 
     of the Treasury often has had to dramatically increase or 
     decrease the size of the compensating balances on deposit at 
     these financial institutions.
       (3) The fluctuation of the compensating balances, and the 
     necessary pledging of collateral by financial institutions to 
     secure the value of compensating balances placed with those 
     institutions, have created unintended financial uncertainty 
     for the Secretary of the Treasury and for the management by 
     financial institutions of their cash and securities.
       (4) It is imperative that the process for providing 
     financial services to the Government be transparent, and 
     provide the information necessary for the Congress to 
     effectively exercise its appropriation and oversight 
     responsibilities.
       (5) The use of direct payment for services rendered would 
     strengthen cash and debt management responsibilities of the 
     Secretary of the Treasury because the Secretary would no 
     longer need to dramatically increase or decrease the level of 
     such balances when interest rates fluctuate sharply or when 
     the public debt outstanding reaches the statutory debt limit.
       (6) An alternative to the use of compensating balances, 
     such as direct payments to financial institutions, would 
     ensure that payments to financial institutions for the 
     services they provide would be made in a more predictable 
     manner and could result in cost savings.
       (7) Limiting the use of compensating balances could result 
     in a more direct and cost-efficient method of obtaining those 
     services currently provided under compensating balance 
     arrangements.
       (8) A transition from the use of compensating balances to 
     another compensation method must be carefully managed to 
     prevent higher-than-necessary transitional costs and enable 
     participating financial institutions to modify their planned 
     investment of cash and securities.
       (b) Authorization of Appropriations For Services Rendered 
     by Depositaries and Financial Agencies of the United 
     States.--There are authorized to be appropriated for fiscal 
     years beginning after fiscal year 2003 to the Secretary of 
     the Treasury such sums as may be necessary for reimbursing 
     financial institutions in their capacity as depositaries and 
     financial agents of the United States for all services 
     required or directed by the Secretary of the Treasury, or a 
     designee of the Secretary, to be performed by such financial 
     institutions on behalf of the Secretary of the Treasury or 
     another Federal agency, including services rendered before 
     fiscal year 2004.
       (c) Orderly Transition.--
       (1) In general.--As appropriations authorized in subsection 
     (b) become available, the Secretary of the Treasury shall 
     promptly begin the process of phasing in the use of the 
     appropriations to pay financial institutions serving as 
     depositaries and financial agents of the United States, and 
     transitioning from the use of compensating balances to fund 
     these services.
       (2) Post-transition use limited to extraordinary 
     circumstances.--
       (A) In general.--Following the transition to the use of the 
     appropriations authorized in subsection (b), the Secretary of 
     the Treasury may use the compensating balances to pay 
     financial institutions serving as depositaries and financial 
     agents of the United States only in extraordinary situations 
     where the Secretary determines that they are needed to ensure 
     the fiscal operations of the Government continue to function 
     in an efficient and effective manner.
       (B) Report.--Any use of compensating balances pursuant to 
     subparagraph (A) shall promptly be reported by the Secretary 
     of the Treasury to the Committee on Financial Services of the 
     House of Representatives and the Committee on Banking, 
     Housing, and Urban Affairs of the Senate.
       (3) Requirements for orderly transition.--In transitioning 
     to the use of the appropriations authorized in subsection 
     (b), the Secretary of the Treasury shall take such steps as 
     may be appropriate to--
       (A) prevent abrupt financial disruption to the functions of 
     the Department of the Treasury or to the participating 
     financial institutions; and
       (B) maintain adequate accounting and management controls to 
     ensure that payments to financial institutions for their 
     banking services provided to the Government as depositaries 
     and financial agents are accurate and that the arrangements 
     last no longer than is necessary.
       (4) Reports required.--
       (A) Annual report.--
       (i) In general.--For each fiscal year, the Secretary of the 
     Treasury shall submit a report to the Congress on the use of 
     compensating balances and on the use of appropriations 
     authorized in subsection (b) during that fiscal year.
       (ii) Inclusion in budget.--The report required under clause 
     (i) may be submitted as part of the budget submitted by the 
     President under section 1105 of the title 31, United States 
     Code, for the following fiscal year and if so, the report 
     shall be submitted concurrently to the Committee on Financial 
     Services of the House of Representatives and the Committee on 
     Banking, Housing, and Urban Affairs of the Senate.
       (B) Final report following transition.--
       (i) In general.--Following completion of the transition 
     from the use of compensating balances to the use of the 
     appropriations authorized in subsection (b) to pay financial 
     institutions for their services as depositaries and financial 
     agents of the United States, the Secretary of the Treasury 
     shall submit a report on the transition to the Committee on 
     Financial Services of the House of Representatives and the 
     Committee on Banking, Housing, and Urban Affairs of the 
     Senate.
       (ii) Contents of report.--The report submitted under clause 
     (i) shall include a detailed analysis of--

       (I) the cost of transition;
       (II) the direct costs of the services being paid from the 
     appropriations authorized in subsection (b); and
       (III) the benefits realized from the use of direct payment 
     for such services, rather than the use of compensating 
     balance arrangements.

