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12 U.S.C. § 5001 — Findings; purposes
Federal law — U.S. Code and appendices · legal_authorities
**(a) Findings** The Congress finds as follows:
(1) In the Expedited Funds Availability Act [[12 U.S.C. 4001](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section4001&num=0&edition=prelim) et seq.], 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(B) directed that the exercise of such authority by the Board superseded any State law, including the Uniform Commercial Code, as in effect in any State.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 chapter 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.
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Stable record: federal_law:legal_authorities:record_usc_63d5a8a1f989754351d1369a
Source file: Laws/federal/codes/united-states-code/title-12/section-5001-findings-purposes--3e7bb3f311.md
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Source location: Title 12, Chapter 50, § 5001; chapter-050-check-truncation.md
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**(a) Findings** The Congress finds as follows:
(1) In the Expedited Funds Availability Act [[12 U.S.C. 4001](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section4001&num=0&edition=prelim) et seq.], 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 chapter 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.
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Federal law — U.S. Code and appendices · legal_authorities
Any Federal Reserve bank may make application to the local Federal Reserve agent for such amount of the Federal Reserve notes hereinbefore provided for as it may require. Such application shall be accompanied with a tender to the local Federal Reserve agent of collateral in amount equal to the sum of the Federal Reserve notes thus applied for and issued pursuant to such application. The collateral security thus offered shall be notes, drafts, bills of exchange, or acceptances acquired under section 92, 342 to 348, 349 to 352, 361, 372, or 373 of this title, or bills of exchange endorsed by a member bank of any Federal Reserve district and purchased under the provisions of sections 348a and 353 to 359 of this title, or bankers’ acceptances purchased under the provisions of said sections 348a and 353 to 359 of this title, or gold certificates, or Special Drawing Right certificates, or any obligations which are direct obligations of, or are fully guaranteed as to principal and interest by, the United States or any agency thereof, or assets that Federal Reserve banks may purchase or hold under sections 348a and 353 to 359 of this title or any other asset of a Federal Reserve bank. In no event shall such collateral security be less than the amount of Federal Reserve notes applied for. The Federal Reserve agent shall each day notify the Board of Governors of the Federal Reserve System of all issues and withdrawals of Federal Reserve notes to and by the Federal Reserve bank to which he is accredited. The said Board of Governors of the Federal Reserve System may at any time call upon a Federal Reserve bank for additional security to protect the Federal Reserve notes issued to it. Collateral shall not be required for Federal Reserve notes which are held in the vaults of, or are
Source: Supplied U.S. Code snapshot — release unconfirmed · 12 U.S.C. § 412
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Federal law — U.S. Code and appendices · legal_authorities
For purposes of this chapter—
(1) **Account** — The term “account” means a demand deposit account or other similar transaction account at a depository institution.
(2) **Board** — The term “Board” means the Board of Governors of the Federal Reserve System.
(3) **Business day** — The term “business day” means any day other than a Saturday, Sunday, or legal holiday.
(4) **Cash** — The term “cash” means United States coins and currency, including Federal Reserve notes.
(5) **Cashier’s check** — The term “cashier’s check” means any check which—
(A) is drawn on a depository institution;
(B) is signed by an officer or employee of such depository institution; and
(C) is a direct obligation of such depository institution.
(6) **Certified check** — The term “certified check” means any check with respect to which a depository institution certifies that—
(A) the signature on the check is genuine; and
(B) such depository institution has set aside funds which—
(i) are equal to the amount of the check; and
(ii) will be used only to pay such check.
(7) **Check** — The term “check” means any negotiable demand draft drawn on or payable through an office of a depository institution located in the United States. Such term does not include noncash items.
(8) **Check clearinghouse association** — The term “check clearinghouse association” means any arrangement by which participant depository institutions exchange deposited checks on a local basis, including an entire metropolitan area, without using the check processing facilities of the Federal Reserve System.
(9) **Check processing region** — The term “check processing region” means the geographical area served by a Federal Reserve bank check processing center or such larger area as the Board may prescrib
Source: Supplied U.S. Code snapshot — release unconfirmed · 12 U.S.C. § 4001
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Federal law — U.S. Code and appendices · legal_authorities
For purposes of this chapter, 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 461(b)(1)(A) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section461/b/1/A&num=0&edition=prelim));
(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 4001(24) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section4001/24&num=0&edition=prelim)).
(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” me
Source: Supplied U.S. Code snapshot — release unconfirmed · 12 U.S.C. § 5002
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Federal law — U.S. Code and appendices · legal_authorities
**(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 5004 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section5004&num=0&edition=prelim) 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 S
Source: Supplied U.S. Code snapshot — release unconfirmed · 12 U.S.C. § 5003
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Federal law — U.S. Code and appendices · legal_authorities
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 5003(b) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section5003/b&num=0&edition=prelim); 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.
Source: Supplied U.S. Code snapshot — release unconfirmed · 12 U.S.C. § 5004
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Federal law — U.S. Code and appendices · legal_authorities
**(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 5004 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section5004&num=0&edition=prelim).
(2) **Amount in absence of breach of warranty** — In the absence of a breach of a warranty provided under [section 5004 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section5004&num=0&edition=prelim), 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 indemnif
Source: Supplied U.S. Code snapshot — release unconfirmed · 12 U.S.C. § 5005
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Federal law — U.S. Code and appendices · legal_authorities
**(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.
(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 descript
Source: Supplied U.S. Code snapshot — release unconfirmed · 12 U.S.C. § 5006
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Federal law — U.S. Code and appendices · legal_authorities
**(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 5006 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section5006&num=0&edition=prelim) 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 5006 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section5006&num=0&edition=prelim) 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 period beginning on the date of the transaction that gave rise to the claim.
**(b) Procedures for claims**
(1) **In general** — To make a claim under subsection (a) for an expedited recredit relating to a substitute check, the claimant bank shall send to the indemnifying bank—
(A) a description of—
(i) the claim, including an explanation of why the substitute check cannot be properly charged to the consumer account; or
(ii) the warranty claim;
(B) a statement that the claimant bank has suffered a loss or is obligated to recredit the consumer’s acco
Source: Supplied U.S. Code snapshot — release unconfirmed · 12 U.S.C. § 5007
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Federal law — U.S. Code and appendices · legal_authorities
A delay by a bank beyond the time limits prescribed or permitted by this chapter 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.
Source: Supplied U.S. Code snapshot — release unconfirmed · 12 U.S.C. § 5008
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Liability**
(1) **In general** — Except as provided in [section 5005 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title12-section5005&num=0&edition=prelim), any person who, in connection with a substitute check, breaches any warranty under this chapter or fails to comply with any requirement imposed by, or regulation prescribed pursuant to, this chapter 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 5006 or 5007 of this title.
**(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.
Source: Supplied U.S. Code snapshot — release unconfirmed · 12 U.S.C. § 5009
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