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#237661 - 08/27/04 04:33 PM Check 21 & Disclosures in statements
Anonymous
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Our bank will be returning items in customer statements. I attended a seminar this week where the presenter was emphatic that we must put a disclosure in every statement which contains a substitute check. (In addition to the one-time disclosure that must be mailed to all consumer account holders.) However, he indicated that there was shorter language that needs to be given in the on-going statements. Is this correct? If so, can anyone direct me to the required language?

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#237662 - 08/27/04 04:42 PM Re: Check 21 & Disclosures in statements
Elwood P. Dowd Offline
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Unfortunately, the only person who can support or explain those statements is the person who made them. I suggest you get in touch with him, confirm your understanding of what was said and ask where you can find that language in the regulation or commentary.

There is no requirement that disclosures be made repetitively in connection with substitute checks included with periodic statements. Accordingly, there is also no abbreviated version of the model substitute check disclosure.
Last edited by Ken/Pegasus; 08/27/04 04:45 PM.
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#237663 - 08/27/04 06:45 PM Re: Check 21 & Disclosures in statements
homestar Offline
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I can see why someone might interpret the regulation this way. But if you stop and carefully analyze the requirement you'll see that ongoing disclosure in statements is not required.

Sec. 229.57(b)(1) governs the distribution of the notice prescribed by Sec. 229.57(a) to consumers who have items returned with their statements. Take a close look at how Sec. 229.57(b)(1)(a) is worded. It says that the notice must be provided no later than the first regularly scheduled communication with the customer after October 28, 2004. This effectively means with the first statement sent after October 28. The key word here is "first." Notice what the regulation does not say. It does not say the notice must be included with the "second" statement or "subsequent" statements. It really means what it says: the "first" statement and only the first statement.

Also, Ken is absolutely correct. The regulation does not prescribe a short form disclosure. Sounds to me like your presenter is borrowing from Reg Z and Reg E.

Finally, you also need to keep in mind that Sec. 229.57(b)(2) applies only when customers receive substitute checks outside of the periodic statement delivery process. Again, there is no obligation to include the notice with subsequent periodic statements under this section of the regulation because this section of the regulation clearly does not apply to periodic statements.

Does this make sense?
Last edited by Tony Wade; 08/27/04 06:49 PM.
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#237664 - 08/31/04 06:23 PM Re: Check 21 & Disclosures in statements
HR Banker Offline
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I am confused where 229.57a says "A bank must provide the disclosure each time it provides a substitute check to a consumer on an occasional basis, regardless of whether the bank previously provided the disclosure to that customer". Do we assume that occasional basis means only when they request a substitute check or if one is returned to them? Someone mentioned to me that they took it to mean we have to give the disclosure each time a substitute check is in their statement.

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#237665 - 08/31/04 09:15 PM Re: Check 21 & Disclosures in statements
bb Offline
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My interpretation of "occasional basis" is exactly how you present it with regard to the returned deposit item.

This is, hopefully for the consumers sake, something that happens on an occasional basis. Another example requiring disclosure would be the customer that insists of receiving the "actual" substitute check to prove they paid for an something rather than a copy of the substitute check.

In both examples, disclosure is required with each time a customer would receive the substitute check.

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#237666 - 08/31/04 10:26 PM Re: Check 21 & Disclosures in statements
homestar Offline
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Quote:

In both examples, disclosure is required with each time a customer would receive the substitute check.




I agree. The operative word here is "receive." You don't need to give the disclosure when the customer "requests" a substitute check. You provide it when you give the customer a substitute check.

If you don't give a substitute check in response to the customer's request, you don't have to give the disclosure. In other words, if you give the customer a copy of a substitute check, you don't have to give a disclosure. The disclosure requirements apply only when you give a genuine substitute check that meets all the Reg CC/Check 21 requirements in order to be the legal equivalent of the original check.
Last edited by Tony Wade; 08/31/04 10:34 PM.
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#237667 - 09/01/04 02:57 AM Re: Check 21 & Disclosures in statements
Anonymous
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Quote:

I am confused where 229.57a says "A bank must provide the disclosure each time it provides a substitute check to a consumer on an occasional basis, regardless of whether the bank previously provided the disclosure to that customer". Do we assume that occasional basis means only when they request a substitute check or if one is returned to them? Someone mentioned to me that they took it to mean we have to give the disclosure each time a substitute check is in their statement.




The notice that is triggered by the fact that a customer will receive paper checks in their statements is a one-time notice. You give it to existing customers no later than the first statement date after 10/28/04. You give it to new paper check statement customers who open accounts beginning 10/28/04.

The "occasional basis" notice given to customers who request and/or receive a substitute check is totally separate and distinct (although the content of the notice is the same). It must be given each and every time a consumer customer requests and/or receives a substitute check other than in their statement. Some individuals will never see receive the notice because they get imaged statements only and don't end up ever requesting or receiving a substitute check.

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#237668 - 09/01/04 12:21 PM Re: Check 21 & Disclosures in statements
HR Banker Offline
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Thank you for your help. It makes things more clear to me.

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#237669 - 09/02/04 04:27 PM Re: Check 21 & Disclosures in statements
Johncrcm Offline
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"Also, Ken is absolutely correct. The regulation does not prescribe a short form disclosure. Sounds to me like your presenter is borrowing from Reg Z and Reg E."

I read in the Fed Register of Aug 4th which contains the comments and Fed's reply to the comments, etc. I am summarizing here when I say, the comments received felt the the appendix C disclosure was lengthy and several requested a short version as found in Reg E and so on. Possibly, this is where the seminar presenter is calling the Final C-5A Policy disclosure the short form.

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