       (d) Technical Amendment.--The 2d undesignated paragraph of 
     section 16 of the Federal Reserve Act (12 U.S.C. 412) is 
     amended--
       (1) in the 3d sentence, by inserting ``or any other asset 
     of a Federal reserve bank'' before the period at the end; and
       (2) in the last sentence, by inserting ``, or are otherwise 
     held by or on behalf of,'' after ``in the vaults of''.
       (e) Effective Date.--Notwithstanding section 20, this 
     section shall take effect on the date of the enactment of 
     this Act.

     SEC. 20. EFFECTIVE DATE.

       This Act shall take effect at the end of the 12-month 
     period beginning on the date of the enactment of this Act, 
     except as otherwise specifically provided in this Act.
       And the Senate agree to the same.

     For consideration of the House bill and the Senate amendment, 
     and modifications committed to conference:
     Michael G. Oxley,
     Spencer Bachus,
     Steven C. LaTourette,
     Melissa A. Hart,
     Patrick J. Tiberi,
     Barney Frank,
     Harold E. Ford, Jr.,
                                Managers on the Part of the House.

     Richard C. Shelby,
     Robert F. Bennett,
     Wayne Allard,
     Paul S. Sarbanes,
     Tim Johnson,
                               Managers on the Part of the Senate.

       JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE

       The managers on the part of the House and the Senate at the 
     conference on the disagreeing votes of the two Houses on the 
     amendment of the Senate to the bill (H.R.

[[Page 23860]]

     1474), to facilitate check truncation by authorizing 
     substitute checks, to foster innovation in the check 
     collection system without mandating receipt of checks in 
     electronic form, and to improve the overall efficiency of the 
     Nation's payments system, and for other purposes, submit the 
     following joint statement to the House and the Senate in 
     explanation of the effect of the action agreed upon by the 
     managers and recommended in the accompanying conference 
     report:
       The Senate amendment struck all of the House bill after the 
     enacting clause and inserted a substitute text.
       The House recedes from its disagreement to the amendment of 
     the Senate with an amendment that is a substitute for the 
     House bill and the Senate amendment.
       The Managers on the part of the House and the Senate met on 
     October 1, 2003 (the House chairing), and reconciled the 
     differences between the House bill and the Senate amendment.
       The differences between the House bill, the Senate 
     amendment, and the substitute agreed to in conference are 
     noted below, except for clerical corrections, conforming 
     changes made necessary by agreements reached by the 
     conferees, and minor drafting and clarifying changes.

         Short Title; Table of Contents; Findings and Purposes

     House Bill
       Section 1 of the House bill establishes the short title of 
     the bill, the ``Check Clearing for the 21st Century Act,'' or 
     the ``Check 21 Act'', and provides the findings and purposes 
     of the legislation.
     Senate Amendment
       Section 1 of the Senate amendment provides the short title 
     of the bill, the ``Check Truncation Act of 2003'', and a 
     table of contents. Section 2 of the Senate amendment also 
     provides the findings and purposes of the legislation.
     Conference Agreement
       The Senate recedes to the House.

                              Definitions

     House Bill
       Section 2 of the House bill defines certain terms, 
     including ``substitute check,'' ``reconverting bank,'' 
     ``collecting bank,'' ``depositary bank,'' ``claimant bank,'' 
     and ``truncate.''
     Senate Amendment
       Section 3 of the Senate amendment defines certain terms, 
     including ``indemnifying bank'', ``MICR line'', 
     ``reconverting bank'', ``truncate'' and ``substitute check''.
     Conference Agreement
       The House recedes to the Senate with an amendment removing 
     the definition of ``claimant bank''.

