FRB Finalizes Regulation CC Amendments to Implement Check 21

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. 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.

Check 21 as implemented includes provisions that will affect all banks, even those that do not choose to create substitute checks. 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. In addition, if a consumer to whom