Pub.L. 108-101 To award a congressional gold medal to Jackie Robinson (posthumously), in recognition of his many contributions to the Nation, and to express the sense of the Congress that there should be a national day in recognition of Jackie Robinson. <...

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[[Page 117 STAT. 1177]]

Public Law 108-100
108th Congress

                                 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. <<NOTE: Oct. 28, 2003 -  [H.R. 1474]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, <<NOTE: Check Clearing 
for the 21st Century Act.>> 

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This <<NOTE: 12 USC 5001 note.>> 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. <<NOTE: 12 USC 5001.>> 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

[[Page 117 STAT. 1178]]

                    (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. <<NOTE: 12 USC 5002.>> DEFINITIONS.

     For purposes of this Act, the following definitions shall apply:
            (1) Account.--The term ``account'' means a deposit account 
        at a bank.
            (2) Bank.--The term ``bank'' means any person that is 
        located in a State and engaged in the business of banking and 
        includes--
                    (A) any depository institution (as defined in 
                section 19(b)(1)(A) of the Federal Reserve Act);
                    (B) any Federal reserve bank;
                    (C) any Federal home loan bank; or
                    (D) to the extent it acts as a payor--
                          (i) the Treasury of the United States;
                          (ii) the United States Postal Service;
                          (iii) a State government; or
                          (iv) a unit of general local government (as 
                      defined in section 602(24) of the Expedited Funds 
                      Availability Act).
            (3) Banking terms.--
                    (A) 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.--

[[Page 117 STAT. 1179]]

                          (i) In general.--The term ``returning bank'' 
                      means a bank (other than the paying or depositary 
                      bank) handling a returned check or notice in lieu 
                      of return.
                          (ii) Treatment as collecting bank.--No 
                      provision of this Act shall be construed as 
                      affecting the treatment of a returning bank as a 
                      collecting bank for purposes of section 4-202(b) 
                      of the Uniform Commercial Code.
            (4) Board.--The term ``Board'' means the Board of Governors 
        of the Federal Reserve System.
            (5) Business day.--The term ``business day'' has the same 
        meaning as in section 602(3) of the Expedited Funds Availability 
        Act.
            (6) Check.--The term ``check''--
                    (A) means a draft, payable on demand and drawn on or 
                payable through or at an office of a bank, whether or 
                not negotiable, that is handled for forward collection 
                or return, including a substitute check and a travelers 
                check; and
                    (B) does not include a noncash item or an item 
                payable in a medium other than United States dollars.
            (7) Consumer.--The term ``consumer'' means an individual 
        who--
                    (A) with respect to a check handled for forward 
                collection, draws the check on a consumer account; or
                    (B) with respect to a check handled for return, 
                deposits the check into, or cashes the check against, a 
                consumer account.
            (8) Consumer account.--The term ``consumer account'' has the 
        same meaning as in section 602(10) of the Expedited Funds 
        Availability Act.
            (9) Customer.--The term ``customer'' means a person having 
        an account with a bank.
            (10) Forward collection.--The term ``forward collection'' 
        means the transfer by a bank of a check to a collecting bank for 
        settlement or the paying bank for payment.
            (11) Indemnifying bank.--The term ``indemnifying bank'' 
        means a bank that is providing an indemnity under section 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

[[Page 117 STAT. 1180]]

                    (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. <<NOTE: 12 USC 5003.>> 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

[[Page 117 STAT. 1181]]

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. <<NOTE: 12 USC 5004.>> 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. <<NOTE: 12 USC 5005.>> 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 

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