(a) Standard of care; liability; measure of damages. A bank shall
exercise ordinary care and act in good faith in complying with the
requirements of this subpart. A bank that fails to exercise ordinary
care or act in good faith under this subpart may be liable to the
depositary bank, the depositary bank’s customer, the owner of a check,
or another party to the check. The measure of damages for failure
to exercise ordinary care is the amount of the loss incurred, up to
the amount of the check, reduced by the amount of the loss that party
would have incurred even if the bank had exercised ordinary care.
A bank that fails to act in good faith under this subpart may be liable
for other damages, if any, suffered by the party as a proximate consequence.
Subject to a bank’s duty to exercise ordinary care or act in good
faith in choosing the means of return or notice of nonpayment, the
bank is not liable for the insolvency, neglect, misconduct, mistake,
or default of another bank or person, or for loss or destruction of
a check or notice of nonpayment in transit or in the possession of
others. This section does not affect a paying bank’s liability to
its customer under the UCC or other law.
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(b) Paying bank’s failure to make timely return. If a paying bank fails both to comply with its expeditious return
requirements under section 229.31(b) and with the deadline for return
under the UCC, Regulation J (12 CFR part 210), or the extension of
deadline under section 229.31(g) in connection with a single nonpayment
of a check, the paying bank shall be liable under either section 229.31(b)
or such other provision, but not both.
(c) Comparative negligence. If a person, including
a bank, fails to exercise ordinary care or act in good faith under
this subpart in indorsing a check (section 229.35), accepting a returned
check or notice of nonpayment (section 229.33(b), (c), and (d)), or
otherwise, the damages incurred by that person under section 229.38(a)
shall be diminished in proportion to the amount of negligence or bad
faith attributable to that person.
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(d) Responsibility for certain aspects of checks.
(1) A paying bank, or in the
case of a check payable through the paying bank and payable by another
bank, the bank by which the check is payable, is responsible for damages
under paragraph (a) of this section to the extent that the condition
of the check when issued by it or its customer adversely affects the
ability of a bank to indorse the check legibly in accordance with
section 229.35. A depositary bank is responsible for damages under
paragraph (a) of this section to the extent that the condition of
the back of a check arising after the issuance of the check and prior
to acceptance of the check by it adversely affects the ability of
a bank to indorse the check legibly in accordance with section 229.35.
A reconverting bank is responsible for damages under paragraph (a)
of this section to the extent that the condition of the back of a
substitute check transferred, presented, or returned by it—
(i) Adversely
affects the ability of a subsequent bank to indorse the check legibly
in accordance with section 229.35; or
(ii) Causes an indorsement that previously
was applied in accordance with section 229.35 to become illegible.
(2) Responsibility
under this paragraph (d) shall be treated as negligence of the paying
bank, depositary bank, or reconverting bank for purposes of paragraph
(c) of this section.
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(e) Timeliness of action. If a bank is delayed
in acting beyond the time limits set forth in this subpart because
of interruption of communication or computer facilities, suspension
of payments by a bank, war, emergency conditions, failure of equipment,
or other circumstances beyond its control, its time for acting is
extended for the time necessary to complete the action, if it exercises
such diligence as the circumstances require.
(f) Exclusion. Section 229.21 of this part
and section 611(a), (b), and (c) of the EFA Act (12 U.S.C. 4010(a),
(b), and (c)) do not apply to this subpart.
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(g) Jurisdiction. Any action under this subpart
may be brought in any United States district court, or in any other
court of competent jurisdiction, and shall be brought within one year
after the date of the occurrence of the violation involved.
(h) Reliance on Board rulings. No provision of this subpart imposing any liability shall apply
to any act done or omitted in good faith in conformity with any rule,
regulation, or interpretation thereof by the Board, regardless of
whether the rule, regulation, or interpretation is amended, rescinded,
or determined by judicial or other authority to be invalid for any
reason after the act or omission has occurred.
(i) Presumption of alteration.
(1) Presumption. Subject to paragraphs (i)(2) and (3) of this section
and in the absence of a Federal statute or regulation to the contrary,
the presumption in this paragraph applies with respect to any dispute
between banks arising under Federal or State law as to whether a substitute
check or electronic check transferred between those banks contains
an alteration or is derived from an original check that was issued
with an unauthorized signature of the drawer. When such a dispute
arises, there is a rebuttable presumption that the substitute check
or electronic check contains an alteration.
(2) Rebuttal
of presumption. The presumption of alteration may be overcome
by proving by a preponderance of evidence that either the substitute
check or electronic check does not contain an alteration, or that
the substitute check or electronic check is derived from an original
check that was issued with an unauthorized signature of the drawer.
(3) Effect of producing original check. If
the original check is made available for examination by all banks
involved in the dispute, the presumption in paragraph (i)(1) of this
section shall no longer apply.
