12 U.S.C. § 5006 — Expedited recredit for consumers

Page 1778 TITLE 12—BANKS AND BANKING § 5006 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 ex- penses 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 indem- nified party, then that party’s indemnification under this section shall be reduced in propor- tion 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 origi- nal check or a copy of the original check (in- cluding 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 wheth- er 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 in- curred 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 sub- stitute check, or a copy under paragraph (1) by an indemnifying bank shall not absolve the bank from any liability on a warranty estab- lished under this chapter or any other provi- sion 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 assist- ance 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 indem- nification. (Pub. L. 108–100, § 6, Oct. 28, 2003, 117 Stat. 1181.) Editorial Notes REFERENCES IN TEXT This chapter, referred to in subsec. (d)(2), was in the original ‘‘this Act’’, meaning Pub. L. 108–100, Oct. 28, 2003, 117 Stat. 1177, which is classified generally to this chapter. For complete classification of this Act to the Code, see Short Title note set out under section 5001 of this title and Tables. Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section effective at the end of the 12-month period beginning on Oct. 28, 2003, see section 20 of Pub. L. 108–100, set out as a note under section 5001 of this title. § 5006. 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 ac- count for a substitute check that was pro- vided 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 nec- essary 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 institu- tion mails or delivers, by a means agreed to by the consumer, the periodic statement of account for such account which contains in- formation 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 para- graph (2) is delayed due to extenuating cir- cumstances, 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 sub- stitute check, the consumer shall provide to the bank that holds the account of such con- sumer— Page 1779 TITLE 12—BANKS AND BANKING § 5006 (A) a description of the claim, including an explanation of— (i) why the substitute check was not properly charged to the consumer’s ac- count; or (ii) the warranty claim with respect to such check; (B) a statement that the consumer suf- fered a loss and an estimate of the amount of the loss; (C) the reason why production of the origi- nal 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 con- sumer under subsection (a) may, in the dis- cretion of the bank, require the consumer to submit the information required under para- graph (1) in writing. (B) Means of submission A bank that requires a submission of infor- mation under subparagraph (A) may permit the consumer to make the submission elec- tronically, 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 (in- cluding an image or a substitute check) that accurately represents all of the in- formation 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 ac- count 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 con- sumer’s account for— (i) the lesser of the amount of the sub- stitute check that was charged against the consumer account, or $2,500, together with interest if the account is an interest-bear- ing account, no later than the end of such 10th business day; and (ii) the remaining amount of the sub- stitute check that was charged against the consumer account, if any, together with interest if the account is an interest-bear- ing account, not later than the 45th cal- endar 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 con- sumer by the start of the next business day after the business day on which the bank re- credits the consumer’s account under sub- section (c). (2) Safeguard exceptions A bank may delay availability to a con- sumer of a recredit provided under subsection (c)(2)(B)(i) until the start of either the busi- ness day following the business day on which the bank determines that the consumer’s claim is valid or the 45th calendar day fol- lowing the business day on which the con- sumer submits a claim for such recredit in ac- cordance with subsection (b), whichever is ear- lier, 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 ques- tion 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 Page 1780 TITLE 12—BANKS AND BANKING § 5007 subsection (c) to any consumer account may impose any overdraft fees with respect to drafts drawn by the consumer on such recred- ited 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 determina- tion— (A) the original check or a copy of the original check (including an image or a sub- stitute check) that— (i) accurately represents all of the infor- mation on the front and back of the origi- nal 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 de- termination 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 deter- mination. (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 busi- ness 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 addi- tional damages under section 5005 or 5009 of this title. (h) Clarification concerning consumer posses- sion A consumer who was provided a substitute check may make a claim for an expedited re- credit under this section with regard to a trans- action involving the substitute check whether or not the consumer is in possession of the sub- stitute check. (i) Scope of application This section shall only apply to customers who are consumers. (Pub. L. 108–100, § 7, Oct. 28, 2003, 117 Stat. 1182.) Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section effective at the end of the 12-month period beginning on Oct. 28, 2003, see section 20 of Pub. L. 108–100, set out as a note under section 5001 of this title. § 5007. Expedited recredit procedures for banks (a) Recredit claims (1) In general A bank may make a claim against an indem- nifying 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 con- sumer under section 5006 of this title with respect to a substitute check or would have been subject to such a claim had the con- sumer’s account been charged; (B) the claimant bank has suffered a re- sulting loss or is obligated to recredit a con- sumer account under section 5006 of this title with respect to such substitute check; and (C) production of the original check, an- other 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 sub- mitted by the claimant bank to an indem- nifying bank before the end of the 120-day pe- riod 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 in- demnifying bank— (A) a description of— (i) the claim, including an explanation of why the substitute check cannot be prop- erly 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