In spite of these universal requirements, however, warranties under Check 21 as implemented flow so that losses associated with a substitute check will ultimately be borne by the party that first transferred, presented, or returned the substitute check (called the "reconverting bank"). Banks that provide substitute checks to consumers, either with their periodic account statements or otherwise, must provide a disclosure that describes substitute checks and substitute check rights. In addition, if a consumer to whom a bank transfers a substitute check suffers a loss in connection with it, the bank may be required to provide expedited recrediting to the consumer’s account. For example, any bank that transfers, presents, or returns a substitute check for consideration would make the substitute check warranties and would be responsible for indemnifying any person that suffered a loss due to the receipt of a substitute check instead of the original check. Under Check 21 and the amendments to Regulation CC ("Check 21 as implemented"), a check that meets Check 21’s requirements for (i) accuracy, (ii) legending, and (iii) warranty by the transferring, presenting or returning bank is made the legal equivalent of the original check for all purposes and all persons.Ĭheck 21 as implemented includes provisions that will affect all banks, even those that do not choose to create substitute checks.
The FRB finalized amendments to Regulation CC that add a new subpart D, with commentary, to implement the Check Clearing for the 21st Century Act ("Check 21") and clarify some existing provisions of Regulation CC and its commentary.
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