             General Provisions Governing Substitute Checks

     House Bill
       Section 3 of the House bill allows a person to deposit, 
     present, or send for collection or return a substitute check 
     without an agreement with the recipient. This section 
     mandates that a substitute check have the legal equivalence 
     of an original check if the substitute check: (i) accurately 
     represents all of the information on the front and back of 
     the original check at the time the original check was 
     truncated; and (ii) contains the legend ``this is a copy of 
     your check. You can use it the same way you would use the 
     original check.''
       The reconverting bank must ensure that the substitute check 
     bears all the endorsements applied by all of the parties that 
     previously handled the check and must identify itself as the 
     reconverting bank.
     Senate Amendment
       Section 4 of the Senate amendment allows a person to 
     deposit, present or send for collection or return a 
     substitute check without an agreement with the recipient. 
     This section mandates that a substitute check have the legal 
     equivalence of an original check if the substitute check: (i) 
     accurately represents all of the information on the front and 
     back of the original check at the time the original check was 
     truncated; and (ii) contains the legend ``this is a copy of 
     your check. You can use it the same way you would use the 
     original check.''
       The reconverting bank must ensure that the substitute check 
     bears all the endorsements applied by all of the parties that 
     previously handled the check and shall identify itself as the 
     reconverting bank.
     Conference Agreement
       This provision is not in disagreement.

                      Substitute Check Warranties

     House Bill
       Section 4 of the House bill provides that a bank that 
     transfers, presents or returns a substitute check and 
     receives consideration for the check is deemed to have 
     warranted that the substitute check meets all requirements 
     for legal equivalence and that no entity will be asked to 
     make a payment on a check already paid.
     Senate Amendment
       Section 5 of the Senate amendment states that a bank that 
     transfers, presents or returns a substitute check and 
     receives consideration for the check is deemed to have 
     warranted that the substitute check meets all requirements 
     for legal equivalence and that no entity will be asked to 
     make a payment on a check already paid.
     Conference Agreement
       This provision is not in disagreement.

                               Indemnity

     House Bill
       Section 5 of the House bill grants an indemnity to the 
     transferee by a reconverting bank and each bank that 
     subsequently transfers, presents or returns a substitute 
     check and receives consideration for the transfer, 
     presentment, or return up to either the amount of the loss 
     proximately caused by the breach of the warranty provided in 
     section 4 or, in the absence of such a breach, the amount of 
     any loss up to the amount of the substitute check plus any 
     interest or expenses.
       This section also allows for comparative negligence if a 
     loss results in whole or in part from the negligence or 
     failure to act in good faith on the part of the indemnified 
     party, reducing that party's indemnification by the amount of 
     negligence or bad faith.
     Senate Amendment
       Section 6 of the Senate amendment bill grants an indemnity 
     to the transferee by a reconverting bank and each bank that 
     subsequently transfers, presents or returns a substitute 
     check and receives consideration for such transfer, 
     presentment or return up to either the amount of the loss 
     proximately caused by the breach of the warranty provided in 
     section 4 or, in the absence of such a breach, the amount of 
     any loss up to the amount of the substitute check plus any 
     interest or expenses.
       This section also allows for comparative negligence if a 
     loss results in whole or in part from the negligence or 
     failure to act in good faith on the part of the indemnified 
     party, reducing that party's indemnification by the amount of 
     negligence or bad faith. Section 6(c)(2) of this section 
     states that nothing in the comparative negligence provisions 
     of section 6(c)(1) reduces consumer's rights under other 
     laws.
     Conference Agreement
       The House recedes to the Senate.

                    Expedited Recredit for Consumers

     House Bill
       Section 6 of the House bill provides an expedited recredit 
     to a consumer if the consumer asserts that the bank charged 
     the customer's account improperly or the customer has a 
     warranty claim with respect to the substitute check. The 
     customer must show that they suffered a loss and that the 
     production of the original or a better copy of the original 
     is necessary to determine the validity of any claim. This 
     claim must be made within 30 days after receiving their 
     periodic statement and may have an additional 30 days to file 
     a claim under extenuating circumstances. According to this 
     section, if the bank has not determined if the claim is valid 
     within 10 business days, the bank must recredit the lesser of 
     the amount charged, or $2,500 with interest and any remaining 
     amount must be recredited within 45 calendar days. 
     Additionally, a consumer does not have to be in possession of 
     the substitute check in order to make a claim.
     Senate Amendment
       Section 7 of the Senate amendment requires the consumer to 
     make a claim for expedited recredit within 40 days after the 
     bank transmits the periodic statement or receipt of the 
     substitute check, whichever is later. Under extenuating 
     circumstances, including extended travel or illness of the 
     consumer, the bank shall extend the period for a reasonable 
     amount of time.
       Section 7(c)(1)(B) requires that banks do not have to 
     provide copies of documentation relied upon in denying an 
     expedited recredit claim. Instead, a bank must provide a 
     statement of right of the consumer to request such 
     documentation.
     Conference Agreement
       The Conference Agreement consists of the Senate provisions 
     relating to (1) the time period for expedited recredit; (2) 
     the extension of the time period for expedited recredit; and 
     (3) allowing electronic submission of expedited recredit 
     claims. Further, the Conference Agreement provides that, when 
     resolving customer claims, the delivered copy of the original 
     check must read that the check ``accurately represents all 
     the information'' on the original check standard and that the 
     bank does not have to provide copies of documentation relied 
     upon in denying expedited recredit claim. Instead, a bank 
     must provide a statement of the right of the consumer to 
     request such documentation.
       The Conference Agreement also adopts the House provision 
     providing that a consumer who receives a substitute check 
     does not need to currently have the substitute check to make 
     a claim for expedited recredit.

