SECTION
229.54—Expedited Recredit for Consumers
A. 229.54(a) Circumstances Giving Rise to a Claim 1. A consumer may make a claim for expedited recredit
under this section only for a substitute check that he or she has
received and for which the bank charged his or her deposit account.
As a result, checks used to access loans, such as credit card checks
or home-equity line of credit checks, that are reconverted to substitute
checks would not give rise to an expedited-recredit claim, unless
such a check was returned unpaid and the bank charged the consumer’s
deposit account for the amount of the returned check. In addition,
a consumer who received only a statement that contained images of
multiple substitute checks per page would not be entitled to make
an expedited-recredit claim, although he or she could seek redress
under other provisions of law, such as section 229.52 or UCC 4-401.
However, a consumer who originally received only a statement containing
images of multiple substitute checks per page but later received a
substitute check, such as in response to a request for a copy of a
check shown in the statement, could bring a claim if the other expedited-recredit
criteria were met. Although a consumer must at some point have received
a substitute check to make an expedited-recredit claim, the consumer
need not be in possession of the substitute check at the time he or
she submits the claim.
2. A consumer must in good faith assert that the bank
improperly charged the consumer’s account for the substitute check
or that the consumer has a warranty claim for the substitute check
(or both). The warranty in question could be a substitute-check warranty
described in section 229.52 or any other warranty that a bank provides
with respect to a check under other law. A consumer could, for example,
have a warranty claim under section 229.34(a) or (d), which contain
returned-check warranties that are made to the owner of the check.
3. A consumer’s recovery under the expedited-recredit
section is limited to the amount of his or her loss, up to the amount
of the substitute check subject to the claim, plus interest if the
consumer’s account is an interest-bearing account. The consumer’s
loss could include fees that resulted from the allegedly incorrect
charge, such as bounced-check fees that were imposed because the improper
charge caused the bank to dishonor subsequently presented checks that
it otherwise would have honored. A consumer who suffers a total loss
greater than the amount of the substitute check plus interest could
attempt to recover the remainder of that loss by bringing warranty,
indemnity, or other claim under this subpart or other applicable law.
Examples
a. A consumer
who received a substitute check believed that he or she wrote the
check for $150, but the bank charged his or her account for $1,500.
The amount on the substitute check the consumer received is illegible.
If the substitute check contained a blurry image of what was a legible
original check, the consumer could have a claim for a breach of the
legal-equivalence warranty in addition to an improper-charge claim.
Because the amount of the check cannot be determined from the substitute
check provided to the consumer, the consumer, if acting in good faith,
could assert that the production of the original check or a better
copy of the original check is necessary to determine the validity
of the claim. The consumer in this case could attempt to recover his
or her losses by using the expedited-recredit procedure. The consumer’s
losses recoverable under section 229.54 could include the $1,350 he
or she believed was incorrectly charged plus any improperly charged
fees associated with that charge, up to $150 (plus foregone interest
on the amount of the consumer’s loss if the account was an interest-bearing
account) The consumer could recover any additional losses, if any,
under other law, such as UCC 4-401 and 4-402.
b. A consumer received a substitute check for which his
or her account was charged and believed that the original check from
which the substitute was derived was a forgery. The forgery was good
enough that analysis of the original check was necessary to verify
whether the signature is that of the consumer. Under those circumstances,
the consumer, if acting in good faith, could assert that the charge
was improper, that he or she therefore had incurred a loss in the
amount of the check (plus foregone interest if the account was an
interest-bearing account), and that he or she needed the original
check to determine the validity of the forgery claim. By contrast,
if the signature on the substitute check obviously was forged (for
example, if the forger signed a name other than that of the account
holder) and there was no other defect with the substitute check, the
consumer would not need the original check or a sufficient copy to
determine the fact of the forgery and thus would not be able to make
an expedited-recredit claim under this section. However, the consumer
would have a claim under UCC 4-401 if the item was not properly payable.
9-576.6
1. The consumer must submit his or her
expedited-recredit claim to the bank within 40 calendar days of the
later of the day on which the bank mailed or delivered, by a means
agreed to by the consumer, (1) the periodic account statement containing
information concerning the transaction giving rise to the claim or
(2) the substitute check giving rise to the claim. The mailing or
delivery of a substitute check could be in connection with a regular
account statement, in response to a consumer’s specific request for
a copy of a check, or in connection with the return of a substitute
check to the payee.
