12 U.S.C. § 5005
A reconverting bank and each bank that subsequently transfers, presents, or returns a substitute check in any electronic or paper form, and receives consideration for such transfer, presentment, or return shall indemnify the transferee, any subsequent collecting or returning bank, the depositary bank, the drawee, the drawer, the payee, the depositor, and any endorser, up to the amount described in subsections (b) and (c), as applicable, to the extent of any loss incurred by any recipient of a substitute check if that loss occurred due to the receipt of a substitute check instead of the original check.
The amount of the indemnity under subsection (a) shall be the amount of any loss (including costs and reasonable attorney's fees and other expenses of representation) proximately caused by a breach of a warranty provided under section 5004 of this title.
In the absence of a breach of a warranty provided under section 5004 of this title, the amount of the indemnity under subsection (a) shall be the sum of-
If a loss described in subsection (a) results in whole or in part from the negligence or failure to act in good faith on the part of an indemnified party, then that party's indemnification under this section shall be reduced in proportion to the amount of negligence or bad faith attributable to that party.
Nothing in this subsection reduces the rights of a consumer or any other person under the Uniform Commercial Code or other applicable provision of Federal or State law.
If the indemnifying bank produces the original check or a copy of the original check (including an image or a substitute check) that accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated) or is otherwise sufficient to determine whether or not a claim is valid, the indemnifying bank shall-
The production of the original check, a substitute check, or a copy under paragraph (1) by an indemnifying bank shall not absolve the bank from any liability on a warranty established under this chapter or any other provision of law.
Each indemnifying bank shall be subrogated to the rights of any indemnified party to the extent of the indemnity.
A bank that indemnifies a party under this section may attempt to recover from another party based on a warranty or other claim.
Each indemnified party shall have a duty to comply with all reasonable requests for assistance from an indemnifying bank in connection with any claim the indemnifying bank brings against a warrantor or other party related to a check that forms the basis for the indemnification.
12 U.S.C. § 5005
EDITORIAL NOTES
REFERENCES IN TEXTThis chapter, referred to in subsec. (d)(2), was in the original "this Act", meaning Pub. L. 108-100, 117 Stat. 1177, which is classified generally to this chapter. For complete classification of this Act to the Code, see Short Title note set out under section 5001 of this title and Tables.
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATESection effective at the end of the 12-month period beginning on Oct. 28, 2003, see section 20 of Pub. L. 108-100 set out as a note under section 5001 of this title.
- State
- The term "State" means any State, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, Guam, American Samoa, or the United States Virgin Islands or any federally recognized Indian tribe, as defined by the Secretary of the Interior under section 5131(a) of title 25.
- Uniform Commercial Code
- The term "Uniform Commercial Code" means the Uniform Commercial Code in effect in a State.
- bank
- The term "bank" means any person that is located in a State and engaged in the business of banking and includes-(A) any depository institution (as defined in section 461(b)(1)(A) of this title);(B) any Federal reserve bank;(C) any Federal home loan bank; or(D) to the extent it acts as a payor-(i) the Treasury of the United States;(ii) the United States Postal Service;(iii) a State government; or(iv) a unit of general local government (as defined in section 4001(24) of this title).
- consumer
- The term "consumer" means an individual who-(A) with respect to a check handled for forward collection, draws the check on a consumer account; or(B) with respect to a check handled for return, deposits the check into, or cashes the check against, a consumer account.
- depositary bank
- The term "depositary bank" means-(i) the first bank to which a check is transferred, even if such bank is also the paying bank or the payee; or(ii) a bank to which a check is transferred for deposit in an account at such bank, even if the check is physically received and indorsed first by another bank.
- indemnifying bank
- The term "indemnifying bank" means a bank that is providing an indemnity under section 5005 of this title with respect to a substitute check.
- person
- The term "person" means a natural person, corporation, unincorporated company, partnership, government unit or instrumentality, trust, or any other entity or organization.
- reconverting bank
- The term "reconverting bank" means-(A) the bank that creates a substitute check; or(B) if a substitute check is created by a person other than a bank, the first bank that transfers or presents such substitute check.