Respectfully suggest that your auditor re-read Regulation CC's §229.57(b)(1). If you don't include original paid checks or actual substitute checks with consumer account statements, there is no requirement that you provide a "Check 21" disclosure to new account customers. Images of checks on or with a statement don't count.

You are required, however, to supply such a disclosure if you supply an actual substitute check (not a copy of one) to a consumer or a consumer asks for a check copy and you are likely to provide a substitute check (see §229.57(b)(2)).

Before you ask, providing the disclosure at account opening cannot substitute for providing it when a substitute check is actually delivered with a charge-back notice or in response to a consumer request. The "per incident" disclosures are still required.

Thanks! Just to clarify one thing, when we send a charge-back notice along with a substitute check (was originally deposited as a regular paper check), we must provide a Check 21 disclosure? Can we adjust the Check 21 model language for those returned deposited checks, since much of the language will confuse our customers?

Yes. The model language is just that -- a model. Note that it applies even if the account being charged back is a savings account, so the model heading is clearly not appropriate. Just make sure you provide the required information in whatever notice you use.