2. Section 229.54(b) contemplates more than one possible
means of delivering an account statement or a substitute check to
the consumer. The time period for making a claim thus could be triggered
by the mailed, in-person, or electronic delivery of an account statement
or by the mailed or in-person delivery of a substitute check. In-person
delivery would include, for example, making an account statement or
substitute check available at the bank for the consumer’s retrieval
under an arrangement agreed to by the consumer. In the case of a mailed
statement or substitute check, the 40-day period should be calculated
from the postmark on the envelope. In the case of in-person delivery,
the 40-day period should be calculated from the earlier of the calendar
day on which delivery occurred or the bank first made the statement
or substitute check available for the consumer’s retrieval.
3. A bank must extend the consumer’s
time for submitting a claim for a reasonable period if the consumer
is prevented from submitting his or her claim within 40 days because
of extenuating circumstances. Extenuating circumstances could include,
for example, the extended travel or illness of the consumer.
4. For purposes of determining the
timeliness of a consumer’s actions, a consumer’s claim is considered
received on the banking day on which the consumer’s bank receives
a complete claim in person or by telephone or on the banking day on
which the consumer’s bank receives a letter or e-mail containing a
complete claim. (But see paragraphs 9(11 of this section for
a discussion of time periods related to oral claims that the bank
requires to be put in writing.)
5. A consumer who makes an untimely claim would not be
entitled to recover his or her losses using the expedited-recredit
procedure. However, he or she still could have rights under other
law, such as a warranty or indemnity claim under subpart D, a claim
for an improper charge to his or her account under UCC 4-401, or a
claim for wrongful dishonor under UCC 4-402.
6. A consumer’s claim must include the reason why the
consumer believes that his or her account was charged improperly or
why he or she has a warranty claim. A charge could be improper, for
example, if the bank charged the consumer’s account for an amount
different than the consumer believes he or she authorized or charged
the consumer more than once for the same check, or if the check in question
was a forgery or otherwise fraudulent.
7. A consumer also must provide a reason why production
of the original check or a sufficient copy is necessary to determine
the validity of the claim identified by the consumer. For example,
if the consumer believed that the bank charged his or her account
for the wrong amount, the original check might be necessary to prove
this claim if the amount of the substitute check were illegible. Similarly,
if the consumer believed that his or her signature had been forged,
the original check might be necessary to confirm the forgery if, for
example, pen pressure or similar analysis were necessary to determine
the genuineness of the signature.
8. The information that the consumer is required to provide
under section 229.54(b)(2)(iv) to facilitate the bank’s investigation
of the claim could include, for example, a copy of the allegedly defective
substitute check or information related to that check, such as the
number, amount, and payee.
9. A bank may accept an expedited-recredit claim in any
form but could in its discretion require the consumer to submit the
claim in writing. A bank that requires a recredit claim to be in writing
must inform the consumer of that requirement and provide a location
to which such a written claim should be sent. If the consumer attempts
to make a claim orally, the bank must inform the consumer at that
time of the written-notice requirement. A bank that receives a timely
oral claim and then requires the consumer to submit the claim in writing
may require the consumer to submit the written claim within 10 business
days of the bank’s receipt of the timely oral claim. If the consumer’s
oral claim was timely and the consumer’s written claim was received
within the 10-day period for submitting the claim in writing, the
consumer would satisfy the requirement of section 229.54(b)(1) to
submit his or her claim within 40 days, even if the bank received
the written claim after that 40-day period.
10. A bank may permit but may not require a consumer to
submit a written claim electronically.
11. If a bank requires a consumer to submit a claim in
writing, the bank may compute time periods for the bank’s action on
the claim from the date that the bank received the written claim.
Thus, if a consumer called the bank to make an expedited-recredit
claim and the bank required the consumer to submit the claim in writing,
the time at which the bank must take action on the claim would be
determined based on the date on which the bank received the written
claim, not the date on which the consumer made the oral claim.
12. Regardless of whether the consumer’s communication
with the bank is oral or written, a consumer complaint that does not
contain all the elements described in section 229.54(b) is not a claim
for purposes of section 229.54. If the consumer attempts to submit
a claim but does not provide all the required information, then the
bank has a duty to inform the consumer that the complaint does not
constitute a claim under section 229.54 and identify what information
is missing.
9-576.7
1. If the bank has not determined whether or not the
consumer’s claim is valid by the end of the 10th business day after
the banking day on which the consumer submitted the claim, the bank
must by that time recredit the consumer’s account for the amount of
the consumer’s loss, up to the lesser of the amount of the substitute
check or $2,500, plus interest if the account is an interest-bearing
account. A bank must provide the recredit pending investigation for
each substitute check for which the consumer submitted a claim, even
if the consumer submitted multiple substitute-check claims in the
same communication.