                Expedited Recredit Procedures for Banks

     House Bill
       Section 7 of the House bill permits a bank to make a claim 
     against an indemnifying bank for an expedited recredit if the 
     claimant's customer has made a claim for recredit, the 
     claimant bank has suffered a loss, and production of the 
     original check, a substitute check or a better copy of the 
     check is

[[Page 23861]]

     necessary to determine the validity of the charge. This claim 
     must be made within 120 days of the transaction. This claim 
     must be in writing and must describe the claim and 
     demonstrate a loss.
     Senate Amendment
       Section 8 of the Senate amendment permits a bank to make a 
     claim against an indemnifying bank for an expedited recredit 
     if the claimant's customer has made a claim for recredit, the 
     claimant bank has suffered a loss, and production of the 
     original check, a substitute check or a better copy of the 
     check is necessary to determine the validity of the charge. 
     This claim must be made within 120 days of the transaction. 
     This claim must be in writing and must describe the claim and 
     demonstrate a loss.
     Conference Agreement
       This provision is not in disagreement.

                         Delays in an Emergency

     House Bill
       Section 8 of the House bill permits delays in compliance 
     with the provisions of this legislation if they are caused by 
     circumstances beyond the control of a bank, and if the bank 
     used such diligence as the circumstances require.
     Senate Amendment
       Section 9 of the Senate amendment permits delays in 
     compliance with the provisions of this legislation if they 
     are caused by circumstances beyond the control of a bank, and 
     if the bank used such diligence as the circumstances require.
     Conference Agreement
       This provision is not in disagreement.

                           Measure of Damages

     House Bill
       Section 9 of the House bill makes persons who breach a 
     warranty or fail to comply with the bill, or regulations 
     under the bill, liable for the lesser of the amount of the 
     loss or the amount of the substitute check plus interest and 
     expenses. This section applies a comparative negligence 
     standard for the determination of damages.
     Senate Amendment
       Section 10 of the Senate amendment makes persons who breach 
     a warranty or fail to comply with the bill, or regulations 
     under the bill, liable for the lesser of the amount of the 
     loss or the amount of the substitute check plus interest and 
     expenses. This section applies a comparative negligence 
     standard for the determination of damages.
       The amendment also provides that nothing in the comparative 
     negligence provision of section 10(b)(1) reduces consumer's 
     rights under other laws.
     Conference Agreement
       The House recedes to the Senate.

               Statute of Limitations and Notice of Claim

     House Bill
       Section 10 of the House bill provides for a 1 year statute 
     of limitations from the time that the customer learns of the 
     claim.
     Senate Amendment
       Section 11 of the Senate amendment provides for a 1 year 
     statute of limitations from the time that the customer learns 
     of the claim.
     Conference Agreement
       This provision is not in disagreement.

                           Consumer Awareness

     House Bill
       Section 11 of the House bill requires that each bank 
     provide notice to its customers describing the process of 
     check substitution and a description of the consumer recredit 
     provision. This section applies to both new and existing 
     customers.
     Senate Amendment
       Section 12 of the Senate amendment states that notice to 
     consumers only has to be sent if consumers get their original 
     checks or substitute checks back in their periodic 
     statements.
       Banks also must provide notice to customers that request a 
     copy of a check and receive a substitute check from the bank.
       Banks must provide customers that receive original checks 
     or substitute checks with a brief informative notice for the 
     first three years that the Act is in effect.
     Conference Agreement
       The Conference Agreement adopts the House position 
     regarding the permanance of the consumer notice provisions.
       The Conference Agreement also merges language from Senate 
     section 12(b)(1)(C) and House section 11(b). The Conference 
     Agreement adopts the Senate provision regarding the 9 month 
     time frame within which the FRB must publish model language 
     and requiring notice to include (i) description of substitute 
     check process; and (ii) description of consumer recredit 
     rights.

