12 U.S.C. § 5002 — Definitions

Page 1775 TITLE 12—BANKS AND BANKING § 5002 mination date established by this chapter for the mortgage. (Pub. L. 105–216, § 11, July 29, 1998, 112 Stat. 908.) Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section effective 1 year after July 29, 1998, see section 13 of Pub. L. 105–216, set out as a note under section 4901 of this title. CHAPTER 50—CHECK TRUNCATION Sec. 5001. Findings; purposes. 5002. Definitions. 5003. General provisions governing substitute checks. 5004. Substitute check warranties. 5005. Indemnity. 5006. Expedited recredit for consumers. 5007. Expedited recredit procedures for banks. 5008. Delays in an emergency. 5009. Measure of damages. 5010. Statute of limitations and notice of claim. 5011. Consumer awareness. 5012. Effect on other law. 5013. Variation by agreement. 5014. Regulations. 5015. Study and report on funds availability. 5016. Statistical reporting of costs and revenues for transporting checks between reserve banks. 5017. Evaluation and report by the Comptroller General. 5018. Depositary services efficiency and cost reduc- tion. § 5001. Findings; purposes (a) Findings The Congress finds as follows: (1) In the Expedited Funds Availability Act [12 U.S.C. 4001 et seq.], enacted on August 10, 1987, the Congress directed the Board of Gov- ernors of the Federal Reserve System to con- sider establishing regulations requiring Fed- eral 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 sys- tem, including the receipt, payment, collec- tion, and clearing of checks, and related functions of the payment system pertaining to checks; and (B) directed that the exercise of such au- thority by the Board superseded any State law, including the Uniform Commercial Code, as in effect in any State.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 estab- lishing such a process. (b) Purposes The purposes of this chapter are as follows: (1) To facilitate check truncation by author- izing substitute checks. (2) To foster innovation in the check collec- tion system without mandating receipt of checks in electronic form. (3) To improve the overall efficiency of the Nation’s payments system. (Pub. L. 108–100, § 2, Oct. 28, 2003, 117 Stat. 1177.) Editorial Notes REFERENCES IN TEXT The Expedited Funds Availability Act, referred to in subsec. (a)(1), (2), is title VI of Pub. L. 100–86, Aug. 10, 1987, 101 Stat. 635, which is classified principally to chapter 41 (§ 4001 et seq.) of this title. For complete classification of this Act to the Code, see Short Title note set out under section 4001 of this title and Tables. This chapter, referred to in subsec. (b), 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 below and Tables. Statutory Notes and Related Subsidiaries EFFECTIVE DATE Pub. L. 108–100, § 20, Oct. 28, 2003, 117 Stat. 1194, pro- vided that: ‘‘This Act [enacting this chapter, amending section 412 of this title, and enacting provisions set out as notes under this section] shall take effect at the end of the 12-month period beginning on the date of the en- actment of this Act [Oct. 28, 2003], except as otherwise specifically provided in this Act.’’ SHORT TITLE Pub. L. 108–100, § 1(a), Oct. 28, 2003, 117 Stat. 1177, pro- vided that: ‘‘This Act [enacting this chapter, amending section 412 of this title, and enacting provisions set out as notes under this section] may be cited as the ‘Check Clearing for the 21st Century Act’ or the ‘Check 21 Act’.’’ § 5002. Definitions For purposes of this chapter, the following definitions shall apply: (1) Account The term ‘‘account’’ means a deposit ac- count 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); (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). (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 Page 1776 TITLE 12—BANKS AND BANKING § 5002 (ii) a bank to which a check is trans- ferred for deposit in an account at such bank, even if the check is physically re- ceived 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 chapter shall be con- strued as affecting the treatment of a re- turning bank as a collecting bank for pur- poses of section 4–202(b) of the Uniform Commercial Code. (4) Board The term ‘‘Board’’ means the Board of Gov- ernors of the Federal Reserve System. (5) Business day The term ‘‘business day’’ has the same meaning as in section 4001(3) of this title. (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, in- cluding 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 for- ward collection, draws the check on a con- sumer account; or (B) with respect to a check handled for re- turn, 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 4001(10) of this title. (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 5005 of this title with respect to a sub- stitute check. (12) MICR line The terms ‘‘MICR line’’ and ‘‘magnetic ink character recognition line’’ mean the num- bers, 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 mag- netic ink in accordance with generally appli- cable industry standards. (13) Noncash item The term ‘‘noncash item’’ has the same meaning as in section 4001(14) of this title. (14) Person The term ‘‘person’’ means a natural person, corporation, unincorporated company, part- nership, 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 proc- essing of substitute checks; (C) conforms, in paper stock, dimension, and otherwise, with generally applicable in- dustry 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 1813(a) of this title. (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 Com- mercial Code. Page 1777 TITLE 12—BANKS AND BANKING § 5005 (Pub. L. 108–100, § 3, Oct. 28, 2003, 117 Stat. 1178.) Editorial Notes REFERENCES IN TEXT This chapter, referred to in text, 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. § 5003. General provisions governing substitute checks (a) No agreement required A person may deposit, present, or send for col- lection 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 with respect to such substitute check. (b) Legal equivalence A substitute check shall be the legal equiva- lent of the original check for all purposes, in- cluding any provision of any Federal or State law, and for all persons if the substitute check— (1) accurately represents all of the informa- tion 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 elec- tronic form or in the form of the original paper check or a substitute check) for forward collec- tion 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 indus- try 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 provi- sion relating to the protection of customers, of part 229 of title 12 of the Code of Federal Regula- tions, 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 chapter. (Pub. L. 108–100, § 4, Oct. 28, 2003, 117 Stat. 1180.) Editorial Notes REFERENCES IN TEXT This chapter, referred to in subsec. (e), 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. § 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 return- ing bank, the depositary bank, the drawee, the drawer, the payee, the depositor, and any en- dorser (regardless of whether the warrantee re- ceives the substitute check or another paper or electronic form of the substitute check or origi- nal check) that— (1) the substitute check meets all the re- quirements for legal equivalence under section 5003(b) of this title; 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 en- dorser has already paid. (Pub. L. 108–100, § 5, Oct. 28, 2003, 117 Stat. 1181.) 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. § 5005. Indemnity (a) Indemnity A reconverting bank and each bank that sub- sequently transfers, presents, or returns a sub- stitute check in any electronic or paper form, and receives consideration for such transfer, presentment, or return shall indemnify the transferee, any subsequent collecting or return- ing bank, the depositary bank, the drawee, the drawer, the payee, the depositor, and any en- dorser, up to the amount described in sub- sections (b) and (c), as applicable, to the extent of any loss incurred by any recipient of a sub- stitute check if that loss occurred due to the re- ceipt of a substitute check instead of the origi- nal check. (b) Indemnity amount (1) Amount in event of breach of warranty The amount of the indemnity under sub- section (a) shall be the amount of any loss (in- cluding costs and reasonable attorney’s fees and other expenses of representation) proxi- mately caused by a breach of a warranty pro- vided under section 5004 of this title. (2) Amount in absence of breach of warranty In the absence of a breach of a warranty pro- vided under section 5004 of this title, the