2. A bank that provides a recredit to the consumer, either
provisionally or after determining that the consumer’s claim is valid,
may reverse the amount of the recredit if the bank later determines
that the claim in fact was not valid. A bank that reverses a recredit
also may reverse the amount of any interest that it has paid on the
previously recredited amount. A bank’s time for reversing a recredit
may be limited by a statute of limitations.
9-576.8
1. The availability of a recredit provided by a bank under
section 229.54(c) is governed solely by section 229.54(d) and therefore
is not subject to the availability provisions of subpart B. A bank
generally must make a recredit available for withdrawal no later than
the start of the business day after the banking day on which the bank
provided the recredit. However, a bank may delay the availability
of up to the first $2,500 that it provisionally recredits to a consumer
account under section 229.54(c)(3)(i) if (1) the account is a new
account, (2) without regard to the substitute check giving rise to
the recredit claim, the account has been repeatedly overdrawn during
the six-month period ending on the date the bank received the claim,
or (3) the bank has reasonable cause to believe that the claim is
fraudulent. These first two exceptions are meant to operate in the
same manner as the corresponding new-account and repeated-overdraft
exceptions in subpart B, as described in section 229.13(a) and (d)
and the commentary thereto regarding application of the exceptions.
When a recredit amount for which a bank delays availability contains
an interest component, that component also is subject to the delay
because it is part of the amount recredited under section 229.54(c)(3)(i).
However, interest continues to accrue during the hold period.
2. Section 229.54(d)(2) describes
the maximum period of time that a bank may delay availability of a
recredit provided under section 229.54(c). The bank may delay availability
under one of the three listed exceptions until the business day after
the banking day on which the bank determines that the consumer’s claim
is valid or the 45th calendar day after the banking day on which the
bank received the consumer’s claim, whichever is earlier. The only
portion of the recredit that is subject to delay under section 229.54(d)(2)
is the amount that the bank recredits under section 229.54(c)(3)(i)
(including the interest component, if any) pending its investigation
of a claim.
9-576.9
1. A bank
must notify a consumer of its action regarding a recredit claim no
later than the business day after the banking day that the bank makes
a recredit, determines a claim is not valid, or reverses a recredit,
as appropriate. As provided in section 229.58, a bank may provide
any notice required by this section by U.S. mail or by any other means
through which the consumer has agreed to receive account information.
2. A bank that denies the consumer’s recredit claim must
demonstrate to the consumer that the substitute check was properly
charged or that the warranty claim was not valid, such as by explaining
the reason that the substitute-check charge was proper or the consumer’s
warranty claim was not valid. For example, if a consumer has claimed
that the bank charged its account for an improper amount, the bank
denying that claim must explain why it determined that the charged
amount was proper.
3. A bank denying a recredit claim also must provide the
original check or a sufficient copy, unless the bank is providing
the claim-denial notice electronically and the consumer has agreed
to receive that type of information electronically. In that case,
section 229.58 allows the bank instead to provide an image of the
original check or an image of the sufficient copy that the bank would
have sent to the consumer had the bank provided the notice by mail.
4. A bank that relies on information or documents in addition
to the original check or sufficient copy when denying a consumer expedited-recredit
claim also must either provide such information or documents to the
consumer or inform the consumer that he or she may request copies
of such information or documents. This requirement does not apply
to a bank that relies only on the original check or a sufficient copy to
make its determination.
5. Models C-22 through C-25 in appendix C contain model
language for each of three notices described in section 229.54(e).
A bank may, but is not required to, use the language listed in the
appendix. The Check 21 Act does not provide banks that use these models
with a safe harbor. However, the Board has published these models
to aid banks’ efforts to comply with section 229.54(e).
9-577
1. The amount that a consumer may
recover under section 229.54 is limited to the lesser of the amount
of his or her loss or the amount of the substitute check, plus interest
on that amount if his or her account earns interest. However, a consumer’s
total loss associated with the substitute check could exceed that
amount, and the consumer could be entitled to additional damages under
other law. For example, if a consumer’s loss exceeded the amount of
the substitute check plus interest and he or she had both a warranty
and an indemnity claim with respect to the substitute check, he or
she would be entitled to additional damages under section 229.53 of
this subpart. Similarly, if a consumer was charged bounced-check fees
as a result of an improperly charged substitute check and could not
recover all of those fees because of the section 229.54’s limitation
on recovery, he or she could attempt to recover additional amounts
under UCC 4-402.
