Final Amendments to Regulation CC
July 27, 2004
Circular No. 11628

To All Depository Institutions and Others Concerned in the Second Federal Reserve District:

The Federal Reserve Board released final amendments to Regulation CC and its commentary to implement the Check Clearing for the 21st Century Act (Check 21 Act), which was enacted on October 28, 2003 and becomes effective on October 28, 2004.

To facilitate check truncation and electronic check exchange, the Check 21 Act authorizes a new negotiable instrument called a “substitute check.” A substitute check is a paper reproduction of the original check that combines an image of the front and back of the original check and can be processed just like the original check. The Check 21 Act provides that a properly prepared substitute check is the legal equivalent of the original check for all purposes. The Check 21 Act does not require any bank to create substitute checks or accept checks electronically. The Check 21 Act includes new warranties, an indemnity, and expedited recredit procedures that protect substitute check recipients.

The Board’s amendments: (1) set forth the requirements of the Check 21 Act that apply to banks; (2) provide a model disclosure and model notices relating to substitute checks; and (3) set forth bank indorsement and identification requirements for substitute checks. The amendments also clarify some existing provisions of the rule and commentary.

Press release OFFSITE
Board’s notice OFFSITE PDF

Maryann Campbell
Supervising Examiner
Legal and Compliance Risk Department