                          Effect on Other Law

     House Bill
       Section 12 of the House bill supersedes any inconsistent 
     Federal or State laws to the extent of the inconsistency.
     Senate Amendment
       Section 13 of the Senate amendment supersedes any 
     inconsistent Federal or State laws to the extent of the 
     inconsistency.
     Conference Agreement
       This provision is not in disagreement.

                         Variation by Agreement

     House Bill
       Section 13 of the House bill permits provisions of section 
     7 to be varied by the banks involved.
     Senate Amendment
       Section 17 of the Senate amendment permits provisions of 
     section 8 to be varied by the banks involved.
     Conference Agreement
       The Conference Agreement makes only technical changes 
     related to cross-references and maintains the substance of 
     both provisions.

                              Regulations

     House Bill
       Section 14 of the House bill allows the Federal Reserve to 
     write regulations related to the operation of this 
     legislation. Additionally, the Federal Reserve is required to 
     report on the increased speed of check processing and the 
     prices it charges for transportation services.
     Senate Amendment
       Sections 14 and 15 of the Senate amendment allows the 
     Federal Reserve to regulate the operation of this 
     legislation. However, it differs in the study and monitoring 
     of funds available. The Senate amendment mandates a study of 
     implementation of the Act, including impact on funds 
     availability.
     Conference Agreement
       The Conference Agreement adopts the Senate provisions 
     regarding the authority of the Federal Reserve to issue 
     regulations as it deems necessary to implement, prevent, 
     circumvent or evasion of, or facilitate compliance with the 
     legislation and the reporting requirements.
       The Conferees also agree to a provision which requires the 
     Federal Reserve Board to publish statistical data on costs 
     and revenue related to transporting commercial checks 
     (exclusive of the checks the reserve banks handle as fiscal 
     agents) between Federal Reserve Bank offices by air or ground 
     couriers. In the past, such statistics have been of interest 
     to certain organizations. This provision does not mandate 
     specific methodologies for imputing or estimating revenues. 
     Further, this section does not change the Monetary Control 
     Act's requirement that the Federal Reserve Banks, over the 
     long run, recover the costs of their priced services or 
     affect the Federal Reserve Board's ability under its pricing 
     principles to determine what constitutes a major service 
     category.
       The House recedes to the Senate on a funds availability 
     study.

            Evaluation and Report by the Comptroller General

     House Bill
       The House bill contains no similar provision.
     Senate Amendment
       Section 16 of the Senate amendment provides for the 
     Comptroller General of the United States to evaluate the 
     implementation and administration of this bill within 5 
     years.
     Conference Agreement
       The House recedes to the Senate.

           Depositary Services Efficiency and Cost Reduction

     House Bill
       The House bill contains no similar provision.
     Senate Amendment
       The Senate amendment contains no similar provision.
     Conference Agreement.
       The Conference Agreement includes langue requested by the 
     Department of Treasury which authorizes the Treasury 
     Department to directly compensate financial institutions that 
     provide depositary services to the Federal Government.
       Additionally, the Conference Agreement includes language 
     requested by Federal Reserve Board to effect technical 
     changes to the Federal Reserve Act in the way currency is 
     collateralized which will allow for greater liquidity in case 
     of a national emergency.

                             Effective Date

     House Bill
       Section 15 establishes the effective date as 18 months 
     after the date of enactment.
     Senate Amendment
       Section 18 establishes the effective date as 12 months 
     after the date of enactment.
     Conference Agreement
       The House recedes to the Senate.
     For consideration of the House bill and the Senate amendment, 
     and modifications committed to conference:
     Michael G. Oxley,
     Spencer Bachus,
     Steven C. LaTourette,
     Melissa A. Hart,
     Patrick J. Tiberi,
     Barney Franks,
     Harold E. Ford, Jr.,
                                Managers on the Part of the House.

     Richard C. Shelby,
     Robert f. Bennett,
     Wayne Allard,

[[Page 23862]]

     Paul s. Sarbanes,
     Tim Johnson,
     Managers on the Part of the Senate.

                          ____________________