Subpart D Flashcards
What is a substitute check?
A negotiable instrument created by the Check 21 Act that must accurately represent all information on the original check.
What must a substitute check bear?
The legend, ‘original check’.
How can a properly prepared substitute check be used?
It is the legal equivalent of the original item for all purposes including any provision of federal or state law.
What are the duties of the reconverting bank?
- Ensure substitute check bears all prior indorsements of parties that previously handled the check for forward collection or return
- Identify in a manner that preserves any previous reconverting-bank identifications, in accordance with ANSI X9.100-140 standard.
True or False: A substitute check must represent all information on both the front and back of the original check.
True.
Fill in the blank: A substitute check is a legal copy of your _______.
check.
What does the bank that truncates the original check identify?
The bank that truncated the original check
This is in accordance with the regulations set forth.
What standards do substitute check warranties comply with?
ANSI X9.100-140
These standards apply to all substitute checks.
What warranties does a financial institution that creates substitute checks provide?
- Meets all requirements for legal equivalency
- There will be no double debit
These warranties apply to all parties involved.
To whom does the bank make warranties regarding substitute checks?
The person to which the bank transfers, presents, or returns the substitute check, and to any subsequent recipient
Parties receive warranties regardless of the form in which they received the substitute check.
What is the indemnity provided by the bank that creates a substitute check?
Indemnifies all parties for loss, if loss is due to receipt of substitute check
This includes consequential damages.
Who bears the responsibility for consequential damages related to substitute checks?
The financial institution that creates the substitute check
They are responsible for any consequential damages arising from the use of the substitute check.
What limitation can a financial institution that creates a substitute check impose?
Limit liability if it produces original check or a sufficient copy of the original check on request
This is a condition of the warranty breach.
What statute of limitations does the Check 21 Act establish for claims?
One (1) year
This applies to claims related to substitute checks.
How long does a consumer have to make a claim for a substitute check under Check 21?
40 calendar days from the statement date, or receipt of the substitute check
This is the timeframe for making a claim that gave rise to the loss.
What is the timeframe for a paying bank to make funds available for claims less than $2,500?
10 business days
This includes interest if the account is interest-bearing.
What is the timeframe for a paying bank to make the remainder of funds available for claims greater than $2,500?
45 calendar days
This is the limit set for making funds available.
What must a paying bank do regarding claims to the reconverting bank?
Make claim within 120 days of transaction that gave rise to claim
The reconverting bank is responsible for handling these claims.
How long does the reconverting bank have to provide recredit or original check after a claim?
10 days
This is the response time to the paying bank’s claim.
What must consumer awareness disclosures describe?
That the substitute check is the legal equivalent of an original check
This is crucial for consumer understanding of substitute checks.
What are the consumer recredit rights when a consumer believes a substitute check was not properly charged?
The consumer has rights to seek recredit if they believe in good faith that a substitute check was not properly charged to their account.
This applies to situations involving unauthorized transactions or errors related to substitute checks.
What disclosure is required for consumers who receive paid checks with periodic account statements?
Consumers must receive a disclosure when they receive paid checks with their periodic account statements.
This ensures consumers are informed about their rights and the nature of the checks they are receiving.
What disclosure is required for consumers who receive substitute checks on an occasional basis?
Disclosure is required for consumers who receive substitute checks on an occasional basis, such as when a financial institution returns a substitute check for a deposited customer (return item i.e., NSF).
NSF stands for Non-Sufficient Funds.
When must a financial institution provide disclosure to a consumer requesting an original or sufficient copy of a check?
Disclosure must be provided at the time of the request or when the substitute check is provided.
This is to ensure transparency regarding the substitute check received.
