Your bank certainly has the right to refuse to accept substitute checks (or images) for deposit, just as you have the right to refuse to accept any check. You could run into a problem, though, if you charge back a returned substitute check to a customer. How is your customer going to collect on that check? Will you force her or him to send it for collection?
You do have a responsibility to provide disclosures under section 229.57 of Regulation CC to any consumer when he or she opens a new deposit account for which the consumer will receive paid checks with periodic statements, and to any consumer when you deliver a substitute check in response to a copy request or when charging back a returned substitute check.
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John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8