Check 21 Act

Check Clearing for the 21st Century Act, or Check 21 Act - Sets forth a statutory framework under which a substitute check is the legal equivalent of an original check for all purposes, if the substitute check: (1) accurately represents all of the information on the front and back of the original check as of the time the original check was truncated; and (2) bears the legend: "This is a legal copy of your check. You can use it the same way you would use the original check."

(Sec. 3) Defines "substitute check" as a paper reproduction of the original check that: (1) contains an image of the front and back of the original; (2) bears a "MICR line" or "magnetic ink character recognition line" containing all the information appearing on the MICR line of the original check; (3) conforms, in paper stock, dimension, and otherwise, with generally applicable industry standards for substitute checks; and (4) is suitable for automated processing in the same manner as the original.

Defines check truncation as removing an original paper check from the check collection or return process and sending in lieu of it a substitute check or, by agreement, information relating to the original check (including data taken from the MICR line of the original check or an electronic image of the original check), whether with or without subsequent delivery of the original paper check.

(Sec. 4) Prescribes implementation guidelines covering: (1) bank endorsements and identification of the reconverting bank (a bank that creates a substitute check or is the first bank to transfer or present such a check already created by a non-bank person); (2) the applicability of Federal and State law, the Code of Federal Regulations, and the Uniform Commercial Code; (2) substitute check warranties; (3) indemnity procedures, including a comparative negligence standard; and (4) expedited recredit procedures for consumers and for claimant banks in instances where a substitute check is improperly charged to an account (including notice requirements for reversal of a recredit).

(Sec. 8) Sets forth: (1) procedures for claimant banks against an indemnifying bank for expedited recredit; (2) excused bank delays owing to emergency conditions; (3) a measure of damages for breach of warranty or failure to comply with requirements that incorporates a comparative negligence standard; (4) a one-year statute of limitations under which the cause of action accrues as of the date the injured party first learns, or reasonably should have learned, of the facts and circumstances giving rise to the cause of action; and (5) consumer education requirements regarding substitute checks.

(Sec. 14) States that any provision of this Act pertaining to expedited recredit procedures for banks may be varied by agreement of the banks involved.

(Sec. 16) Instructs the Board of Governors of the Federal Reserve System (Board) to study and report to Congress on: (1) the percentage of total checks cleared in which the paper check is not returned to the paying bank; (2) the extent to which banks make funds available to consumers for local and nonlocal checks before the expiration of maximum hold periods; (3) the length of time within which depositary banks learn of the nonpayment of local and nonlocal checks; (4) the increase or decrease in check-related losses over the study period; and (5) the appropriateness of certain time periods and amount limits applicable under the Expedited Funds Availability Act, as in effect on the date of enactment of this Act.

(Sec. 17) Directs the Board to include in subsequent annual reports the amount of operating costs attributable to transportation of commercial checks between Federal Reserve bank check processing centers, including an estimate of the Federal Reserve banks' imputed revenues derived from such transportation.

(Sec. 18) Instructs the Comptroller General to evaluate and report to Congress on the implementation and administration of this Act.

(Sec. 19) Authorizes appropriations to the Secretary of the Treasury for fiscal years beginning after FY 2003 to replace the deposit of compensating balances with direct U.S. payments to reimburse financial institutions in their capacity as depositaries and financial agents of the United States for all services required by the Secretary (or a designee) to be performed on behalf of the Secretary or another Federal agency, including services rendered before FY 2004. (Currently the Secretary compensates financial institutions for various critical depositary and financial agency services provided for or on behalf of the United States by: (1) placing large compensating balances on deposit in such institutions; (2) using imputed interest on such funds to offset charges for such services; and (3) increasing or decreasing the size of such balances as interest rates fluctuate or the public debt outstanding reaches the statutory debt limit.)

Prescribes procedural guidelines for the Secretary to promptly begin phasing in the use of appropriations to pay such institutions and to expedite the transition away from the use of compensating balances.

Requires the Secretary to report on the use of compensating balances and on the use of appropriations authorized for such purpose for each fiscal year.